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How Lean Six Sigma is delivering more value to BPO solutions

How Lean Six Sigma is delivering more value to BPO solutions

Posted Wednesday 10 Dec 2014 13:37 PM

How Lean Six Sigma is delivering more value to BPO solutions.

In today’s ever changing economic climate, BPO service providers have to be quick to react to the changing demands of their clients. Cost reduction is no longer the only reason BPO’s are in demand, they are seen as one of the first service providers to contact for advice around strategy development, operational improvements, and restructuring support. BPO’s are now the new problem solvers.

Clients no longer see BPO’s as just providers of basic administrative tasks (customer service, back office admin), but are now seen by many as an integral part of their growth strategy, offering deep domain expertise that can deliver value and knowledge processes to manage whole departmental functionality such as financial or legal services. Taking responsibility for these services has positioned BPO’s as key business partners with their clients who now have a remit for business transformation and delivery of real cost savings.

The question asked is what is what is the key to gaining true value and business transformation? One approach is to apply lean Six Sigma to move processes from a point of stable outsourcing to a ‘lean’ approach that takes in process redesign, and ultimately to process innovation.

Lean Six Sigma is about perfection, the removal of waste and variation and driven by data so decision making is based on facts. It focuses on the best people, the highest priorities and improves process with a rigorous alignment of actions and strategy. LSS measures bottom line impact and is a top down program that works with executive support that will transform how a business and its employees work.

Fujitsu Services took this approach with its contract with British Midland International (Lean Solutions: How Companies and Customers Can Create Wealth Together. Author: James Womack). BMI outsourced its service help desk function to Fujitsu, with a business process that involved handling calls from BMI agents at airports regarding computers and printers that were installed at airport offices and airline service counters.

The goals for this business process evolved for Fujitsu from one of just providing the help desk services to trying to eliminate the root causes of the for any calls at all. It worked with the printer manufactures improving printer reliability to the point that calls to the help desk fell 80% and continued to fall with on-going Kaizen (continuous process improvement) efforts. This business transformation effort was so successful that Fujitsu was awarded the contract for handling BMI’s entire IT asset infrastructure. This time however, the contract was structured to deliver both cost cutting and continuous process improvement and better quality.

Fujitsu demonstrated as that as a BPO service provider they could introduce lean Six Sigma methodology to move the BMI up the value chain and achieve true business transformation.

The Transition Process:

Typical steps in the BPO transition process might include:
1. Process transition. Observing, participating and training in the process; documenting the process and key Critical to Quality (CTQ) or Service Level Agreement (SLA) measures; forming a process team; training the team; and running a pilot effort in parallel to the regular operation of the process.

2. Transfer to regular BPO operations group. Once the process team is in place with the BPO service provider and it has been executing the process for a certain period of time, it is transitioned to their operations group for ongoing operations.

3. Measure and report SLAs and metrics. BPO contracts may specify SLA measures like average handle time (for phone processes) or network availability (for network management processes). Service providers often measure a number of additional metrics that help them evaluate the performance of their own employees and/or to make sure that the business process is executed well.

4. Statistical process control check. Many service providers also make sure that key performance indicators are in statistical process control. If they’re in process control, only minor adjustments are made to the process, often necessitated by people turnover or other more minor factors. If KPIs aren’t in statistical process control, then root causes may be addressed and adjustments to the process made appropriately.
If you take the above as the current state of BPO transition and operations, you might feel that there is no fundamental innovation or reengineering of any business process. There may be minor adjustments or tweaks, but nothing that announces business transformation in the making!

Taking this to the next stage of development with LSS:

Walking through the transition: The first set of steps are the same as in the ‘before-state’ — process transition, transfer to operations, measure and report SLAs and statistical process control check. Here is what changes in process have added.
? Six Sigma efforts. These help ensure that the process is in statistical process control whether the process runs as-is or when any fundamental change to the process is implemented. All KPIs need to be stable and in statistical process control! Defects need to be identified and minimized, moving from lower sigma levels towards a Six Sigma level.
? Lean process. This involves a number of tools and techniques that provide continuous improvement to all aspects of a business process — turnaround time, accuracy, error rates, currency-related effectiveness metrics, customer satisfaction levels and so on. The tools you would find of value include value stream analysis (making sure that each process step is adding value to the customer and non-value adding steps are completely eliminated or speeded up), failure mode and effect analysis- FMEA (analysing and minimizing risks due to failure of process steps), service blue printing (analysing customer touch points and minimizing the chances for making mistakes) and Poke Yoke methods (mistake proofing).
? Process redesign/innovation. These flow naturally after an extended period of process leaning and use of Six Sigma. Radical process redesign may not work as well as process innovation and redesign born out of an extended period of deep analysis and understanding of existing processes.

How You, the Client, Will Benefit:

When your BPO service provider moves up the value chain with lean Six Sigma, you benefit in a number of ways:
First, you’ll see a change from pure cost savings to process improvement. Hopefully, this change results in better quality and greater speed at less cost (as the Toyota Production System and other lean Methods have proven within manufacturing as well as services). Process improvement adds to the cost savings or at least mitigates costs as and when they rise.

Second, you’ll be able to leverage process understanding and documentation. In many large organizations in the US and Europe, business processes have evolved over time. The latest documentation for the business process may not exist. BPO vendors may insist on documenting the business process along with workflows, KPIs and SLAs for legal and contractual purposes. The very process of outsourcing makes many of these processes explicit. Moving up the value chain with lean Six Sigma depends upon proper documentation of the business process.

Third, you’ll see a movement from informal to formal process measurements. Before outsourcing, there may not have been a compelling need to formally identify SLAs and KPIs for processes and measure them diligently. However, now that they’re outsourced, informality leads to formality due to legal and contractual reasons. Process improvement can build on these measurements and result in better quality while identifying areas to reduce expense.

How the BPO Service Provider Will Benefit:

Moving up the BPO value chain benefits a service provider in a number of ways. Why should you care? The success of the outsourcing engagement depends as much on the relationship you as a client form with your service provider as on the services performed by that provider.

First, it gets the BPO vendor out from under the mode of competing on price. When a service provider adds value over and above simple costs savings with continuous process improvement, it removes that company from the fray of competing on price for contract extensions or other business processes. The BPO becomes a partner that provides true business transformation. They can renegotiate contracts based on value added with process improvement rather than a simple time and materials or full-time equivalents approach.

Second, the BPO service provider becomes a true business partner. Moving up the value chain provides a chance for a longer term relationship with your company. When a client outsources a technical help desk, the ideal isn’t to handle those calls in the best possible way; it’s to reduce those calls altogether while still keeping customer sat levels high. That kind of transformation, effected through lean Six Sigma, can demand revenues an order of magnitude higher than simple process execution (because the client gains far greater benefit).

Third, the service provider gains invaluable vertical skills development. When a BPO service provider moves up the healthcare claims processing value chain, they cease being just a service provider. Over time, they slowly become world-class experts in healthcare, not just claims processing! They can leverage this expertise for much more valuable process design/redesign/innovation business, thereby continuing the cycle of continuous improvement.

How to start down the road to Business Transformation:

As a client, a good place to begin is by looking for the addition of incentives for process improvement to a contract. Initially, Fujitsu was getting paid by BMI for help desk processes on an FTE number of agent’s basis. Fujitsu had no incentive to fix root causes of commonly reported problems in calls to their help desk. However they renegotiated the contract. They based it on the number of BMI employees that could potentially call their help desk rather than the number of agents needed to take calls (FTE number). This meant they would get paid the same if they handle 100 calls a day or 1,000 calls a day! This kind of structuring provided an incentive for the Fujitsu to do real business transformation! It became a win-win for both the buyer and provider! For proper process improvement efforts, incentives and contract need to be designed in such a way that they encourage appropriate efficiency and effectiveness.

Don’t expect an immediate payback, especially in the trust department. Moving up the value chain in BPO needs to be done one step at a time over a long period of time. First, the BPO needs to execute the business process that exists today properly and then slowly improve it step by step. Once the provider understands the process in all its dimensions, it can earn client trust by demonstrating small improvements first before attempting any process redesign or innovation.

Lean Six Sigma requires a long-term viewpoint. BPO Service providers, especially those offshore, are vulnerable to price competition from other countries. For example, when the focus is on price, many business processes in the UK could be considered vulnerable to price competition from lower-cost locations. Moving up the value chain requires a longer term outlook on the BPO. The beauty of that is that it is difficult for a competitor to duplicate in a short amount of time. When service providers begin their lean Six Sigma journey and bring clients along for the transformation, they can ensure protection of their current business, and even win additional business once they demonstrate that they’re long-term business partners.

BPO solutions provide an outstanding opportunity for both clients and service providers to look at both optimizing cost savings and achieving continuous process improvement! Lean Six Sigma provides the tools and techniques to make business transformation not just the ‘in-thing’ to do, but offers a systematic, disciplined approach to daily business operations.

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