Partnering to Provide Process Optimization Solutions For Telecommunications Service Providers Reducing Costs and Improving Service Using Quality Management Tools Process Analysis A Guide for Telecommunications Service Providers White Paper Presented by: John Tomik - Director of Business Consulting Vertek Corporation www.vertek.com www.igrafx.com www.minitab.com 2003 Vertek Corporation 2003 Corel Corporation 2003 Minitab Corporation
Reducing Costs and Improving Service Using Quality Management Tools Abstract Telecommunications Service Providers, driven by competition, legislation, and increasing customer requirements, need to continuously search for new ways to improve productivity and quality, while simultaneously reducing costs in order to remain competitive in the marketplace. To address these issues, many management teams have turned to Quality Management techniques to solve specific problems that they encountered, such as Six Sigma for process stability and defect reduction; TQM for Continuous Improvement; and ISO 9000 and TL 9000 for documentation and process standards. Most recently, executives must face the requirements of the Sarbanes- Oxley legislation and the emphasis on controls and financial accountability as a result of the ethical issues introduced by accounting misrepresentations. Since there are so many major quality initiatives that sometimes overlap each other, it is easy to become confused about how to implement a process improvement program that provides real measurable value. This paper describes a fundamental tried and tested approach for instituting quality into everyday processes, and it introduces a set of quality and process management tools that help facilitate the implementation of a quality management program. It provides an introductory framework for quality improvement initiatives to address cost, performance, and quality control issues that all Telecommunications Service Providers face today. Furthermore, this paper describes results that can be expected through the implementation of process-specific tools for business analysis. We, at Vertek, can attest to the success of this program. Our consultants have delivered dramatic results to our clients through the use of the statistical methods and quality control techniques outlined in this paper. These improvements can add up to millions of dollars in annual cost savings, not to mention cycle time improvements, efficiency gains, rework reduction and, most importantly, customer satisfaction. 1
Introduction Few industries have faced as many technical, operational, legislative, and cost issues as the telecom industry faces today. Pressures to reduce staff, to outsource resources to off-shore suppliers, and to conform to legislation continually push the envelope for delivering higher quality services in a highly scrutinized and competitive environment where existing service providers struggle to stay in the game. Cost reductions and off-shoring As technology advances and pressures from competition continue to drive how services are delivered to customers, prices plummet to near commodity levels. Service providers that are not automating the service delivery process and looking for less expensive methods of delivering services to customers will be driven out of the market. In addition, as MCI and Global Crossing emerge from bankruptcy, another price war with the remaining debt-heavy carriers could drive further cost pressures. Dramatic changes to the process, such as outsourcing whole portions of the process to offshore groups, introduce large risk and uncertainty into already fragile environments. Understanding the impact of such dramatic process changes is critical for informed management decision making. Consolidation Since divestiture, service providers have been looking for ways to build up service offerings in order to provide complete solutions to their customers. Some service providers built these capabilities and increased IT investment in past years to support new offerings. Other carriers are pursuing mergers and consolidations with other service providers to obtain these capabilities. Either pursuit involves large-scale change and requires significant information about the impacts on the existing organizations, processes, and procedures. Legislation, technology and service expansion Legislation (e.g. wireless number portability) and new technologies are forcing dramatic changes to sales and Customer Care processes. Process owners supporting these groups need a place to construct, house, and collaborate on processes, methods, and procedures in order to keep up with the rapid pace of change. No longer can individuals work in silos and stay connected. 2
Necessity of stricter controls The Sarbanes-Oxley requirements to outline control points and performance of key processes, especially those directly tied to financial measures, are stimulating executives to team up process and quality control associates with financial managers and auditors to ensure that the integrity of financial statements are infallible. This paper will present an approach that provides process managers with tools for more effective process management. The following topics will be discussed: Attributes of a successful quality control program Tools that facilitate the quality improvement process Available software that simplifies the job Benefits from the quality improvement process Background Many of the concepts and tools presented here are familiar to quality managers in the telecommunications industry. In fact, many of the core tools (e.g. Pareto charts, Cause & Effect diagrams) originated from the statistically focused teams at Bell Labs. Within the general Quality Industry, there have also been some large-scale initiatives like TQM, ISO 9000, and the more recent Six Sigma movement that have stimulated energy around quality practices. Before implementing these initiatives, however, it is very important to understand that these projects can easily fail unless they are adopted completely into the culture of the organization. A strong team with a strong statistics foundation, armed with the proper tools is instrumental in achieving breakthrough levels of success. As consultants within the Telecommunications industry, we at Vertek have delivered dramatic results using the techniques and procedures outlined in this paper. One process simulation project reduced a major service provider s ordering cycle time by 10 days, which translated into over $6.8 Million in annual savings. We have also used process simulations to coach our clients on projects that should be avoided. One client, after reviewing our simulation results, stopped a costly development project that was not returning the right value back to the organization. Given the intense scrutiny on the practices of telecom carriers, those corporations that incorporate and invest in quality tools and methods will hold a significant advantage over those who do not. It may mean the difference between survival and failure for many organizations. 3
Addressing the challenges Key concepts: Four elements critical to any Quality Improvement Program: 1. Dedication 2. Planning 3. Diligence 4. Patience Quality Improvement Tools 1. Process maps 2. Control charts 3. Pareto diagrams 4. Cause & effect diagrams 5. Simulations / What if scenarios Attacking such large challenges is not easy and should not be underestimated. Some companies have experienced incredible success using the many quality improvement techniques that have come into the spotlight over the last several years, while others have only grown frustrated with the lack of expected results. Based on successful Quality Improvement projects, four critical elements need to be present in order to maximize the probability of success: Dedication, Planning, Diligence, and Patience. First and foremost, the organization must be dedicated to the success of the program. Dedication comes in the form of executive sponsorship, resource commitment, time allowances, and the relentless perseverance in uncovering the true causes affecting performance regardless of political implication. Second, the organization must spend a significant amount of time planning for the program to ensure that it is executed and communicated properly. Quality is contagious and when improvement results become publicly known, additional resources and support will be made available. Diligence is critical when working with processes and investigating special causes. Teams need to be trained properly in the use of quality management tools. Control charts, cause & effect diagrams, Pareto diagrams and simulations with what if scenarios are all tools that need to be used meticulously throughout the process. Additionally, the corporation must objectively attack any special causes identified no matter how they occurred. Feelings, pride, and politics must not impede the improvement process otherwise the project will fail. Finally, the organization needs to have patience with newly initiated quality programs and allow them time to produce results. Too often, organizations look for that breakthrough improvement and implement process changes, one on top of another, without any regard to their consequences. Rapid, haphazard process change introduces confusion and noise into the measures and erases any evidence of improvements that may have been uncovered. These four attributes, while they won t guarantee success of your quality improvement program, will significantly improve the probability of producing positive results and will certainly create a supportive environment for the process improvement teams. Excellent service will not appear immediately, but with the right environment, it will continuously move towards the predefined goals. 4
Tools that facilitate quality improvement programs Process map: Standard quality tools should not be unfamiliar to Telecom companies since many of the fundamental principles and tools originated from Western Electric AT&T Bell Laboratories manufacturing partner. A number of tools are available to the process engineer. Five of the most important quality tools are presented below: Process maps: Control Chart: # Errors Sample Mean 57 UCL=56.91 56 55 Mean=54.28 54 53 52 LCL=51.65 51 Subgroup 0 10 20 30 1 4 UCL=3.850 Sample StDev Xbar/S Chart for Data 3 2 S=1.843 2 2 1 0 LCL=0 Pareto diagram: Pareto Diagram 100 100.00 100% 90.00 80.00 60.00 50 50% 38.00 0 0% Insufficient Limited Access No Inconsistent Complex Number to Customer Performance Information Measures Percent Total As defined by igrafx, a process map is a graphical representation of a process, which is used for communication, documentation, and visual analysis. Process maps themselves are powerful tools for presenting how a process operates. Consultants at Vertek have improved process performance dramatically by thoroughly documenting our clients internal business processes. In one case with a major service provider, Vertek consultants virtually eliminated ordering methods variation by standardizing the organization s work steps based on corporate best practices. Control charts Shewhart and other types of control charts are fundamental to quality control. Their purpose is to measure variation around a mean and signal when that variation is due to one or more special causes. Special causes are those instances where something assignable has occurred in a process that should be investigated and addressed. Six Sigma programs utilize control charts and process capability indexes extensively to signal when issues influence process variation. Employing control charts to demonstrate how in control (or out of control) a process is often is enough to convince an executive team that action is required. Pareto diagrams J.M. Juran first published a training document for Western Electric / AT&T Bell Labs that outlined the Pareto principle, demonstrating the power of focusing on the vital few rather than the useful many. This tool identifies and ranks defect types in descending order (based on either frequency or value) in order to prioritize the categories that should be addressed first. In addition to assigning a natural priority for addressing defects, the Pareto diagram acts as a mechanism for quantifying contributing factors to problems identified during the process troubleshooting phases. 5
Cause & effect diagram Cause & effect diagram: Complex Procedures Lack of Awareness Inconsistent No History of Correspondance No Common Access Limited Access to Customer Information Plant Low Priority Poor Funding Policies Inadequate Training No Performance Measures Insufficient Number Not Communicated Boundaries Undefined People Process simulation: Poor Customer Service Used in conjunction with Pareto diagrams, a cause & effect diagram (sometimes referred to as fish bone diagrams or Ishikawa charts) helps a process engineer identify the root causes associated with an error condition or defect identified in troubleshooting sessions. Most effectively used in team environments, the cause & effect diagram takes the analytics to the next level by using creative problem solving techniques. When done properly, a cause & effect diagram becomes one of the most powerful and effective tools available to process engineers. Vertek consultants have delivered breakthrough results by using this tool with Pareto charts, control charts, and process capability indexes. Process simulations / What if analysis Among the most exciting and powerful tools available for process engineers, process simulations assist analysts to create models of current process performance by using process maps, activity times, and transaction volume data. These models can then be manipulated to determine the impacts that process changes will have on performance metrics. Process simulations are powerful tools for a number of reasons: Effective modeling of business processes plays a key role in identifying and correcting inefficiencies Improved results are achieved through greater insight into your business processes Hypothesis testing increases the ability to identify highest impact opportunities Full experimentation through simulation increases accuracy of analysis and chances of project success Simulations prevent costly mistakes in deploying process changes that negatively impact performance We at Vertek can attest to the flexibility and power of process simulations. We have incorporated the use of process simulation models into almost every process engagement that we take on. With simulations, we have been able to factually answer questions that our clients were struggling with: How can I rationalize my organization for peak performance? What steps do I need to take to improve throughput, on-time-performance, cycle time, and overall quality? Where should I direct my process automation efforts to maximize my IT investments? 6
Available software to simplify the job Statistical Process Control has come a long way from calculating control limits and process capability indexes by hand. A number of software packages exist for this purpose; however one of the most complete and powerful solutions for process management is the combination of tools provided by igrafx and Minitab. Statistical analysis using MINITAB Performing statistical process control can be challenging, especially when performing multiple calculations using formulas like: S C UCL= X 4 + ( USL µ ) ( µ LSL) 3 and C pk = min n, 3σ 3σ Statistical software packages now can create control charts like X, R, S, X - R, X - S and calculate process capability indexes quickly and with little effort providing the process engineers with more time to focus on analysis. MINITAB, a comprehensive statistical and graphical analysis software package, is the leading package used in Six Sigma and other quality improvement projects. igrafx Process 2003 for Six Sigma This tool allows process engineers to identify, evaluate, and deliver high-impact Six Sigma projects. With a powerful simulation engine and seamless integration with MINITAB, this product brings a new dimension to process modeling through advanced techniques such as data fitting and fullfactorial experimentation. The Design of Experiments (DOE) features reduce time, cost, and risk to any process improvement project. igrafx Process 2003 for Six Sigma also facilitates the creation of Pareto diagrams, cause & effect diagrams, and produces detailed statistics for simulations. The American Society for Quality (ASQ) uses this package in their Six Sigma Black Belt training course. igrafx Process Central 2003 Collaboration is the key to breakthrough process improvements. igrafx Process Central 2003, a serverbased Process Management repository, is a collaborative groupware application that delivers true version control, document security, extensive query capabilities, and a comprehensive audit capability. It provides enterprise-wide access to materials and supports best-practice development, just-in-time learning, and quality management. 7
Benefits of Quality Programs A typical Six Sigma Black Belt project saves a client $230-350K and usually spans 4-6 months. Telecom service providers can experience even more dramatic results given the complexity of processes and systems involved. Some categories of typical expected results are: Cycle Time Improvements Cycle time improvements are critical for service providers the quicker a customer can be turned up onto a network, the faster that provider can bill for services rendered. At Vertek, we focus on cycle times in order to increase our client s cash flows. In one case, we virtually eliminated the cycle time for a sales handoff process that was averaging 21 days. Customer Satisfaction Improvements Customers appreciate (and demand) quality service. We have seen where Customer Satisfaction has gone from Poor (customer leaving the Service Provider because of billing issues or poor service times) to Excellent (same customer switching over their remaining business to the carrier). Providing high quality service will result in retaining as well as increasing revenues. Rework Reductions Failed service turn-ups cost an organization deeply. Most of them can be avoided with the right processes in place. The do-it-right the first time principle can be achieved when quality tools and procedures are deployed throughout the organization s methods and procedures. Cost Reductions The dramatic cost reductions associated with quality improvement projects usually result from addressing one of the above categories. An additional area of cost reduction is resource optimization. The ability to determine optimal resource levels to support a sales forecast or service level is very valuable in environments where forced reductions are viewed as primary ways of reducing expenses. Other Improvements There are numerous other benefits attainable from employing quality improvement programs in an organization. One that is often overlooked is employee morale. Associates want to see their teams be successful and if continuous improvements are visible in organizations, then companies will find that employee morale and productivity will improve dramatically. 8
Summary: For more information contact: John Tomik Director of Business Consulting jtomik@vertek.com Vertek Corporation 430 Mountain Avenue Murray Hill, NJ 07974 908.464.8400 Quality programs can dramatically improve an organization s productivity. It is typical to expect high returns on a project that focuses on service level improvements, cycle time reductions, or customer satisfaction. There are many tools available for process managers to perform process analysis. These tools, when deployed correctly, will create a powerful environment for collaborative process improvement. igrafx and Minitab support this environment with their integrated solution for Six Sigma projects. This solution is used by organizations such as the American Society for Quality (used in their Six Sigma Training Program) and by consulting companies like Vertek Corporation specializing in process optimization solutions for the telecommunications industry. References: TL 9000 Performance Metrics to Drive Improvement The Telecommunication Industry takes a new approach to sector standards, Quality Progress, July 1999. Ryan, Thomas P., Statistical Methods for Quality Improvement, Wiley-Interscience, 2000. Breaking Away: Leading the Telecommunications Turnaround, Ernst & Young, 2003. The Road to TL 9000: From the Bell Breakup to Today The development of TL 9000 caused a revolution in the telecommunications supplier industry, Quality Progress, June 2001. Pande, Peter, et al., The Six Sigma Way: Team Fieldbook, McGraw Hill, 2002. ASQ Six Sigma Black Belt training program materials: http://www.asq.org/ed/sixsigma/blackbelt/materials.html 9