Transforming Six Sigma Into A Service Methodology John Karolenko, Director of Project Development...

Transforming Six Sigma Into A Service Methodology

John Karolenko, Director of Project Development PHH Arvaljohn.karolenko@phh.com410-771-3738

September 15, 2005

Transforming Six Sigma Into A Service Methodology

John Karolenko, Director of Project Development PHH Arvaljohn.karolenko@phh.com410-771-3738

September 15, 2005

WelcomeWelcome

Introduction Background on PHH

Process Improvement in Service Delivery Why is PHH doing this? Challenges in the service sector The focus on the customer Progress to date

Who is PHH?Who is PHH?

PHH CorporationPHH Corporation

• PHH Arval is part of PHH Corporation Mortgage and vehicle management operations efficiently

provide outsourced services to corporate customers

PHH Mortgage is the sixth largest retail originator of residential mortgage loans in the United States

PHH Corporation (NYSE: PHH) has 7,800 employees in North America

Business ProfileBusiness Profile

• PHH Arval’s business history and culture are all about innovative customer service Industry leaders and innovators since 1946

Recognized leader in developing technology that enhances customer service

Diverse and experienced team of customer service professionals

Consistent track record of successful relationships

Business ScopeBusiness Scope

• PHH Arval is an industry leader in outsourced fleet management services for corporate clients and government agencies throughout North America Over 1,300 employees

600,000 vehicles under management

Provide services worldwide with global marketing partners

Purchase more than 80,000 vehicles annually

Strategic RelationshipsStrategic Relationships

• PHH Arval partners with thousands of organizations worldwide. Over 100 clients have been with PHH for 20 years

or more

What Exactly Does PHH Do?What Exactly Does PHH Do?

PHH provides services for: Lease funding Vehicle specification design & order processing Management of vehicle delivery, title & registration Comprehensive suite of maintenance & repair services Vehicle sale Consulting

Acquire Maintain Dispose

The Lifecycle of a Vehicle

Six Sigma &Six Sigma & Service DeliveryService Delivery

Three Years AgoThree Years Ago

• PHH detected a shift in our client’s focus. They wanted to know: PHH what are you doing to improve yourself?

How will you know that you have improved?

• What they really meant was: We’re working to improve ourselves

We only want to partner with organizations who can help us meet our improvement goals

Industry ChangesIndustry Changes

• More and more Six Sigma focused clients and prospects Becoming more common in every visit

Increased interest in PHH’s metrics that are displayed throughout our building

• Service Level Agreements (SLA’s) becoming more common Ascendancy of purchasing managers

Clients want to know how they perform against the baseline

OpportunityOpportunity

• This was an opportunity to gain a competitive advantage

Differentiate our service from competitors

Move PHH from “Good” to “Great” Establishing PHH as the clear

service leader in our industry• Competitors include GE

OpportunityOpportunity

• The timing was right PHH is a thriving organization, not one under threat

• No desperate times and desperate measures Having a solid foundation ensured that we had time to do

this right Building on a strong service delivery culture

Our ResponseOur Response

• A Six Sigma based program for improvement

• We chose Six Sigma for its: Proven track record

• Largely in manufacturing Readily available supply of:

• Knowledge• Skills• Tools

Our ChallengeOur Challenge

• Recognized immediately that PHH would have to adapt 6 to the service world PHH does not manufacture anything

Much of our service delivery is done through networks of service providers outside of our building

Our networks are often the visible face of PHH to our customers

PHH’s Approach

PHH’s ApproachPHH’s Approach

• We follow the basic DMAIC steps Data-driven Metrics-focused

PHH’s ApproachPHH’s Approach

We do employ trained Black Belts to customize our approach with the various processes that we support

PHH’s ApproachPHH’s Approach

• The service challenge How to keep service flowing while using the same resources

to improve it?

• Organizational readiness Leading change

• “If we’re doing fine, why do we need to do this?”

No traditional top down implementation• Started with our service delivery organization• Build wins & interest, then expand

PHH’s ApproachPHH’s Approach

• Specific focus on making the client central to our improvement effort Typically, efforts are focused on the adopting organization Client benefit is often, at best, an after thought PHH still expects to benefit from 6, but the client focus

directs where our efforts should be• If we focus on the right metrics, the dollars will follow

ChallengesChallenges

Challenges In The Service WorldChallenges In The Service World

• Perceptions against Six Sigma

• Gathering Data

• Client Customization

Some are unique to service, some are not

Challenges In The Service WorldChallenges In The Service World

• Perceptions against Six Sigma

“This isn’t manufacturing… Six Sigma doesn’t apply here”

“We never do anything the same way twice”

“How can you document a process when everything is an exception?”

“We do whatever it takes to satisfy the client. That’s our process”

Challenges In The Service WorldChallenges In The Service World

• Gathering Data Legacy systems

• Hybrid of system reporting and manual methods

Lack of recognition for the need to gather the data• “I know where the problem is…”

SurveysSurveys

• We do make extensive use of client & driver surveys While we incorporate this into our improvement efforts,

surveys represent lagging information Since we enforce client’s policy, not always a true measure

Challenges In The Service WorldChallenges In The Service World

• Client Customization In customized service delivery “Everything is an exception”

The standard process is the most frequently occurring exception

This is a fundamental issue for PHH• Our willingness to provide highly customized service is a

strength over our competitors• It’s also a source of variability in our service delivery

Services vs. ProductsServices vs. Products

• Service delivery is significantly more fragile that products It lives from experience to experience, based on perceptions At PHH long intervals between contact with drivers

• Because you can only experience a service as opposed to touching a product There is always some level of apprehension surrounding its

reliability and availability Vulnerable to misperceptions about service levels

Client FocusedClient FocusedA differentiator from our competitors

Client FocusedClient Focused

• In service delivery, PHH can’t Measure material waste Test product output

• Instead, we focus on those things that matter most to clients

• We’re only as good as our last service delivery experience!

Program FocusProgram Focus

Rally to Results is focused on:

SpeedSpeed

ReliabilityReliability

ValueValue

Program FocusProgram Focus

Speed of service delivery

Reliability of our service

Value that PHH brings to the customer

MetricsMetrics

SpeedSpeed How long does the process take?How long does the process take? How long How long shouldshould it take? it take?

ReliabilityReliability How often does it fail? Why does the process fail?

ValueValue Have we saved the customer money?

MetricsMetricsThe

MetricHierarchy

AverageSpeed ofAnswer

OrderReceived to

OEM

SpecificMeasures

OrderAccuracy

Registration RenewedOn Time

SubrogationRecovery

VMA Savings

First Run Yield SavingsCycle TimePHHFocus

Speed Reliability ValueClientFocus

Sub LevelData

ProcessSteps

Process Improvements

Vehicle Accident ServicesVehicle Accident ServicesA Case Study in Reducing Cycle Time

SM

Vehicle Accident Services:Key ObjectivesVehicle Accident Services:Key Objectives

• Increase Driver Productivity

• Ensure driver safety

• Get them back on the road as soon as possible

• Manage Costs

• Minimize repair time

• Manage the cost rental vehicles

• Choose the best repair/replace option

• Maximize recovery of damages

Property of PHH Arval

Vehicle Accident Services:The ProcessVehicle Accident Services:The Process

Driver Calls toReport Incident

Incident is Closed

SubrogationAssesses and

ManagesRecovery

DamageAuthorizes and

Manages Repair

DriverAssistanceCompletes

Report

Obtain EstimateAuthorizeRepairs

Follow up onRepair Status

Obtain FinalInvoice

Property of PHH Arval

Define: The ProblemDefine: The Problem

The VAS “Days to Shop” component of cycle time is

impacted by slow driver response time in obtaining

estimates or scheduling repairs.

• The average cycle time for the months of August and September

2003 was 15.7 days.

Property of PHH Arval

Define: The Detailed Process FlowDefine: The Detailed Process Flow

Was theestimate

obtained?

Contact driver forstatus of estimate

by letter (3 wks.) orIVR call (2 wks.)

EstimatedObtained

Was theestimate

obtained?

Contact shop; if noestimate contact

driver for status byletter (3 wks.) or IVR

call (2 wks.)

Was theestimate

obtained?

Contact driver; if stillno estimate contact

client by letter or email(30 days) and close in

2 weeks

Was theestimate

obtained?

Contact shop; if noestimate, close file as"closed without repair"

no

yes

no no no

yes

Driver Calls toReport Incident

Incident is Closed

SubrogationAssesses and

ManagesRecovery

DamageAuthorizes and

Manages Repair

DriverAssistanceCompletes

Report

Obtain EstimateAuthorizeRepairs

Follow up onRepair Status

Obtain FinalInvoice

Property of PHH Arval

Define: Begin the Business CaseDefine: Begin the Business CaseBusiness Case: Damage Control Fax Process Date: 1/29/04

Project Owner: L. Gamber/ J. Baker Version: 2.0

Project Summary Damage Control cycle time is impacted by slow driver response time in obtaining estimates or scheduling repairs.

Vision The driver will receive “real time” correspondence which will prompt the driver to take action in a more efficent time frame.

Problem Statement The Damage Control team, the subrogation team and the client are negatively impacted by delays in driver response time due to the current manual letter process. The current process is to mail a letter to the driver requesting that an action be taken within a specified period of time. When there is a lack of response by the driver, the Damage Control team is required to follow up more and an increased cycle time which reduces first run yield. Subrogation claim handle time is also increase creating a potential loss of recovery due to the statutes of limitations, which ultimately may impact the client on a financial level.

Objective Statement Criteria for Evaluation

Scope In Scope Out Of Scope

Assumptions

Constraints & Dependencies

Impact PHH Internal PHH External

Risk Factors

Stakeholders CVS Owners: T. Keilty D. Zuidema L. Gamber J. Baker Damage Control Team

BD Owners: N/A

Project Coach: K. Ridgley

Property of PHH Arval

MeasureMeasure

• Ran report to determine cycle time

• Manually tracked volume of mailings

Property of PHH Arval

AnalyzeAnalyze

VAS Cycle Time - Days to Shop

0

2

4

6

8

10

12

14

16

18

Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04

Cyc

le T

ime

(in

day

s)

Days to Shop

Property of PHH Arval

AnalyzeAnalyze

• Average Days to Shop cycle time = 14.4 days

• Annual volume of mailings = 11,124

• Time spent on mailings = 742 hours annually

Property of PHH Arval

Improve Improve

• Implementation Plan: Driver follow up letters will be emailed instead of mailed whenever

possible. The follow up time between communication attempts will be

reduced from 3 weeks to 1 week.

• Goals: Reduce driver mailings by 70% Decrease Damage Control cycle time by 5% Increase Damage Coordinator productivity by 3%

Property of PHH Arval

ControlControl

VAS Cycle Time - Days to Shop

0

2

4

6

8

10

12

14

16

18

Aug'03

Sep Oct Nov Dec Jan'04

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan'05

Feb Mar Apr May Jun

Cyc

le T

ime

(in

day

s)

Days to Shop Linear (Days to Shop )

Improvement Implemented

2/18/04

Property of PHH Arval

ControlControl

Results:

•Reduced annual volume of mailings by 76% 5,200 to 1,500

•Decreased cycle time by 35%, from 14.4 days to 9.3 days

•Decreased touch time by 57%

Property of PHH Arval

Six Sigma Still AppliesSix Sigma Still Applies

• Fundamentals of Six Sigma still apply DMAIC Five Whys Data driven Pareto tool Reducing variability in processes Shifting the mean

SustainingSustainingThe EffortThe Effort

Client VisitsClient Visits

Client VisitsClient Visits

• An opportunity to ensure clients understand what we’re working to achieve on their behalf Process improvement is central to every client visit We typically meet with clients before they see our service

areas Lead with our metrics by posting them in every service area

• 10 Displays – All focused on Speed, Reliability & Value

• Almost 50 key metrics visible to anyone who walks in the door

– Requires courage to take this risk

Client VisitsClient Visits

• A dialogue with our visitors PHH’s approach to process improvement What clients can expect from PHH Encourage clients to ask our managers

• “What are you working on?”• “How will my drivers benefit?”

Discuss a case study illustrating our efforts

RecognitionRecognition

R2R Stars Are Awarded For:Bronze    Quantifiable financial benefit

between $1,000 and $5,000 or

Observable improvement in one or more process metrics

Silver    Quantifiable financial benefit between $5,000 and $25,000

Gold    Quantifiable financial benefit above $25,000   

Craig PijanowskiASE Certified Mechanic

Maintenance Team Leader

Key ThoughtsKey Thoughts

• Six Sigma is still highly effective in the service realm

• Need to be flexible in adapting it to services

• Must focus on what’s important to the customer

QuestionsQuestions