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Achieve PredictabIe

ExceIIence
Integrate Lean 5ix 5igma vith
GIobaI 5ervices 5ourcing
y Arvinder Monty 5ingh
5enior Vice President
Lean 5ix 5igma and Transitions
Copyright 2007 by Genpact. All rights reserved.
Contents
Introduction. 1
Lean.Six.Sigma-Global.Sourcing.Interplay. 2
Strategic.Assessment..Laying.the.Foundation. 3
Quick.Hits. 4
Work.Transfer..Sowing.the.Seeds.of.Success. 5
Risk.Identifcation.and.Mitigation. 6
Training. 8
Case.Study:.Lean.Six.Sigma.Enables.Rapid.Process.Transition. 9
Process.Stabilization. 10
Case.Study:.Lean.Six.Sigma.Project.Reduces.Invoice.Backlog. 11
Continuous.Improvements . 12
Case.Study:.Paying.on.Time.Delivers.$13.Million.. 16
Breakthrough.to.Best-in-Class. 17
Case.Study:.Better.Payment.Terms.Saves.$63.Million. 18
Conclusion . 19
1 Achieve.Predictable.Excellence
The global outsourcing of business processes delivers exponential cost, effciency, core
competency, and innovation benefts to buy-side organizations. Mature buyers adopt
global sourcing as a cost reduction strategy, but move on to enhancing shareholder
value through higher margins, new revenue streams, and penetrating new markets to
name a few.
Some buyers gain more from global souring than others, but the most successful
organizations implement global sourcing with clinical precision. Fundamentally,
success depends on:
> Knowing what and when to outsource
> Risk identifcation and mitigation
> Managing expectations
> Flawless execution
> Continued business impact through process excellence
The key to global sourcing success is total control of the program. Customers and
suppliers control sourcing initiatives using tools such as the Capability Maturity Model
or Balanced Scorecard, depending on the process.
We at Genpact feel that Lean Six Sigma is the best way to manage global sourcing
of business processes. The Lean Six Sigma based transition structure helps to
achieve fawless migration and continuously improve processes by reducing
variation. Eventually Lean Six Sigma drives outsourced processes to best-in-class.
2 Achieve.Predictable.Excellence
Lean 5ix 5igma GIobaI 5ourcing InterpIay
Genpact leverages Lean Six Sigma to divide a global sourcing initiative to clearly
demarked phases that include:
> Strategic Process Assessment
> Onsite Re-engineering
> Work Transfer
> Process Stabilization
> Continuous Improvements
> Transform to Best-in-Class
Adherence to the Lean Six Sigma discipline of measurement solves unique issues
such as identifying the wrong process for outsourcing, poor expectation management,
and a lack of visibility into the process among others. Not using Lean Six Sigma on
the other hand can result in a loss of process control and also an inability to achieve
outsourcing goals.
Lean Six Sigma Roadmap to Process Excellence
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Phase I Phase II Phase III
Voice of the Customer
Strategic
Assessment
Work
Transfer
Process
Stabilization
Continuous
Improvement
Best in
Class
3 Achieve.Predictable.Excellence
Strategic.Assessment..Laying.the.Foundation.
Strategic assessment enables companies to decide what to outsource and when to
outsource. Mature companies use this phase to build a strategic outsourcing plan,
which blueprints their outsourcing journey. The next steps in this phase include:
> Get customer buy-in and ownership
> Understand customer expectations
> Build a plan to smoothly outsource
> Defne service levels
> Build timelines for processes to be outsourced
> Jointly organize and commit resources
> Understand process start and stop points to
defne project boundaries
> Understand the current process and process map
Lean Six Sigma also stencils processes and compares them to benchmark processes.
The process handoffs, workfow, value stream, and technology are understood and
documented to enable the creation of a wing-to-wing process map.
Genpact uses the assessment phase to capture process deviations and gaps, spot
waste, assess the potential to decouple processes, and mitigate issues that can affect
the global sourcing initiative.
In order to understand processes and the risks of migrating them, the Lean Six Sigma
methodology uses face-to-face interviews with process experts at the customer
site. Questionnaires are used to understand pain points of processes and focus on
exceptions in the value chain. Based on this exercise, Genpact presents the customer
with a plan to outsource which includes:
> Processes divided up by stages
> Optimum talent count and cost
> Potential productivity gains
> Risk mitigation strategies
> Recommendations to maximize
return on investment
4 Achieve.Predictable.Excellence
Quick.Hits
In the strategic assessment and work transfer phases, buyers get quick
benefts by using Lean. Lean quickly identifes and eliminates waste,
thereby improving productivity.
Failure Modes and Effects Analysis (FMEA), a commonly used tool for instance,
delivers quick hits by analyzing potential problems in the initial outsourcing phases
when it is easier to take actions to overcome these issues. FMEA proactively identifes
potential failure modes and their effect on the process. This facilitates the teams to
put together an action plan well in advance.
Benchmarking and quality function deployment (QFD) are other tools that provide
quick hits. Benchmarking compares processes to be outsourced with best-in-class
processes to identify gaps and map scalable improvement ideas. QFD also helps
outsourcing vendors and their customers to build critical process characteristics from
the viewpoints of the customers, external markets, and technology. This enables
Genpact to prioritize and focus on the key metrics as per the customer.
Lean Six Sigma improvements give immediate results during the initial stages
of global sourcing, but more importantly, it sets up the process to move to the
continuous improvement and best-in-class phases.
5 Achieve.Predictable.Excellence
Work.Transfer..Sowing.the.Seeds.of.Success
Work transfer is the make or break stage of global sourcing and also the point where
buyers and providers sow the seeds of future success.
Several outsourcing projects fail or face tough hurdles as providers and customers do not
identify the risks inherent in outsourcing processes. This often happens when the process
handoffs are not clearly understood and how its decoupling affects the workfow.
Lean Six Sigma measures and analyzes the complete process chain prior to outsourcing
to identify and mitigate risks upfront. The performance of the processes touched by
outsourcing is measured, after a robust data collection exercise. The data is used to
determine defects and decide on metrics for future process tracking.
Next, the data collected and newly developed process maps are analyzed to determine
root causes of defects and identify areas for improvement. Genpact identifes gaps
between current performance and goal performance, captures sources of variation,
and prioritizes opportunities to improve.
Work Transfer
Strategic
Assessment
Feasibility
Analysis
Transition
Work Transfer
Service
Delivery
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PLANNING EXECUTION OPERATIONS
6 Achieve.Predictable.Excellence
Risk.Identifcation.and.Mitigation
At this stage, tools such as Feasibility & Risk Analysis as well as Failure Modes &
Effects Analysis (FMEA) identify the specifc processes for outsourcing. In the feasibility
analysis, Genpact uses Lean Six Sigma to score a process on several criteria to
determine outsourcing feasibility. The criteria used are:
> Ability to decouple
> Baseline processes to measure future performance against current
> Manual intensity of the process
> Expected savings from outsourcing
> Direct contact with customer
> Process standardization level
> Process capability
> Language requirement
In assessing outsourcing risks, Lean Six Sigma examines:
> Knowledge transfer and retention
> Skill availability
> IT/ Communication requirements
> Process complexity
> Buyers openness to change
> Profciency in language
> Legal aspects
Risk Assessment & Control
Function
Part/Process
Failure Mode
Causes
Occurrence
(1-10)
RPN
Risk Priority Number
RPN = SxOxD = 1 to 1000
Controls
Detectability
(1-10)
Effects
Severity
(1-10)
7 Achieve.Predictable.Excellence
A low score on risk and high score on feasibility make a process suitable for
outsourcing. For instance in outsourcing an F&A process for a large pharmaceutical
company Genpact found high feasibility but a couple of high risk areas in
communication and peoples aspects. The risks were then mitigated through robust
knowledge transfer and effective communication within the buyers organization.
Genpact also conducts FMEA to identify failure factors in process transition and builds
a preventive plan. For instance, applying FMEA to an F&A process, Genpact examines
causes of failure such as:
> Incorrect data entry or delay in data set up
> Customer dissatisfaction and rework
> Long response times or lack of data cross referencing
> Lack of existing control such as performance
standards or supervision
Based on the FMEA results Genpact recommends a course of action prior to
shipping the process. The goal of the work transfer phase is to eliminate
disruption to client operations on outsourcing.
8 Achieve.Predictable.Excellence
Training
The work transfer phase also includes knowledge transfer where provider employees
are trained on the customers industry, domain & process skills. This phase includes
identifying training material, creating a training plan, building a standard operations
procedure and validating the resultant documentation with the customers subject
matter experts. These subject matter experts usually train future trainers onsite,
who then train associates at the process delivery center. The performance of the team
being trained is continuously monitored through a training process tracking plan
and dashboards.
Global sourcing can succeed only if vendors are able to quickly assimilate and retain
knowledge. This is proving to be increasingly diffcult given the high attrition rates in
the global sourcing industry. Genpact uses Lean Six Sigma in its people practices to
retain talent by hiring right, training right and rewarding right. As a result, Genpacts
retention rates are at twice the industry level.
During work transfer, the mutually agreed upon process metrics are validated, issue
escalation, resolution paths, and communication plans are fnalized, and the IT plan is
implemented. Genpact also fnalizes the business continuity plan at this stage.
Finally by using Lean Six Sigma in the work transfer phase both the customer and
provider clearly understand:
> The process to be outsourced
> Its links to other processes
> Commitments needed
> Expectations
9 Achieve.Predictable.Excellence
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Lean.Six.Sigma.Enables.Rapid.Process.Transition
A leading UK-based global health and care provider wanting greater scalability
decided to move 10 processes from an existing service provider to Genpact.
The processes, involving 176 associates, had to be transitioned to India in a very
short time of two months.
The use of Lean Six Sigma right upfront at the request for proposal stage and
simultaneous implementation of the solution identifcation and transition stages
enabled rapid process migration. This transition was front loaded to ensure
customer satisfaction, seamless operations post transition and reduced time in
knowledge transfer. The steps taken in this direction were:
> Commencing remote knowledge transfer with offshore team
> Anticipatory visa clearance for potential trainees traveling to UK
> On the job training to Genpact associates
> Creation of IT alternatives
> Customer and Genpact trainers created training manuals/standard operating
procedures well in advance
> Validation of customer data to:
n Create baselines
n Defne service level agreements
n Understand critical performance metrics
n Set expectations
Genpact also created a business process management system which tracks:
> Transaction level productivity
> Daily agent productivity
> Processes and errors
> Trends through dashboards
Business.Impact. .
Genpact transitioned all the 10 process in less than two months and exceeded
customer expectations on 80 of the 88 metrics focused on productivity, accuracy
and turnaround times. Less than six months after commencing the engagement
Genpact processes 10% more claims.
10 Achieve.Predictable.Excellence
Pocess.Stabilization
To stabilize the outsourced process, Lean Six Sigma ensures that
improvements are kept on the new course by preventing a relapse.
An ongoing monitoring plan is developed, documented, and
implemented. Vendors such as Genpact have institutionalized Lean
Six Sigma improvements by modifying systems and structures that
pertain to staffng, training, and incentives.
The stabilization stage, similar to Business Process Management, uses
software tools to:
> Enable process execution
> Monitor process execution
> Analyze process and people performance
> Make process changes in real-time
> Upskilling of people on regular basis
The frst step of process stabilization is the pilot phase. Here Lean Six
Sigma validates in actual application the measurement system on
process inputs that cause or control a problem in output. This ensures
that Genpact can successfully manage the outsourced process, that
the IT systems are in place and that the process documentation is
working. Genpact also analyzes key sources of variation and tests the
offshore site readiness and business continuity.
The second area pertains to determining process capability of
the offshore site by confrming statistically that set goals are met
and defects monitored. Finally, process control is rolled out by
implementing a control plan to remediate identifed defects. The
implemented process and control plan are handed over to the
process owner. On successful implementation of the pilot plan the
outsourced process goes into full production phase. A quality team
monitors the outsourced process until it is stabilized. The metrics are
continuously monitored after process stabilization to prevent relapse
and identify opportunities to improve the process to best-in-class.
Process Stabilization
Stabilization
Monitor performance
by trend analysis
Enable zero surprise
operations through
communication
Six Sigma / Lean driven
process improvements
Create Process Mission
Document Process
Document CTQs
Identify & Segment
Improvements
Create Performance
Management System
Transition
Data Collection Plan
Transition
Performance Monitoring
Develop Dashboards
Improve Process
11 Achieve.Predictable.Excellence
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Lean.Six.Sigma.Project.Reduces.Invoice.Backlog
After outsourcing, a $1.5 billion water technologies company continued to face
a huge backlog of invoices. The outsourcing team working on the accounts
payment process could not create appropriate accruals to close the general ledger
on time. The Genpact Lean Six Sigma team examined the process map of both
upstream and downstream processes and found the following root causes:
> The invoice amount to be booked could not be seen until the end of the year
> Productivity variance in team members
> Lack of prioritization as queued invoice details were not visible
Genpact fxed the IT system to enable viewing of invoice amount. The ability to
view the invoice enabled associates to prioritize them. Several approvals and email
responses were automated to speed up the process. All approval and rejection
notices were consolidated in a single repository for easy access. Genpact rolled
out a training plan to improve productivity of team members.
The result was a reduction in backlog from 5538 invoices to 1290.
12 Achieve.Predictable.Excellence
Continuous.Improvements.
The discipline of Lean Six Sigma must be a way of life and not just a set of discrete
green belt or black belt projects that aim to better Sigma levels and control them.
True disciples of Lean Six Sigma do not treat process stabilizations as a goal but just
another step towards continuous improvements.
Lean Six Sigma tools such as the Voice of Customer, CTQ metrics combined with
structured communication, ensures that customer expectations and value delivered are
always visible. Not only do the Lean Six Sigma tools assist the vendor in proving value,
but the buyers too are able to convey the benefts of outsourcing in their organizations.
Betters Y Factors
Productivity
Business Impact
Speed,
Customer acquisition
Retention
Control, Improve X factors
Accuracy
Minimum touch points
Analysis time
Review Rigor
Business Knowledge
Timely delivery
Uniform process steps
Reach a new level
of process efficiency
13 Achieve.Predictable.Excellence
The Voice of Customer loop runs through and ties continuous improvement and
breakthrough phases to understand customer needs and changing market conditions
that require process changes. The main tool used to get customer feedback is Net
Promoter Score (NPS). NPS measures Genpact through its customers eyes. Using
a model developed by Fred Reichheld at Bain, NPS tracks promoters who are
enthusiastic and recommend Genpact, passives who are satisfed but may not
recommend and detractors who are unhappy.
NPS Overview
Standard means to compare
customer satisfaction levels
across Biz / Processes
Proactive method of Identifying
potential concern areas
Helps capture feedback
from across the cross section
of Process Owners
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Web based tool that helps to
gather data from Customers
about their Needs & Requirements
14 Achieve.Predictable.Excellence
Genpact listens attentively to customers, acts on feedback to convert passives
and detractors to promoters, resulting in an increase in NPS scores. Recent NPS
scores also improved due to process improvements, meeting CTQs/CPS and
effective communication.
A key philosophy at Genpact is to generate good profts for customers and shun bad
profts. Good profts are earned by increasing value to customer, but bad profts are
generated by increasing prices to the detriment of the customer.
Research shows that average frms are in the 5 to 10 percent NPS range, which means
that promoters are slightly higher than detractors. Several companies have negative
NPS. But past and current fast-growing companies such as Amazon, eBay, Costco,
and Dell have NPS ratings in the range of 4080%. Genpact has achieved an overall
NPS score of 55% in the frst half of 2006.
15 Achieve.Predictable.Excellence
Work Transfer
Process moved for
Measuring NPS
Process moved for
Measuring NPS
Database dump taken
for processes to be
measured
Upload completed
data on eVoC Site
Rollout the
questionnaire
scorecard to Clients
(Respondents)
Inform RM / Ops for
info. and follow-up
Filled-in Scorecard
received?
Reports Generated:
Satisfaction level by
CEO
RM every account
SDO
AVP portfolio wise
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Track details on response
from clients. Publish age
response report by CoE
Close VoC survey after
4 weeks. Publish VOC
reports on performance
Send Reminders every
week for two weeks
Respondent names
& email Ids added
Final Verification of
Respondent Details
Follow-up with
respondents for
participation
Continue online
tracking on eVOC site
for responses
Access eVOC site and
fill up the scorecard
and comments
Y
N
16 Achieve.Predictable.Excellence
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Paying.on.Time.Delivers.$13.Million.
Corporations not paying on time do not get the best pricing from suppliers.
Suppliers often provide discounts for timely payments and levy penal interest for
delays. A global customer was losing more than 11% in discounts on invoices due
to delayed payments. The delays also created friction in the supplier relationship.
Using the Lean Six Sigma toolroot cause analysisGenpact tracked the
problem to:
> Not basing invoice prioritization on payment terms
> Inadequate training of AP team across sites
> Infrequent information updating on system
Solution
Genpact developed a tool with prioritization logic that was derived from
payment terms. The suspense report on the IT system was updated more
frequently and to prevent a productivity drop due to increased updating,
Genpact digitized several activities. Genpact is also training the AP team
across multiple sites
Business.Impact.
Performance Metric Pre-Genpact 2005 Post-Genpact 2006
Discount lost (%) 11.1 <3
Discount lost ($) $2 million $700k
Beneft to Client Impact to bottom-line is $1.3 million
17 Achieve.Predictable.Excellence
Breakthrough.to.Best-in-Class
Breakthroughs are achieved due to the best practices followed by outsourcing
vendors. Working with multiple clients give outsourcing providers access to best in
class processes over and above which they have extensive experience in improving
processes. These two strengths enable them to drive processes to best-in-class.
Genpact has achieved several breakthroughs for its customers:
> Higher revenues
> Reduced accounts receivables
> On time payables to get better pricing
> Productivity increases
> Penetrating new markets
18 Achieve.Predictable.Excellence
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Better.Payment.Terms.Saves.$63.Million
Genpacts learning from its multiple customers helps to quickly identify problems
in specifc processes. Since Genpact has eliminated several defects for a range
of customers, each new instance of the same defect is fxed in less time. When
a global media frms account payables faced accuracy and controllership issues
Genpact quickly identifed the problems as:
> Duplicate payments
> Varied vendor payment terms
> Slow system response
Genpact used Lean Six Sigma to improve accuracy, productivity, and payment
terms by:
> Finding root causes for inaccuracy and retraining resources
> Daily audits to track duplicate payments
> Using templates to improve system response
> Reducing variance in payment terms by:
n Analyzing payment history
n Balances
n Terms of contract
Business.Impact
> $63 million savings from improved payment terms
> Accuracy up to 99% from 94%
> Zero duplicate payments from 1%
> Transactional productivity of 18%
> 43% more invoices processed
19 Achieve.Predictable.Excellence
Conclusion
Several organizations implement global sourcing without Lean Six Sigma. Some of
them have been successful and some have failed. In most cases, not integrating
Lean Six Sigma to your global sourcing initiative can lead to waste and rework. It can
also result in an inability to quantify the benefts of global sourcing and statistically
measure continuous improvements. Sometimes emerging risks are not highlighted
early enough, which can disrupt operational fow.
Without Lean Six Sigma, buyers may be able to sense the benefts of global sourcing,
but will fnd it diffcult to explicitly prove that outsourcing benefted the organization.
Lean Six Sigmas data-driven discipline and its structured communication methodology
solves the problem.
Lean Six Sigma is the DNA of Genpact. Its embedded in everything that Genpact
does, both internally and for external customers. It is a culture inherited from
Genpacts parent, GE, and necessary to successfully leverage Lean Six Sigma.
Genpact has over 400 black belts, master black belts, and quality leaders. It also
has over 2,000 certifed greenbelts and 150 lean coaches. Genpact usually runs
about 400 Six Sigma projects and over 2,400 lean projects. Genpacts Lean
Six Sigma discipline delivers industrial strength processes to customers.
Arvinder Monty Singh is Senior Vice President
of Lean Six Sigma and Transitions. He can be
reached at arvinder.singh@genpact.com.