1 Outsourcing Life Cycle: Integrating DMAIC Controls WCQI Concurrent Session: M09 Monday May 21, 1:30 2:30 PM Presenter: Daniel Zrymiak
2 Introduction This presentation combines knowledge of an Outsourcing Life Cycle consisting of distinct phases with Common problems encountered in Outsourcing in order to Determine a Six Sigma DMAIC approach to resolving and controlling these outsourcing problems at suitable times.
3 Learning Objectives: 1. Evaluate Evaluate an outsourcing initiative (i.e. software technical support, business processes) to identify Six Sigma opportunities for common outsourcing problems. Can you describe an outsourcing scenario that would benefit from Six Sigma?
4 Learning Objectives: 2. Design Develop and design a DMAIC (Define- Measure-Analyze-Improve-Control) approach that addresses and prioritizes improvement activities. Can you describe how DMAIC would help to focus and prioritize improvements?
5 Learning Objectives: 3. Understand Understand some of the common failure modes and effects characteristic of outsourcing or offshoring work, and how to resolve them using the DMAIC approach. Can you describe one potential quality problem caused by improper outsourcing?
6 Learning Objectives: 4. Recommend Leverage experiences across the entire effort in order to recommend enterprisewide system controls for outsourcing. Can you describe one advantage of establishing enterprise-wide controls?
7 Overview This presentation covers an Outsourcing Life Cycle consisting of distinct phases: Assessment Engagement Reengineering Operations and Logistics Modification Execution Maintenance and Support
8 Outsourcing Fusion with DMAIC At each phase, common outsourcing problems can be addressed with: Define Measure Analyze Improve Control
9 Relevance and Application Method of analysis to reveal specific improvements to outsourcing Pertinent for management of service and software quality with global supply chain Linked to Six Sigma, failure modes, metrics, analysis, improvement, and control methods within outsourcing.
10 Outsourcing Life Cycle Recognition that Outsourcing is progressive and constructive Life cycle has distinct phases emphasizing particular actions and objectives. Generic phases defined to reflect the purposes and objectives for that portion of the outsourcing sequence.
11 Outsourcing: Assessment Determine the outsourcing strategy Initial evaluations to select business functions and entities to be outsourced. Justifications to outsource are determined cost reduction, service availability, capability enhancement strategic partnership
12 Outsourcing: Engagement Identify the departments and touchpoints Set expectations and delivery levels Strategy meets operational realities Determine how to adjust the enterprise to accommodate outsourcing changes. Ranges from business as usual to a managed service with significant change
13 Outsourcing: Reengineering Modify the value stream and high-level architecture to incorporate outsourced entities. Identify tasks for transition and transformation. Modify the workflow to a new normal Rationalize or eliminate wasteful processes that do not add value.
14 Outsourcing: Operations and Logistics Exchanging knowledge and resources to support transition to new model. Modify operations and logistics to support knowledge transfer and proficiency Acquisition of necessary infrastructure and licenses to support outsourced resources
15 Outsourcing: Execution Confirmation of outsourcing changes into the new normal mode of operations. Stabilization where baselines for operational and delivery commitments are established. Transition and transformation should be complete. Resources should perform independently.
16 Outsourcing: Maintenance and Support Ongoing corrective and preventive maintenance to outsourcing arrangement Address and correct problems Anticipate and prevent incidents Adapt to external changes Optimize systems and processes
17 Outsourcing Problems & Improvements Examples of outsourcing problems Skill Level Critical Requirements Process Compatibility Interfaced Tools/Applications International Norms Governance Late or Incorrect Delivery
18 Problem: Skill Level Define: Inadequate skill levels Measure: Losses, Cost of Poor Quality. Cost of escalations or interventions Analyze: Cost-benefit of qualifications. Investment in premium personnel Improve: Set explicit qualifications. Conduct Design of Experiments with treatments at Intermediate, Senior, Expert levels to evaluate significance Control: Define controls at outsourcing life cycle phases
19 Problem: Critical Requirements Define: Critical requirements are missed Measure: Losses, Cost of Poor Quality. Cost of unsuccessful validations, noncompliance penalties, delays, rework time and materials charges Analyze: Cost-benefit of a structured and accountable Knowledge Transfer and Transition approach Improve: Conduct knowledge transfer, seamless transition of tasks. Commit to joint accountability between subject experts and knowledge recipients Control: Define controls at outsourcing life cycle phases
20 Problem: Process Compatibility Define: Outsourced resources have processes that are incompatible with core organization and clients Measure: Losses and Cost of Poor Quality from process gaps. Inconsistent delivery, inadequate provision of goods and services, rework and corrective adjustments Analyze: Cost-benefit of common methodology and similar definitions for frequently used terms. Improve: Establish a common approach. Enforce with clear expectations, touchpoints, gates, and outcomes. Control: Define controls at outsourcing life cycle phases
21 Problem: Interfaced Tools/Applications Define: Interface or connectivity errors between outsourced and core tools or applications Measure: Losses, Cost of Poor Quality. Cost of inadequate technical solutions. Time lost due to delays or interruptions from system rework or restoration. Analyze: Cost-benefit of common architecture and shared toolset for core and outsourced users. Improve: Common infrastructure to simplify details, documentation, and reduce variation between teams. Control: Define controls at outsourcing life cycle phases
22 Problem: International Norms Define: Outsourced operations conflict with business expectations due to international norms (i.e. holidays) Measure: Losses, Cost of Poor Quality from interruptions or unplanned termination of services. Analyze: Cost-benefit of deploying a rolling 12 month calendar including outsourced holiday and staffing patterns. Identify cultural hazards within the operation. Improve: Avoid surprises and mitigate cultural irregularities or offset with contingencies. Control: Define controls at outsourcing life cycle phases
23 Problem: Governance Define: Governance is misaligned between outsourced and core functions, causing breakdowns in decisions and authority patterns. Measure: Losses, Cost of Poor Quality from interruptions or delays while waiting for decision, or reversals of decisions due to inappropriate authorization. Analyze: Cost-benefit of setting up a framework of authority channels for reports, decisions, and references. Improve: Map common functions and authority levels, ensure frequent contact for mutual accountabilities. Control: Define controls at outsourcing life cycle phases
24 Problem: Late or Incorrect Delivery Define: Outsourced outcomes are late or incorrect Measure: Losses, Cost of Poor Quality from deficient deliveries including late charges, overtime, expediting premiums, wasted project expenses. Analyze: Cost-benefit of deploying a strategic delivery management approach, track and prioritize work, assign based on criticality to appropriately skilled resources. Improve: Designate and direct work to right resources at right times. Minimize waste, resource misuse, backlog. Control: Define controls at outsourcing life cycle phases
25 Problem: Continuity and Improvement Define: Outsourced resources do not improve over time but decline due to attrition and poor replacements Measure: Benchmark improvement, innovation, productivity growth. Track comparative progress. Analyze: Cost-benefit of retention program for outsourced employees, support growth and proficiency. Improve: Establish targets to keep outsourced employees engaged to improve outcomes and deliverables to clients and colleagues. Control: Define controls at outsourcing life cycle phases
26 Revisit the Outsourcing Phases Identify the Outsourcing Life Cycle phases where improvements should occur: Assessment Engagement Reengineering Operations and Logistics Modification Execution Maintenance and Support
27 Problems and Life Cycle Phases X indicates the suitable phase for action
28 Outsourcing: Assessment Initial evaluations to select business functions and entities to be outsourced. DMAIC Project: International Norms Infuse outsourcing with correct assumptions and expectations from the start.
29 Outsourcing: Engagement Determine how to adjust the enterprise to accommodate outsourcing changes. DMAIC Project: Governance Map the core and outsourced organizations early as part of the engagement process to define decision frameworks and reporting.
30 Outsourcing: Reengineering Modify the value stream and high-level architecture to incorporate outsourced entities. DMAIC Projects: Skill level, Process Skill levels and process compatibility can be clarified from value stream analysis when outsourced components are considered.
31 Outsourcing: Operations and Logistics Modify operations and logistics to support knowledge transfer and proficiency DMAIC Project: Interfaced Tools The tools and applications used by the core and outsourced entities can be synchronized early to minimize costs and complexity.
32 Outsourcing: Execution Confirmation of outsourcing changes into the new normal mode where baselines for operational and delivery commitments are established. DMAIC Projects: Critical Requirements, Late or Incorrect Delivery Execution reveals gaps and failure effects of outcomes needing correction and baselines.
33 Outsourcing: Maintenance and Support Ongoing corrective and preventive maintenance to outsourcing arrangement DMAIC Project: Continuity & Improvement The outsourcing arrangement is not static but must continually adapt and evolve. Development and engagement must be sustained to avoid back-sliding or regressing.
34 Conclusion DMAIC can be applied to address common Outsourcing problems. Outsourcing can be segmented into life cycle phases. Controls can be applied throughout the outsourcing life cycle. Outsourcing corrective measures can be proactively addressed by life cycle phase.
35 Interactive Review and Questions Revisit common outsourcing problems and life cycle phases Revisit Learning Objectives Confirm the core WCQI presentation questions Address individual questions with remaining time
36 Problems and Life Cycle Phases The matrix summarizes both items.
37 Learning Confirmation: 1. Evaluate Evaluate an outsourcing initiative (i.e. software technical support, business processes) to identify Six Sigma opportunities for common outsourcing problems. Can you now evaluate outsourcing failures for potential Six Sigma opportunities?
38 Learning Confirmation: 2. Design Develop and design a DMAIC (Define- Measure-Analyze-Improve-Control) approach that addresses and prioritizes improvement activities. Can you now describe how to focus and prioritize outsourcing improvements?
39 Learning Confirmation: 3. Understand Understand some of the common failure modes and effects characteristic of outsourcing or offshoring work, and how to resolve them using the DMAIC approach. Can you now describe how DMAIC can be used to improve outsourcing failures?
40 Learning Confirmation: 4. Recommend Leverage experiences across the entire effort in order to recommend enterprisewide system controls for outsourcing. Can you now describe an approach for enterprise-wide outsourcing controls?
41 Presentation Business Context What is the business context and how does it improve upon the existing knowledge base? This presentation fused the practices of Six Sigma and DMAIC into outsourcing in a phased manner.
42 Presentation Practical Applications What are the practical applications towards the participants jobs, functions, projects, or departments? This presentation defined the outsourcing function into manageable phases in order to position the improvement activities to be timed for optimal effectiveness.
43 Presentation Integration or Connection How can this knowledge be integrated or connected to other areas? This presentation is tied to overall supply chain and quality management, and continual improvement. Six Sigma practitioners will benefit from observing the application of DMAIC to outsourcing.
44 Presentation Business Context What are the expected gains, and the risks and implications of omission? This presentation provides awareness of potential outsourcing problems and a structured approach to correction, with the risks being expanded losses and Cost of Poor Quality from undesirable outcomes.
45 Questions and Comments Daniel Zrymiak Accenture Surrey, British Columbia, Canada (604)
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