5

Analysis of Chola Way of Business: Turn Around Time Reduction of Light Commercial Vehicle Finance for Walk-in Customers using Lean Six Sigma and TRIZ approach

ByGagandeep Singh

Indian Institute of ManagementRaipurJune, 2013Analysis of Chola Way of Business: Turn Around Time Reduction of Light Commercial Vehicle Finance for Walk-in Customers using Lean Six Sigma and TRIZ approach

ByGagandeep SinghUnder the guidance of

Shri Tushar S. Hirani Dr. Rajeev RoySr. AM Geo- Surat Associate ProfessorCholamandalam Investment IIM R, Raipurand Finance Company Limited

Indian Institute of ManagementRaipurJune, 2013Certificate of Approval

The following Summer Internship Report titled "Analysis of Chola Way of Business: Turn Around Time Reduction of Light Commercial Vehicle Finance for Walk-in Customers using Lean Six Sigma and TRIZ approach" is hereby approved as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of Post-Graduate Programme in Management for which it has been submitted. It is understood that by this approval the undersigned do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn therein but approve the Summer Internship Report only for the purpose it is submitted.Summer Internship Report Examination Committee for evaluation of Summer Internship Report Name Signature

1. Faculty Examiner

2. PGP Summer Internship Co-coordinator

Certificate from Summer Internship Guides

This is to certify that Mr. Gagandeep Singh, a student of the Post-Graduate Programme in Management, has worked under our guidance and supervision. This Summer Internship Report has the requisite standard and to the best of our knowledge no part of it has been reproduced from any other summer Internship, monograph, report or book.

Dr. Rajeev RoyShri Tushar S. HiraniAssociate Professor Sr. AM Geo- SuratIIM Raipur Cholamandalam Investment and05/06/2013Finance Company Limited Third Floor, Shanthi Point, B/S Reeva House, Udhana Junction, Surat, Gujarat 05/06/2013

Abstract

With the cut throat competition becoming ubiquitous, it has become imperative for each and every organization to provide exhilarating customer experience and satisfy specific needs of the customer in a time bound manner. Banking, Financial Services and Insurance (BFSI) sector is no exception to the above stated fact. It becomes even more important for a Non-Banking Financial Company engaged in Vehicle Finance segment to atleast equate themselves if not surpass the Banks due to inherent superiority of banks in terms of low cost of capital and large customer base. In order to maintain their market share in the commercial vehicle finance segment it becomes imperative for the players to shorten the Turn Around Time of loan sanction and disbursal, in conjunction with high productivity of Sales Field Executives a must for the former to be in place. This research has focused on the Customer Walk-in with special focus on Light Commercial Vehicle Finance segment as the topic of research study. This project makes use of the unique combination of Lean Six Sigma tools and TRIZ Framework of inventive principles as the base for evaluation of the current system and making of necessary recommendations. Define Measure, Analyze, Improve, Control i.e. DMAIC approach with special application of TRIZ framework in the Improve phase was utilized for reducing the duplication of efforts, elimination of wastes, and improvement in productivity and cost reduction. The process involved estimation of as-is process capability using Sixpack capability analysis for the purpose of calculation of short and long term process capability of each process. This further paved the way for root cause analysis for identifying the major reasons behind existence of bottlenecks in the process which made use of FMEA, Pareto and Fishbone Diagram. Improve phase involved the application of TRIZ framework for making recommendations on the basis of scientific analysis of improving and worsening features due to recommendations so made. However it was not possible to measure the to-be process capability and employ control measures due to time constraints.

Major recommendations made were as follows:1) SFE allocation to be based on past/expected productivity to ensure that work load is balanced across each lean cell team. 2) Shift wise rotation of SFEs in the office for elimination of the waiting time due to non-availability.3) Removal of CRM from the process and directing the Walk-in Customer directly to the SFE to prevent the duplication of efforts and resources due to superficial query resolution and entry into CSM. 4) Intimation to customer regarding the submission of Margin money, PDC beforehand which will help to bring the waiting time to almost "zero". This is akin to the practice of slipping in the hotel bill in the room of the customer during the last night of their stay. 5) Lean cell Realignment and job rotation- Cross training to executives will ensure resource optimization and overcoming the problem of overlooking of minute crevices in the files even though related to other department. This will also ensure early detection and resolution of queries. 6) Elimination of External FI and the process to be conducted in- house7) Combined Application + Term Sheet will help to reduce documents supposed to be scanned and repeated check points. Implementation of the envisaged improvements will help to bring down the TAT from 9.86 days to 3.6 days (approximately), an improvement of 63.48%. Thus, productivity in terms of files per SFE is likely to improve from 4.56 to 11.25, an increase of 147%. This will bring down the monthly and yearly salary expense of the branch by INR 66563.89and 789766.73 respectively. Similarly, the transaction cost per file will entail a saving of INR 1823.67.The results prove that the application of the LSS approach combined with TRIZ methodology effects successful improvement of service activities.Acknowledgement

I express my sincere gratitude to the faculty members of IIM Raipur, the library and computer centre for providing the guidance and support throughout my internship. I am very grateful to Mr. Tushar S. Hirani (Senior Area Manager Geo- Surat, Cholamandalam Investment and Finance Company Limited) for his constant support and guidance as my mentor throughout the duration of project. I express my sincere gratitude to Mr. Manish Radhakrishnan (Asst. Manager-Mumbai-Vehicle Finance Support) for his constant endeavor to help me as my Project Guide and Reporting Manager. I express my sincere thanks to Dr. Rajeev Roy (Associate Professor, Indian Institute of Management Raipur) for his consistent encouragement and guidance as Faculty Guide. I am grateful to Cholamandalam Investment and Finance Company Limited for providing me the opportunity to intern at their esteemed organization. I would also like to thank all the employees at the Surat branch of CIFCL for the help and cooperation extended for completion of the project. Finally, I wish to thank my parents, family members and friends for their constant support in my endeavor.

_______________________ (Signature of the Student)GAGANDEEP SINGH 12PGP015

Table of ContentsCertificate of ApprovaliiiCertificate from Summer Internship GuidesivAbstractvAcknowledgementviiTable of ContentsviiiList of FiguresxiiList of TablesxiiiList of AppendicesxivAbbreviationsxvCHAPTER 1: INTRODUCTION11.1.ABOUT CHOLAMANDALAM INVESTMENT AND FINANCE COMPANY LTD.11.1.1.Murugappa Group11.1.2.Cholamandalam Investment and Finance Company Limited (CIFCL)11.1.3.Cholamandalam Distribution Services Limited (CDSL)21.1.4.Cholamandalam Securities Limited (CSec)21.2.VALUES AND BELIEFS21.3.PRODUCT MIX31.3.1.Vehicle Finance31.3.2.Home Equity Loans31.3.3.CorporateFinance31.3.4.GoldLoans31.3.5.Distribution and Advisory Services41.3.6.Securities41.4.VEHICLE LOAN FINANCE41.4.1.Vision- Chola 201541.4.2.Product Mix41.5.INDUSTRY ANALYSIS51.5.1.Future Growth Potential of Commercial Vehicles51.5.2.Future Growth Potential of Light Commercial Vehicles71.5.3.Trends in Automotive Finance Industry91.6.MANAGERIAL PROBLEM111.6.1.Background to the problem111.6.2.Managerial/Business Problem13CHAPTER 2: RESEARCH PROBLEM15CHAPTER 3: LITERATURE REVIEW163.1.LEAN SIX SIGMA163.2.APPLICATION OF LEAN SIX SIGMA IN MANUFACTURING173.3.APPLICATION OF LEAN SIX SIGMA IN SERVICE INDUSTRY173.4.TRIZ FRAMEWORK17CHAPTER 4: RESEARCH DESIGN194.1.RESEARCH METHODOLOGY194.1.1.Define:214.1.2.Measure:214.1.3.Analyze214.1.4.Improve224.1.5.Control224.2.SAMPLE AND SAMPLE FRAME224.2.1.Target Population224.2.2.Sampling Frame234.2.3.Sampling Technique234.2.4.Sample Size234.2.5.Data Collection234.3.DATA ANALYSIS244.3.1.Identification of problem244.3.2.SIPOC Diagram244.3.3.Process Flow Diagram254.3.4.Data Collection264.3.5.Measurement of as-is capability264.3.6.Identification of root causes:304.3.7.Failure mode and effects analysis:314.3.8.Identification of vital few initial variables:324.3.9.Development of solutions using TRIZ matrix:324.3.10.Redesigning of new process flow334.3.11.Formulation of control plan33CHAPTER 5: RESULTS AND CONCLUSIONS345.1.SIPOC DIAGRAM345.2.AS-IS PROCESS FLOW DIAGRAM345.3.MEASUREMENT OF ASIS CAPABILITY395.3.1.Query at Reception395.3.2.Query Data Entry405.3.3.Credit process before Customer visit415.3.4.Customer meeting425.3.5.Credit Process After customer meeting435.3.6.Operations445.3.7.CPU455.3.8.Total Turnaround Time465.3.9.Pareto Chart of Factors475.4.FAILURE MODES AND EFFECTS ANALYSIS (FMEA)485.4.1.Pareto Chart based on Risk Priority Number535.5.TRIZ MATRIX545.6.TO- BE PROCESS FLOW DIAGRAM635.7.EXPECTED COST REDUCTION, TAT REDUCTION AND PRODUCTIVITY IMPROVEMENT65CHAPTER 6: RECOMMENDATIONS666.1.LIMITATIONS686.2.FUTURE SCOPE68REFERENCES70APPENDIX 171APPENDIX 273

List of FiguresFigure 1.1 Sale of Passenger Vehicles in India...6Figure 1.2 Figure 1.2: Chart of % increase in LCV sales8 Figure 1.3 Month wise Productivity of SFEs in Retail vertical12 Figure 1.4 Number of SFEs having productivity < 5 (month wise)..12 Figure 1.5 Number of SFEs having productivity > 15 (month wise)13 Figure 4.1 Conceptual Framework20 Figure 5.1 SIPOC Diagram..35 Figure 5.2 As-is Process Flow Diagram36 Figure 5.3 Minitab Output for Process Capability Sixpack of query at CRMs desk39 Figure 5.4 Minitab Output for Process Capability Sixpack of query data entry...40 Figure 5.5 Minitab Output for Process Capability Sixpack of credit process before SFE visit to customer41 Figure 5.6 Minitab Output for Process Capability Sixpack of SFE visit to customer...42 Figure 5.7 Minitab Output for Process Capability Sixpack of Credit Process after SFE visit to customer43 Figure 5.8 Minitab Output for Process Capability Sixpack of Operations44 Figure 5.9 Minitab Output for Process Capability Sixpack of CPU.....45 Figure 5.10 Minitab Output for Process Capability Sixpack of Total Turnaround Time.46 Figure 5.11 Pareto Chart of Factors responsible for failures.47 Figure 5.12 Pareto Chart of Factors based on Risk Priority Number53 Figure 5.13 To- be Process Flow Diagram....63 Figure 5.14 Excel Snapshot of Calculations of expected improvement65 Figure A 2.1 Observation Sheet for Time taken for step: Customer and CRM73 Figure A 2.2 Observation Sheet for Time taken for step: Query at Reception.73 Figure A 2.3 Observation Sheet for Time taken for step: Credit process Before Customer visit by SFE...74 Figure A 2.4: Observation Sheet for Time taken for step: Customer visit by SFE...74 Figure A 2.5 Observation Sheet for Time taken for step: Credit process after Customer visit by SFE...75 Figure A 2.6 Observation Sheet for Time taken for step: Operations...76 Figure A 2.7 Observation Sheet for Time taken for step: CPU.76 Figure A 2.8 Summary sheet of Total Turn Around Time for 20 observations77

List of Tables

Table 1.1 Sale of Passenger vehicle in India...6Table 1.2 Sale of LCV in India and YOY growth...8 Table 1.3 Monthly increase in sales8 Table 1.4 Market share dynamics in automotive and Vehicle Finance..9 Table 1.5 Difference in RBI requirements for Banks and NBFCs10 Table 1.6 Productivity improvement from April 2012 to March 2013.13 Table 5.1 FMEA Report48 Table 5.2 Inventive Principles and Improvement action...54 Table 5.3 Improving and Worsening features...59 Table A 1.1: Ranking for Severity of a Failure Mode (FMEA)71 Table A 1.2: Ranking for Detection of a Failure Mode (FMEA)..71 Table A 1.3: Ranking for Occurrence of Failure Mode (FMEA)..72

List of Appendices

APPENDIX 171APPENDIX 273

Abbreviations

CIFCL Cholamandalam Investment and Finance Company LimitedCSM Customer Servicing ModuleLCV Light Commercial VehicleSCV Small Commercial VehicleM&HCV Medium and Heavy Commercial VehicleNBFC Non-Banking Finance CompanySFE Sales Filed ExecutiveLSS Lean Six SigmaTAT Turn Around TimeFMEA Failure Modes and Effect AnalysisQDE Quick Data EntryCRM Customer Relationship ManagerCIBIL Credit information Bureau (India) LimitedFI Field InvestigationMMR Margin Money RequirementPDC Post Disbursal DocumentECS Electronic Clearance Service

xv

CHAPTER 1: INTRODUCTION1.1. ABOUT CHOLAMANDALAM INVESTMENT AND FINANCE COMPANY LTD.1.1.1. Murugappa GroupEstablished in 1990,INR 225 Billion Murugappa Group is one of India's leading business houses. The Group comprises of 28 businesses including eleven listed Companies traded in NSE & BSE. Headquartered in Chennai, some of the major Companies of the Group include Carborundum Universal Ltd., Cholamandalam Investment and Finance Company Ltd., Cholamandalam MS General Insurance Company Ltd., Coromandel International Ltd., Coromandel Engineering Company Ltd., E.I.D. Parry (India) Ltd., Parry Agro Industries Ltd., Sabero Organics Ltd., Shanthi Gears Ltd., Tube Investments of India Ltd., and Wendt (India) Ltd.Group is a market leader in afore-mentioned segments- Abrasives, Auto Components, Cycles, Sugar, Farm Inputs, Fertilizers, Plantations, Bio-products and Nutraceuticals. It has a wide geographical presence spanning 13 states in India and 5 continents. Renowned brands like BSA, Hercules, Ballmaster, Ajax, Parrys, Chola, Gromor and Paramfos form a part of the prestigious group.Cholamandalam is a pan-Indian financial services provider. It comprises of the parent company, Cholamandalam Investment & Finance Company Limited (CIFCL), and its corresponding subsidiaries CDSL and CSec. Following is an overview of the abovementioned companies.1.1.2. Cholamandalam Investment and Finance Company Limited (CIFCL)CIFCL was incorporated in 1978 by Murugappa Group as an attempt to foray into the financial services sector. The Company commenced business as an equipment financing company. Overtime it has emerged as a comprehensive financial services solution provider that includes exhaustive product mix comprising of vehicle finance, business finance, home equity loans, and stock broking. The Company operates from over 350 branches across India with assets under management being over Rs.10000 Crores. 1.1.3. Cholamandalam Distribution Services Limited (CDSL)CDSL is in the business of providing wealth management services with focus on larger product basket. Products offered include mutual funds, life and general insurance, equities, fixed deposits, bonds, real estate advisory and home loan.1.1.4. Cholamandalam Securities Limited (CSec)CSec is a securities broking company offering broking and equity advisory services to institutional investors. Csec is a member of Bombay Stock Exchange Limited and National Stock Exchange of India Limited. It is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited.1.2. VALUES AND BELIEFSThe vision of the company has been envisioned in the form of five lights as mentioned below:1) Integrity: We value professional and personal integrity above all. We achieve our goals by being honest and straight forward with all our stakeholders. We earn trust with every action, every minute of every day.2) Passion: We play to win. We have a healthy desire to stretch, to achieve personal goals and accelerate business growth. We strive constantly to improve and be energetic in everything that we do.3) Quality: We take ownership of our work. We unfailingly meet high standards of quality in both what we do and the way we do it. We take pride in excellence.4) Respect: We respect the dignity of every individual. We are open and transparent with each other. We inspire and enable people to achieve standards and challenging goals. We provide everyone equal opportunities to progress and grow.5) Responsibility: We are responsible corporate citizens. We believe we can help make a difference to our environment and change lives for the better. We will do this in a manner that befits our size and also reflects our humanity. 1.3. PRODUCT MIXMajor products and services being offered are as follows:1.3.1. Vehicle FinanceCholamandalam is one of the pioneers in Commercial Vehicle Financing. Having financed over 750,000 customers, and increasing by over 15,000 new customers every month Chola VF offers finance for a large variety of vehicles through a wide range of product. It offers finance for used as well as new vehicles ranging from small commercial vehicles, Light and Heavy Commercial Vehicles, Multi Utility Vehicles to tractors and cars. It has a strong distribution network with presence in over 344 branches and expanding rapidly.1.3.2. Home Equity LoansIt provides long tenure loans ranging from 10 lakhs to 5 Crores with special products for self-employed depending on their requirements.1.3.3. CorporateFinanceThe CMF division caters primarily to Corporates, Promoters, High Net worth Individuals and Retail investors. The products include:1) Purely Equity shares2) Commercial/Residential Property & shares3) Pure Commercial / Residential Property4) Combination of assets and shares1.3.4. GoldLoansThe company has recently started Gold Loan operations in 45 branches across Andhra Pradesh, Tamil Nadu and Karnataka.1.3.5. Distribution and Advisory ServicesIt also provides wealth management services with products offered being mutual funds, life and general insurance, equities, fixed deposits, bonds, real estate advisory and home loan.1.3.6. SecuritiesIt offers stock broking and equity advisory services to institutional investors, including many of the largest mutual funds in India and individual clients across the country.1.4. VEHICLE LOAN FINANCE1.4.1. Vision- Chola 20151) Follow a direct to customer model in all of our businesses2) Be our customers financial advisor3) Be a company that acquires, develops, excites, and retains top talent 4) Have the most productive workforce in theindustry5) Utilize technology to its fullest capability 6) Maintain the strongest values and ethics7) Act as one team

1.4.2. Product MixThe product offerings have been segregated primarily on the basis of New and used Vehicle Finance with corresponding category offerings being based on varied criteria such as commercial, personal, special product offerings to self-employed etc. 1.4.2.1. RetailRetails as the name suggests comprises of new vehicles finance offerings except for Medium and Heavy Commercial vehicles which is covered in the product category Direct:1) Three wheelers: It includes both passenger and commercial vehicles of companies such as Bajaj, Mahindra and Mahindra, Atul Auto, TVS etc.2) Small Commercial Vehicles: Major financed vehicles include TATA ace, Maxximo, Force and Piaggio.3) Light Commercial Vehicles and Intermediate Commercial Vehicles: It includes Eicher, TATA, Ashok Leyland, Bharat Benz etc.4) Cars: All personal and commercial purpose cars.5) Multi Utility Vehicles: Major vehicles financed includes Scorpio, Bolero, Innova with special focus on Taxis and Yellow Board segment

1.4.2.2. Direct 1) Medium and Heavy Commercial Vehicles: This includes financing of new M&HCV.2) Sambandh: This is also a new vertical introduced recently which focuses on repeat business from existing customers. Through this vertical company wishes to leverage the existing customer base and reaching the dormant customers by providing them benefits of Pre approved loans. It tends to Optimize repeat business potential, keeping acquisition cost at minimal.3) Shubh: Company has come up with special vertical of Shubh Trucks for providing financing services to the self-employed truck drivers which categorizes as a high yielding offering.1.5. INDUSTRY ANALYSIS1.5.1. Future Growth Potential of Commercial VehiclesAs per KPMG Global automotive finance and leasing: The role of product diversification and emerging markets in future growth 2013,India is among the markets with highest growth potential in traditional F & L services and additional vehicle services. Despite obstacles, such as the lack of infrastructure, state bureaucracy and corruption GDP growth rate is likely to remain high compared to mature automotive markets. India has a growing young population with an increasing number of well educated workers and a strong demand for passenger as well as commercial vehicles.Passenger vehicle sales are expected to grow with a CAGR of 14% over the next 15 years. Table 1.1 shows the past sales of passenger vehicles in India till 2012 and forecasted and predicted sales till 2027 (Source: LMC Automotive, second quarter 2012). Same has been depicted graphically by the means of Figure 1.1 for better understanding.Table1.1: Sale of Passenger vehicle in IndiaYearSales (In millions)

20091.7

20102.2

20112.3

20122.6

20132.9

20143.5

20154.1

20164.8

20175.6

202211.4

202719.4

Figure1.1:Sale of Passenger Vehicles in India1.5.2. Future Growth Potential of Light Commercial VehiclesAfter posting a strong 30% and above growth over the past two fiscals i.e. 2010-11 and 2011-12, the growth in the Commercial Vehicle (CV) industry slowed down during fiscal year 2012-13. During April-November 2012, the domestic Commercial Vehicle industry registered a growth of 20% on Year on Year basis riding on a strong 29.3% growth in Light Commercial Vehicles and a meagre 9.4% in Medium &Heavy Commercial Vehicles.Steadily rising interest rates, contracting industrial output and a considerable increase in vehicle prices coupled with high-base effect of previous years are the main factors hampering the growth. The operating environment for fleet operators has been deteriorating over the past six months. All factors that influence the viability appear to be going against the profitability and cash flows. The sharp rise in overall cost of ownership combined with considerable rise in operating costs and an almost stagnant freight rates in a confluence are flagrant signs of pressure on fleet operators.As per the CRISIL report on Indian Commercial Vehicle Industry Operators are postponing their expansion plans due to rising interest rates and expectation of slowing industrial growth. Capacity utilization is declining and freight rates continue to remain stagnant despite rise in operating expenditure for operators. Given the current environment where the growth in industrial activity is low and the operating environment for fleet operators is the near term appears to be subdued, resulting in a slowdown in new vehicle sales.Among segments, M&HCVs which tend to be more influenced by the macro-economic indicators is likely to register a weaker performance over the near term as against the steadily growing LCV segment. The proliferation of the hub-n-spoke model, improving last mile connectivity and last but not the least the strong demand originating from rural segment is likely to drive demand in the LCV segment over the medium term. LCV industry is expected to grow by 17-18% in FY13. LCV is expected to maintain a CAGR of 11-13% over the next five years which is a good indicator of the robustness of LCV segment.Table1.2: Sale of LCV in India and YOY growthSegmentVolumesYOY Growth%

FY09FY10FY11FY12FY13 (Expected)FY09FY10FY11FY12FY13 (Expected)

LCV215912200699287777353620413735-0.4-33.233.531.817-18

Month% increase over previous month

Nov-1123

Dec-1136

Jan-1218

Feb-1210

Mar-1214

Apr-1215

May-1222

Jun-1231

Jul-1238

Aug-1236

Sep-1237

Oct-1220

Nov-1252

Table1.3: Monthly Figure1.2: Chart of % increase in LCV sales Increase in sales

1.5.3. Trends in Automotive Finance IndustryIndias auto finance industry is estimated at Rs 60,200 Crores for FY2012.The auto finance Industry has both organized and unorganized players. The organized players comprise of:1) Banks: Private, foreign, public and co-operative 2) NBFCs can be further categorized as standalone NBFCs and captive NBFCs.3) Captive NBFCs are financing arms of auto manufacturers set up with the objective of primarily financing the products of their parent manufacturer.4) The unorganized players include local moneylenders, dealers etc. The auto finance industry was once dominated by the NBFCs. While banks dominated the low risk car-financing segment, NBFCs dominated the commercial vehicle space, which was perceived to be risky. However, the entry of banks in retail finance space poised severe competition to NBFCs. The share of auto loans in total advances of banks has gone up from 11% in FY2000 to almost 25% in FY12. Banks have an edge over the NBFCs because of their access to low cost funds in the form of CASA (Current and savings account). With the advantage of low-cost funds, banks have eaten into the market share of NBFCs. The market share of NBFCs in car and CV finance segments declined from 35% and 86% in 2001-02 to 20- 25% and 40-45% in 20010-11 respectively. (Source: CRISIL).YearCar and Utility VehiclesCommercial Vehicles

NBFCBanksNBFCBanks

2001-0235658614

2005-0618824951

2011-1222775054

Table1.4: Market share dynamics in automotive and Vehicle Finance

1.5.3.1. Competitive advantage of NBFC over banksRegulatory requirements Regulatory Requirements are less stringent for Auto finance companies as compared to banks. Like Banks, the Auto Finance companies are governed (NBFC norms) by RBI. However the regulatory requirements for auto finance companies are less stringent than those for banks as 1) Auto Finance companies dont need to maintain a cash reserve ratio (CRR), 2) No not need to make loans to priority sectors (whereas the banks have to lend 40% of their loan book to the priority sector) 3) Lower SLR requirements (15% vs. 25% for banks). Hence despite being disadvantaged on the cost of the funds (due to access to CASA), the auto finance companies can compete with banks on pricing of loans. Moreover, some portion of the loans of the auto finance companies is eligible for being classified under priority sector lending. Therefore the auto finance companies securitize these assets with banks. This not only frees cash flows for the auto finance companies but also reduces the cost of funds, as these funds are available at relatively lower cost when compared to direct borrowings from banks.NBFCBanks

Capital adequacy ratio129

Cash Reserve Ratio05.75

Statutory Liquidity Ratio1525

Priority Sector Lending040

Table1.5: Difference in RBI requirements for Banks and NBFCsClass of consumersNBFCs serve such customers who are considered to be risky and high NPA prone as per the banking standards, for example consumers from the rural areas, who are unable to meet the documentation requirements of the banks. Further companies are into financing of pre-owned vehicle which although are high yielding segment but are considered to be risky due to poor credit history of the customers. Therefore banks generally stay away from this class of consumers, which acts as an advantage for these NBFCs. While the auto finance companies are disadvantaged on the cost of funds, they score better in terms of credit assessment skills, better operational efficiency, higher loan yields and lower regulatory requirements. 1.6. MANAGERIAL PROBLEM1.6.1. Background to the problemA lean banking initiative named as Hi-Per Drive was introduced by the company in 2012 which has revolutionized the work culture of the company with focus on waste elimination and cost reduction. As a part of the lean drive various path breaking initiatives were undertaken. Prominent ones are as follows:1) Lean Cells for loan processing for reducing instances of waste, inflexibility and variability.2) Huddle board as a means of visual management 3) Daily morning huddle4) Dealer Key account management5) Micro market mapping6) Mobile AppsAbovementioned major lean initiatives along with various other micro and macro level measures helped to sort out the major problems of High query ratios, low productivity and High TAT etc. Figure 1.3 shows the productivity of the SFEs in retail vertical of the company as a whole for twelve months period after the implementation of HI-Per Drive. It is evident form the graph that productivity has gone up from single digit to double digit with approximately 100% improvement in productivity. Figure 1.4 shows the number and percentage of SFEs having a productivity of less than 5 which is showing a continuously downward trend over time. Figure 1.5 shows the number and percentage of SFEs having a productivity of greater than 15 which has registered tremendous increase over the period of twelve months. As per the company statistics, productivity registered increase from an average 6 to 9 and TAT has from 11 days to 7-8 days. Table 1.6 shows the monthly productivity for the company for the twelve month period from April 2012 to March 2013.

Figure1.3: Month wise Productivity of SFEs in Retail vertical

Figure1.4: Number of SFEs having productivity 15 (month wise)

1.6.2. Managerial/Business ProblemDespite all these efforts, Company has not been able to address all the issues. The problem of high TAT and low productivity persists in many area and branch offices. Thus company wishes to ascertain the reasons behind subpar performance of the SFEs and inefficient loan disbursal procedure which mars the effectiveness of the operations and has long ranging ramifications on customer satisfaction. Company wishes to reduce the TAT to acceptable levels which is atleast at par with Banks and other competitors (variable 3-10 days).Retail & Direct

MonthDisbursement CountTotal Head CountProductivity

APR'121149421255.41

MAY'121361421076.46

JUN'121370021006.52

JUL'121460521416.82

AUG'121410220876.76

SEP121456620787.01

OCT'121611221047.66

NOV'121604620387.87

DEC'121739821368.15

JAN'131722422007.83

FEB'131692224936.79

Mar'132298324599.35

Table1.6: Productivity improvement from April 2012 to March 2013The problem was found to be existential in Surat branch of the company with productivity nearing meagre 4-5 and TAT being very high at 8-10 days. The company wishes to document root causes of the major problems and take effective measures to curb them. Hence, in line with companys intention and limiting scope of the internship it was decided to conduct the same only for Customer Walk-in in Light Commercial Vehicle Finance Segment. Major findings of the research can be easily extended to other verticals with slight modifications according to the specific needs of the vertical/segment.

CHAPTER 2: RESEARCH PROBLEMThe project entails study of the current/as-is process of loan disbursement for Light Commercial Vehicles for identification of non- value adding activities devising of necessary corrective measures. The objectives of the study are as follows:1) To study the current process for estimation of as-is process capability using Statistical Process Control Charts as a tool for Quality Control.2) To identify the root causes of bottlenecks using Fishbone Diagram, 5 Whys approach and Pareto diagram.3) To carry out Failure Mode and effects Analysis for identification of possible modes of failure of the key steps in the process.4) To make necessary recommendations for TAT reduction on the basis of Inventive framework of TRIZ matrix approach.5) To facilitate improvement in the productivity of Sales Field Executives, a natural byproduct of TAT improvement due to inherent inseparability and intertwining of the two variables.

CHAPTER 3: LITERATURE REVIEW3.1. LEAN SIX SIGMAIn the past, Six Sigma and the principles behind Lean management were often seen as competitors rather than synergetic elements. Lean Six Sigma approach is a powerful action plan for dramatically improving quality, increasing speed and reducing waste. Arnheiter and Maleyeff (2005) suggested that LSS organization would capitalize on the strengths of both Lean management and Six Sigma.Statistical management concepts are useful for improving financial administrative processes, monitoring critical success factors and cost drivers and post-audit evaluations of capital expenditures. DMAIC is a data-driven, problem-solving strategy, not unlike the scientific method, which can be applied to any process or system. In general, DMAIC is used in processes that already exist, but need to be improved in order to meet customer requirements for a product or service.(Jawaher A. Bin Jumah, MSN, RN,Ren P. Burt, EIT, MSIE, Benjamin Buttram;2012).Early adopters of Lean Six Sigma for financial services, such as Bank of America, Merrill Lynch, and Vanguard, have leveraged the power of this methodology to create billions of dollars in operational cost cuts and up to 25-percent improved customer service rates. This management approach has four essential factors: (1) Delight your customers with speed and quality, (2) Continuously improve your processes,(3) Work together for maximum gain,(4) Base decision on data and facts (George, 2003; Nonthaleerak & Hendry, 2006).3.2. APPLICATION OF LEAN SIX SIGMA IN MANUFACTURINGThere are innumerous examples of implementing the LSS approach in the manufacturing industry. Pickrell et al. (2005) presented two case studies for LSS projects completed at a world-wide manufacturer of precision slip rings and integrated motion systems for high performance requirements in military and commercial aircraft, satellites and space vehicles, missiles, and automated industrial machinery. The results show that the LSS approach can reduce the costs, cycle time, customer returns and inventory, and increase in production capacity.3.3. APPLICATION OF LEAN SIX SIGMA IN SERVICE INDUSTRYFurterer and Elshennawy (2005) presented a case study of applying Lean and Six Sigma tools and principles to improving the quality and timeliness in a citys finance department. After implementing a LSS programme, the time to process payroll, purchasing and accounts payable were reduced by 60%, 40% and 87%, respectively. Heuvel et al.(2006) stated that hospitals faced major challenges where patients demand that quality of care be improved continuously and health insurance companies demand the lowest possible prices. They applied a LSS programme to help healthcare providers to achieve these conflicting goals. Koning et al. (2006) illustrated how principles of Lean thinking and Six Sigma can be combined to provide an effective framework for producing systematic innovation efforts in healthcare and emphasized that a service operation requires systematic innovation efforts to remain competitive, cost efficient, and up to date.3.4. TRIZ FRAMEWORKThe theory of inventive problem solving (TRIZ) is a science that allows creative problems in any field of knowledge to be revealed and solved, while developing creative(inventive) thinking skills and a creative personality (Altshuller, 2000). Often at the root of a problems solution lies what seems at first glance to be a wild idea. TRIZ gives one the ability not only to be prepared for such ideas, but to create them. TRIZ is the knowledge-based, systematic approach to innovation. TRIZ methods are drawn from analysis of the most innovative inventions in different industries, technologies, and fields of engineering.These principles can be used to consciously develop a system along its path of technical evolution. It has been proved that TRIZ is a powerful problem-solving methodology through its development over about 60 years. TRIZ provides people with a dialectic way of thinking, which guides us to understand the problem as a system, to get an image of the ideal solution first and to promote the performance of products by solving contradictions. Domband Dettmer (1999) reported that inventors using TRIZ experienced an improvement of 70% to 300% or more in the number of creative ideas that they generated for solving technical problems and in the speed with which they generated innovative ideas. Many researches that integrate or compare TRIZ with different creativity tools, methods and philosophies have shown that TRIZ provides the most useful help to designers for developing high-level products and service application as well. Manufacturing is an area wherein one can easily find applications of TRIZ integrated with problem-solving tools (Stratton & Mann, 2003; Stratton& Warburton, 2003). During the application, it is important to define the conflicts, and then based on the conflicts, to develop innovative solutions. The service industry is an area where TRIZ is difficult to apply; but along with its fast development and its integration with problem-solving tools, integrated methods have been applied in this area (King, 2004).

CHAPTER 4: RESEARCH DESIGN4.1. RESEARCH METHODOLOGYSeminal researches based on Lean Management, Six Sigma and the subsequently developed hybrid form of both i.e. Lean Six Sigma forms the base for the project. The project derives its methodology from a combination of tools of above-mentioned topics. The research report does not contain any new information but only extends the application of same to the operations of a Vehicle Finance Company which has become a pioneer by application of lean banking initiatives in the setting of an NBFC. This report entails applied research which aims at redressal of the problem of high Turnaround Time (TAT) and low productivity and despite the application of lean initiatives. The report is based on both primary and secondary data collected from variety of sources. Primary data was collected first hand by noting down the time taken in various steps of all the processes on site. Secondary data has also been used intermittently which primarily has been sourced from the Vehicle Loan Financing business unit of the company. Information relating to the credit department was sourced from the CAS module of Finnone used by the company. The methodology adopted for the research is depicted in the Figure 4.1. For the purpose of holistic analysis of the processes, identification of loopholes and delineation of feasible solutions to the problems, methodology as mentioned below was employed. It is based on the Define, Measure, Analyze, Improve and Control (DMAIC) approach of Lean Six Sigma. DMAIC is the five-step approach that makes up the Six Sigma tool kit, and its sole objective is to drive costly variation from business processes.The theory of inventive problem solving (TRIZ) was employed during the improve phase instead of traditional approaches as it is a systematic methodology that allows creative problems in any field of knowledge to be revealed and solved, while developing creative (inventive) thinking skill. Thus, this research makes use of an approach that integrates TRIZ into the improve phase of the LSS approach to achieve business improvement for the service industry focusing on Vehicle Finance operations.Figure4.1: Conceptual Framework

Research Methodology is described as follows:4.1.1. Define:1. Identification of Problem: This step revolves around jotting down the major bottleneck or problem which has to be addressed and cured.2. SIPOC Diagram: In order to accomplish the objectives of Define phase, SIPOC diagram was used for confirming or refining project scope and boundaries which includes Suppliers, Inputs, Process, Outputs and Customers for creating a high-level map of as-is process.3. Process Flow Diagram: Based on step one, the high-level process of SIPOC-related activities and process flow was analyzed. Based on the high-level process of SIPOC, and the process flow diagram of the project, value-adding and non-value adding activities were identified.4.1.2. Measure:1. Data Collection: In order to understand the process capability before improvement, data collection plan was deployed to gather sample data of actual time which will be described in detail later.2. Measurement of as-is capability: The sample data collected was then used to ascertain the average Turn Around Time (TAT),the short-term capability Cpk and long-term capability Ppk of the process.4.1.3. Analyze

1) Identification of root causes: The root cause of the problem/variation from normalcy was identified using the Fishbone Diagram, 5 whys approach and Pareto Diagram.2) Failure mode and effects analysis: FMEA was used to identify in advance the factors that may cause function failure in the key process and allocate a risk priority number (RPN). Factors with a high RPN, usually defined as the ones which have RPN greater than 125, were selected and corrective actions recommended.3) Identification of vital few initial variables: Using the Pareto chart and FMEA the vital few initial variables were identified which were subsequently used for streamlining of operations.4.1.4. Improve

1) Development of solutions using TRIZ matrix: Based on the findings of the significant causes in the analyze phase, the improvement activities using TRIZ methodology were proposed.2) Redesigning of new process flow and estimation of new process capability: This step focused on the redesigning of process based on the improvements suggested. However it was not possible to measure the new process capability due to time constraints.4.1.5. Control

1) Formulation of control plan: In the control phase, a control plan to prevent system failure is to be proposed, together with use of a control chart. However due to lack of time and organizational constraint it was not possible to chart a control plan.4.2. SAMPLE AND SAMPLE FRAME4.2.1. Target PopulationTarget population is the collection of objects, which possess the information required by the researcher and about which the inference is to be made. The target population for this project can be defined as the information pertaining to the loan disbursement in Cholamandalam Investment and Finance Company Limited on a pan India basis. Thus, target population consists of data pertaining to all the branches of the company carrying out the vehicle finance operations. Hence, company data of all the branches relating to the time taken for sanction and disbursal of Light Commercial Vehicle loans is the target population.4.2.2. Sampling FrameThe project was executed at the Surat branch of the company which is the area office comprising of three branches: Navsari, Vyara and Surat itself. Hence, the data pertaining to the Light Commercial Vehicle financing operations at the Surat branch was taken as the Sampling frame. Thus target population and Sampling frame are different and latter is a subset of former. Sampling technique was then employed on the abovementioned sample frame for the extraction of representative sample. 4.2.3. Sampling TechniqueConvenience Sampling was employed for the sample selection. Since the project relates to service operations which deal with the intangibles, it was extremely difficult to track the operational procedures. Hence, convenience sampling was the only feasible sampling technique. Due to time and manpower constraints it was nearly impossible to apply random sampling techniques. Thus, samples which were easy to obtain within the given time frame were collected for the purpose of research.4.2.4. Sample SizeThe company provides 40-60 Light Commercial Vehicle Loans in a month. During the period of internship (8 weeks), 84 LCV loans were disbursed out of which 11 were already under processing. So, effectively 73 loans were initiated and disbursed during the aforementioned time period. The initial consideration was to extract atleast 25 samples for analysis, however due to time and manpower constraint, sample size was curtailed to 20 observations.4.2.5. Data CollectionThe project is based on primary data collected on site and secondary data sourced from the CAS module of Finnone used by the company. The primary data collection procedure simply involved noting down of time taken in various steps of the processes involved in the loan processing. The data collection was majorly done first hand with certain exceptions. In some cases, assistance of the concerned employee was sought while in some cases certain assumptions were made because of inherent non viability of data collection. Stop watch was used for calculation of time taken for various processes. Secondary data was primarily used for finding out the time taken from credit login till underwriting and sanction.

4.3. DATA ANALYSISAs envisaged earlier in the conceptual framework the first phase i.e. Define involves three steps:4.3.1. Identification of problemAccording to the experience of company, it takes much more time and resources to serve the customers than is desirable. Consequently, it was identified that the important problem was to shorten the Turn Around Time of operation of the loan sanction and disbursement. Thus, for better turnover efficiency, according to the voices of customers, the problem is identified as to reduce the Turnaround Time of operation in loan processing of Light Commercial Vehicles.4.3.2. SIPOC DiagramIn order to accomplish the objectives of Define phase, a SIPOC diagram is used to help in confirming or refining project scope and boundaries which includes Suppliers, Inputs, Process, Outputs and Customers for creating a high-level map of process.1) Suppliers The entities that provide whatever is worked on in the process. The supplier may be an outside vendor or another division or a co-worker. 2) Inputs the information or material provided.3) Process the steps used to transfer both those that add value and those do not add value.4) Outputs the product, service or information being sent to the customer.5) Customers the next step in the process, or the final customers.

4.3.3. Process Flow DiagramConsequent upon the preparation of SIPOC diagram, Process Flow Diagram was prepared which enlists and depicts the entire sequence of steps involved in the loan disbursal starting from the customer walk-in and ending at loan payout. The as-is process flow chart depicts the existing process flow for the Light Commercial Vehicle Loans which is more or less in line with the process flow of other verticals with few exceptions. The process entails six subparts based on the officials, department handling the concerned step of the process. The six subparts are: Customer, Customer Relationship Manager, Sales Field Executives, Credit Executives, Operations Executives and CPU.1) Customer: Customer here refers to the walk-in customer. Customer sourcing is done from a variety of sources such as: Dealers, Brokers, repeat finance by existing customers referred to as Pre approved Loans, Customer referrals etc. However for the purpose of project only walk-in customers have been considered, hence the definition as above.2) Customer Relationship Manager: Customer Relationship Manager takes care of the servicing needs of existing customers such as collection of Cheques at counter, resolving of queries, and renewal of loans, refinance form submission etc. At the same time, he/she is also responsible for attending the walk-in customers, resolution of queries and entry in Customer Servicing Module i.e. CSM.3) Sales Field Executives: Sales Field Executives i.e. SFEs attend to the customers resolve their queries and serve them throughout the process. SFEs are the common thread that runs through the entire process with their presence being required at every stage of the loan processing right from the beginning. They make the Quick Data Entry triggering the process, collect the documents from the customers, and resolve the queries that arise at any stage of the processing.4) Credit Executives: Credit Executives have the authority to sanction the loans. They are responsible for thorough verification of credit related documents such as Identity proof, residence proof, Credit Information Bureau (India) Limited report i.e. CIBIL report, KYC, business stability proof, guarantors consent etc. They are also responsible for making entry into the Customer Application Servicing Module regarding the entire proposal and underwriting of the loan.5) Operations Executives: Operations Executives undertake the process of preparation of loan related documents such as agreement, Post disbursal documents, time sheet etc. 6) CPU: Post sanction and ops health check, the proposal is sent to the head office wherein detailed health check is conducted and loan amount is disbursed.4.3.4. Data CollectionThe project is based on primary data collected on site and secondary data sourced from the CAS module of Finnone used by the company. The primary data collection procedure simply involved noting down of time taken in various steps of the processes involved in the loan processing. The data collection was majorly done first hand with certain exceptions. In some cases, assistance of the concerned employee was sought while in some cases certain assumptions were made because of inherent impossibility of data collection. Stop watch was used for calculation of time taken for various processes. Secondary data was primarily used for finding out the time taken from credit login till underwriting and sanction. The process flow diagram was used to segregate the jobs into homogeneous sub processes and data collection was grounded on the same basis. Data was stored in Microsoft Excel files for analysis in further steps.4.3.5. Measurement of as-is capabilityBased on the data collected initially on temporary basis, Time observation Sheets for each job, sub process and process were filled. Time observations so obtained were then used to determine the Turn Around Time for each sub process. The TAT so calculated for individual processes was subsequently summated to obtain the TAT for loan disbursal as a whole. Following is a brief explanation of the steps and sub processes. 4.3.5.1. Customer and Customer Relationship Manager1) Customer sits at the reception: The first step is customer walk-in and waiting at the reception due to queue at the CRMs desk. This step involved calculation of time taken from the entry of customer into premises till waiting at the reception for interaction with the CRM. However, it was practically impossible to gather pertinent data for the obtained observations as it was possible to determine as to which vehicle the customer was desirous of financing. Hence, instead of data pertaining to the observations used for the purpose of analysis, waiting time was calculated for 30 random walk-in customers spread evenly over the business hours. This data was used to calculate the average waiting time which was included in the first process for calculation of Turn Around Time.2) Query and response: This step consists of query put forward by the customer being addressed by the CRM. The time was noted down using stop watch beginning with the initiation of the conversation and ending at the point of beginning of the entry in CSM.3) Entry in CSM: The basic information of customer is then fed in the Customer Servicing Module and he/she is sent to the SFEs for further assistance. The data for this step was readily available from the module itself. Hence this step involved the use of secondary data.

4.3.5.2. Quick Data Entry1) Query by Customer and response: This step marks the beginning of the interaction of customer with SFEs. The customer puts forward his queries which are addressed by the available SFE. This step usually takes time due to detailed nature of conversation. However, there were instances when customer had to wait for a long time for SFE because of their visit to the micro market assigned to them.2) QDE: Consequent upon closure of conversation with the customer, SFE makes Quick Data Entry into his mobile which involves feeding of basic information. It has five fields: Customer Name, Mobile Number, Sourcing pattern, product category and PIN Code.3) Telesmart: QDE results in saving of the information in Telesmart module which directs the same to the credit department through CAS module. Information flow is real time, hence no point in noting down of time.4.3.5.3. Credit process before customer visit by SFE1) Dedupe: Chola Dedupe refers to the existing customer database records with the company. This step involves checking the Dedupe to cross check whether the customer is an existing one or not.2) CIBIL: CIBIL report containsthecredit history of commercialand consumer borrowers. CIBIL provides this information to its Members in theform of credit information reports. CIFCL being a Non-Banking Finance Company is a member of Credit information Bureau (India) Limited and has ready access to the CIBIL report of any individual or commercial institution. It is generated by the Credit Executive immediately upon receipt of customer information regarding PAN card, Driving License etc.3) FI Initiation by informing External FI: Credit executive triggers the Field Investigation by drafting and sending the mail to the concerned third party/external investigator agency. Corresponding time was noted using stop watch ranging from the drafting of mail to dispatch of the same.4) FI report submission by external FI agency: After triggering the FI, the external agency takes atleast two days. All the pending FI reports are submitted in the Chola office at the same time of the day in batch. Thus the time taken is calculated from the time of dispatch of mail to receipt of FI report.

4.3.5.4. Customer Visit by SFE:1) Travel Time: Travel time was based on the estimate of the SFE in most of the cases while in some cases it was noted down by the researcher himself.2) SFE visit to customer for inspection and documents collection: SFEs visit the customers place for collection of documents and inspection. The data regarding the time taken at the customers place was collected with the assistance of the concerned SFE for most of the observations with some being noted down by the researcher himself by accompanying the SFE to the customers place.

4.3.5.5. Credit process after customer visit by SFE1) Sales-support Checkup: The sales support checkup involves preliminary screening of the documents by the Sales Support staff personnel who is a part of the lean cell. This step hardly involves any time as it involves cursory cross checking of the documents with the required documents list. Collection of data was through on site noting of time taken for selective observations2) Credit Check Up: Documents collected by the SFE are then thoroughly checked by credit executive for consideration of the viability of the proposal. This step entails checking of the CIBIL report for identification of deviations if any, Identity proof of applicant and co-applicant, Residence proof of applicant and co-applicant, FI report, business stability proof etc. For this step, assistance of the Credit Executive and Branch Credit Manager was sought. Due to lack of time and clashing of time with other steps of different observations, some of the readings were taken by the researcher while rest of them was taken by the concerned executives.3) Query resolution: In case any document is missing or there is any deviation, it is referred to the concerned SFE or higher authority for necessary approval respectively. The time taken to resolve the query is noted down from the CAS directly.4) Scanning of KYC and documents: The documents are scanned and stored in CAS module for which there is no need to collect time readings as it is available in CAS.5) Detailed Data Entry: DDE is made using the information extracted from the scanned documents. The information regarding the time taken for DDE is also readily available in CAS module.6) Underwriting and sanction: When the proposal is found viable it is sanctioned and underwriting is done by the Credit Executive n CAS.4.3.5.6. Operations1) Branch ops Health check: Branch operations Health Check involves preliminary checking of the sanctioned file. This step warrants the availability of Margin Money Requirement i.e. MMR, Electronic Credit System clearance, Standing instructions, Post Dated Cheques i.e. PDC etc. Data collection in this step was also done manually using stop watch.2) Query resolution: If at all there is any issue, then respective SFE is called upon for the resolution of the same. Usually the query raised is regarding the non-availability of the documents as enlisted in the preceding step. Data collection in this step was also done manually using stop watch.3) Documents preparation: This step entails the preparation of documents such as post Disbursal Documents, Agreement etc. The time was noted down using stop watch.4) Scanning of Post sanction Documents: This step involves scanning of post sanction documents and updation of the same in CAS.4.3.5.7. CPU1) Quick Health Check: The proposal is sent to the head office where it is subjected to quick health check and thereafter approved for disbursal.2) Disbursal: Disbursal marks the end of loan processing and amount is transferred directly to the automobile dealer. Using the data so collected, process capability chart, I Chart, Moving range chart are made using Minitab for the estimation of short-term capability: Cpk, long-term capability: Ppk. It helps to determine the capability of the process as against the specifications and the common cause deviations.4.3.6. Identification of root causes:The root causes of the defects i.e. delay in loan processing or High TAT is determined using Fishbone Diagram, Five Whys approach and Pareto Chart. Fishbone Diagram: Fishbone Diagram also known as Cause and Effect Diagrams, Fishbone Diagrams, Ishikawa Diagrams, Herringbone Diagrams, and Fishikawa Diagrams was used for determination of probable causes of various problems.Five Whys Approach: In conjunction with Fishbone Diagram Five Whys approach was used for holistic understanding of eth bottlenecks and their root causesPareto Chart: Pareto Chart helps to determine the 20% root causes responsible for 80% problems

4.3.7. Failure mode and effects analysis:On the basis of detailed discussion with Branch Credit Manager, Area Sales Manager, Branch Operations Manager, Team Lead: Sales Team, Credit Executives, Ops Executives, Sales Support Personnel and SFEs a Failure Mode and Effects analysis was carried out to in order to identify probable causes of failures in the process. However for the purpose of assigning of the rankings only Area Manager was consulted due to holistic understanding of the process. The standard FMEA format was used for calculation of Risk Priority Number corresponding to the problems identified for various steps. Prior to the development of the Process Failure Modes and Effects Analysis, the process map was developed in order to list down various value adding and non-value adding activites. The process steps were listed down in the First column of the form and corresponding to each process step a list of potential failure modes i.e. ways in which the service might fail were identified through brainstorming with concerned stakeholders (mentioned earlier). Corresponding to each such failure mode, potential causes were identified and their likelihood of occurrence rated in consultation with Area Manager. The occurrence frequency and corresponding rating was modified due to incongruence of standard occurrence sheet with the organizational needs. For this purpose of modification of occurrence sheet, optimum productivity level of organization was considered and probabilities were assigned accordingly for service operations.Subsequently the control measures already in place if any were rated on the basis of their ability to control or detect or prevent the failure modes or causes. Thereafter the three ratings i.e. Severity, Occurrence and Detection were multiplied to obtain the Risk Priority Number. Calculation of Risk Priority Number marks the ending of first phase of the FMEA. The second phase involves identification of improvement actions for reduction or elimination of the risk associated with high RPNs in particular.4.3.8. Identification of vital few initial variables:Fishbone Diagram, Five Whys approach, Pareto Chart and Failure Mode and Effects Analysis helps to sever the root causes of inefficiencies from the superficial/trivial causes. The combination of tools used ensures fool proof mechanism of root causes identification and cross checking of the causes identified using different tools. Through such thorough analysis, vital few initial variables of problem were identified and solutions were developed for them in the succeeding step.4.3.9. Development of solutions using TRIZ matrix:Improve phase involves development of improvement plan for the identified vital few initial variables. Traditional tools of improvement are best suited for manufacturing organizations and manufacturing part of the service organizations. However, they are known to yield sub optimal results for service industry due to manufacturing orientation of the improvement tools. Thus instead of traditional improvement tool, TRIZ matrix was used for development of solutions to the problem at hand. In the recent development of TRIZ research, much effort has been put in extending TRIZ to a broader application with special focus on application in non-technical areas. TRIZ analyses bottlenecks and problems using the unique concept of contradiction.For this purpose, 40 non-technical inventive principles for application in service operations (Saliminamin & Nezafati, 2003) were applied to solve the service contradictions. Corresponding to the 39 features of the contradiction matrix, features to be considered for improvement were weighted against the worsening features. The contradiction matrix was then examined to denote the numbers of the inventive principles in which the rows contain the features that have been worsened as a result of improving the features in the column. Out of the available inventive principles the ones viable of yielding positive results were considered for development of solutions tailor made for the organizational process and work culture.4.3.10. Redesigning of new process flowThis stage is more or less an extension of previous stage which entails the development of solutions and improvement actions. This stage involves assimilation of improvements in the process and process redesigning on the basis of same. Thus the new process flow chart is drawn to pave the way for measurement of to-be process capability using collection of new observations and repeating the abovementioned process. However due to time constraints it was not possible to undertake this part of the envisaged project.4.3.11. Formulation of control planControlphase is all about sustaining the changes made in the Improve phase to guarantee lasting results. The best controls are those that require no monitoring, but it is highly improbable to devise such controls. Thus a control plan is used for constant monitoring and review of improvement actions. However the same could not be employed due to organizational constraints.

CHAPTER 5: RESULTS AND CONCLUSIONS5.1. SIPOC DIAGRAMSIPOC Diagram has been used as a communication tool for visual documentation of the process. It helped to identify the basic elements of the process (boundaries, suppliers, inputs, process steps, outputs, and customers).SIPOC helped in translating customer requirements into input & output requirements and identifying related Key Process Input & Output Variables (KPIVs & KPOVs) before detailed process mapping. It helped in narrowing down the scope of the project.5.2. AS-IS PROCESS FLOW DIAGRAMAs is process flow diagram helped in understanding the current process, value adding and non-value adding activities. Visual representation of the entire process helped to break the process into major sub divisions and identification of the major loopholes or shortcomings in the current system. Using the Process map following activites were found to be non-value adding on a preliminary basis:1) Query put forward to the Customer Relationship Manager 2) Entry of customer details by the Customer Relationship Manager in Customer Servicing Module3) External Field Investigation4) Repeat visit by Sales Field Executive to customers place for collection of documents

Figure5.1: SIPOC Diagram

CustomersOutputProcessesInputsSuppliers

Customer Relationship ManagerSales Field Executives Credit and Ops ExecutivesCIBILField InvestigatorsValuersCIBIL ReportProperty proofsPhotos of applicant and co-applicantPost-dated ChequesInterest ratesMargin Money DeviationsPost DisbursalDocumentsLoan amount AgreementVehicle DocumentsRegistration Documents

(Primary)Vehicle Finance Customers

(Secondary)Lending InstitutionsStaffDealers

Lead IdentificationCustomer VisitProfile identificationDocs collectionCredit LoginCredit DecisionDistributed docs collectionBranch ops processingCPU Disbursement

Figure5.2: As- is Process Flow Diagram

S F ETelesmartCustomer Walks out NoCUSTOMERNoFor Queries? C R MCustomer Walk-inYesAttends to the customer and entry in CSMInterested?YesYesNoInterested?QDE made using mobile apps Provide necessary details regarding the process and schemesResolve the query and direct them to the SFEs

Figure5.2: As- is Process Flow Diagram (continued)

C R E D I TSFE visit to customer for docs collection

Dedupe

CIBIL

External Field Investigator

FI ReportFI initiation

Customer Available and other conditions met?1

Yes

NoComplete docs available

Repeat VisitYes/No

Credit Login

Scanning of KYC and Docs

Quick Health CheckC P UDisbursalDetailed Data EntryUnderwriting and sanctionDocs preparationYes O P S C R E D I TFigure5.2: As- is Process Flow Diagram (continued)NoScanning of Post sanction DocsSFE referred to & query resolvedQuery?Branch ops Health checkHand over to ops executive

5.3. MEASUREMENT OF ASIS CAPABILITY5.3.1. Query at Reception

Figure5.3: Minitab Output for Process Capability Sixpack of query at CRMs deskAlthough the Individual X bar chart seems to portray lack of variation in the process, moving range chart depicts otherwise with wide variations in observations with tendency to move towards the Lower Control Limit. While almost equivalent observations lie above and below the x-bar average, it is not so in Moving Range Chart. The short term capability Cpk=.5 and long term capability Ppk= .58 are way below the desired levels. Hence the as-is capability is not good considering the benchmark Cpk=1 to 1.33 with 1.33 being the more preferred one.

5.3.2. Query Data Entry

Figure5.4: Minitab Output for Process Capability Sixpack of query data entryTest Results for I Chart TEST: 1: One point more than 3.00 standard deviations from center line.Test Failed at points: 5Test Results for MR ChartTEST: 1: One point more than 3.00 standard deviations from center line.Test Failed at points: 5I chart and Moving Range Charts clearly indicate that the process is out of statistical control at one point which was due to non-availability of SFE and delay in QDE. The short term capability Cpk=.45 and long term capability Ppk= .44 are way below the benchmark.

5.3.3. Credit process before Customer visit

Figure5.5: Minitab Output for Process Capability Sixpack of credit process before SFE visit to customerTest Results for MR ChartTEST: 1: One point more than 3.00 standard deviations from center line.Test Failed at points: 13In this process too, the short term capability Cpk=.91 and long term capability Ppk= .60are not so good. Cpk and low PPM bode well for the future performance of the process. However considering the fact that Ppk which is an indicator of past performance of the process is low and control charts are varying, future prospects as a whole for the process stability are low.5.3.4. Customer meeting

Figure5.6: Minitab Output for Process Capability Sixpack of SFE visit to customerAlthough the process seems to be stable, but both the short term and long term capability indices Cpk and Ppk are pretty low.

5.3.5. Credit Process After customer meeting

Figure5.7: Minitab Output for Process Capability Sixpack of Credit Process after SFE visit to customerThere is a clear upward trend in the I chart which indicates that the process is spiraling out of control. As also Cp is high but Cpk is low indicating that variation is high but performance is within specifications. Similarly Ppk is also low with PPM being very high.

5.3.6. Operations

Figure5.8: Minitab Output for Process Capability Sixpack of OperationsTest Results for I ChartTEST: 1. One point more than 3.00 standard deviations from center line.Test Failed at points: 7Test Results for MR ChartTEST: 1. One point more than 3.00 standard deviations from center line.Test Failed at points: 7, 8This process is completely out of control as per statistical measures. As listed earlier I chart has failed at one point and MR chart at two points, the main reason being queries.The short term capability Cpk=.23 and long term capability Ppk= .15are too low with the standard deviation being very high.5.3.7. CPU

Figure5.9: Minitab Output for Process Capability Sixpack of CPUTest Results for I Chart of Minutes TEST: 1. One point more than 3.00 standard deviations from center line.Test Failed at points: 12Even though Cp is high Cpk is low due to high variation in the observations which is not reflected in Cp, same being the case with process performance index.

5.3.8. Total Turnaround Time

Figure5.10: Minitab Output for Process Capability Sixpack of Total Turnaround TimeAccording to the individual control chart of 20 observation samples, the results show that the average time is 4731.41minutes. The short-term capability Cpk and long-term capability Ppk of this process is 0.73 and 0.60. Thus, the current-state process capability is not so good.

5.3.9. Pareto Chart of Factors

Figure5.11: Pareto Chart of Factors responsible for failures

Pareto chart helps to identify the 20% factors/root causes which are responsible for the 80% problems. So on the basis of 168 observations of various factors responsible for delay/inefficiency in the process, initial vital few variables were identified in conjunction with Fishbone Diagram and Failure Mode and Effects Analysis.

5.4. FAILURE MODES AND EFFECTS ANALYSIS (FMEA)Table5.1: FMEA reportProcess Function (Step)Potential Failure Modes (process defects)Potential Effect(s) of FailureSEV

1SFE visit to customer for inspection and docs collectionComplete docs not availableQuery and delay 8

2Query by Customer and response Non availability of SFEsWaiting time increased thereby increasing TAT7

3SFE visit to customer for inspection and docs collectionNon availabilityNegative report 7

4QDEQDE made at a later stage Smaller funnel size display, discrepancy in huddle board data and system data, 6

5Customer sits at the receptionLong queueCustomer dissatisfaction and waiting time 5

6QDEMobile N/A with the available SFEsCredit login delayed6

7Branch ops Health checkNon availability of MMR, PDC, ECSHigh Disbursal TAT6

8Sales support Check upPerfunctory attitude and overlooking important minutiaeQueries at later stages 5

9Entry in CSMDouble entry Plethora of Information and waste of time4

10Credit Check UpDiscrepancy in information as per CIBIL and docs collected from customersQuery 4

11Quick Health CheckQuery Non Approval from Head office5

12Detailed Data EntryDelay in data entry High TAT, repeat visit to customer3

13DedupeWrong entry of basic information about the customerProcedural delay and discrepancy of data as per Dedupe and docs provided by customer4

14CIBILDelay in extraction No serious impact 2

15Scanning of KYC and docsScanner resolution not as per norms and scanner non- functionalDuplication of resources2

16Scanning of Post sanction DocsScanner resolution not as per norms and scanner Duplication of resources2

Table5.1: FMEA report (continued)Potential Cause(s) of FailureOCCCurrent Process ControlsDETRPN

Customer not aware, SFE allows the customer to submit incomplete docs 9N/A10720

Visit to micro markets 9Any official having free time attends the customer10630

Customer not intimated7N/A10490

Lack of knowledge about relevance of the same8N/A10480

Workload on CRM due to servicing needs of Existing customers8N/A10400

Negligence of Repair and Maintenance 7Dropping of mail to IT office (Regional office) without any follow-up9378

Customer's failure to submit Margin money with dealer, PDC and ECS with the company 7Intimation to customer 8336

Lack of clear cut demarcation of authority and responsibility8Lean team's responsibility for queries and high TAT7280

Poor process design5N/A10200

Customer's fault 4Dissemination of information to customer regarding providing correct information7112

Neglect of norms by credit, ops team2sales support, credit, ops health checkup770

Incomplete documents3Query raising 763

Negligence of Credit assistant 2N/A756

System slowdown 1Not required714

noncompliance with procedures and norms1Norms established for resolution, repair and maintenance714

noncompliance with procedures and norms1Norms established for resolution, repair and maintenance714

Table5.1: FMEA report (continued)Potential Cause(s) of FailureOCCCurrent Process ControlsDETRPN

Customer not aware, SFE allows the customer to submit incomplete docs 9N/A10720

Visit to micro markets 9Any official having free time attends the customer10630

Customer not intimated7N/A10490

Lack of knowledge about relevance of the same8N/A10480

Workload on CRM due to servicing needs of Existing customers8N/A10400

Negligence of Repair and Maintenance 7Dropping of mail to IT office (Regional office) without any follow-up9378

Customer's failure to submit Margin money with dealer, PDC and ECS with the company 7Intimation to customer 8336

Lack of clear cut demarcation of authority and responsibility8Lean team's responsibility for queries and high TAT7280

Poor process design5N/A10200

Customer's fault 4Dissemination of information to customer regarding providing correct information7112

Neglect of norms by credit, ops team2sales support, credit, ops health checkup770

Incomplete documents3Query raising 763

Negligence of Credit assistant 2N/A756

System slowdown 1Not required714

noncompliance with procedures and norms1Norms established for resolution, repair and maintenance714

noncompliance with procedures and norms1Norms established for resolution, repair and maintenance714

Table5.1: FMEA report (continued) Recommended ActionsResponsible Person & Target DateSEVOCCDETRPN

Inform customer beforehand about all docs to be submitted Branch Sales Manager8910720

Availability in rotating shiftsTeam Leader (Sales Team)7910630

Customer to be intimated before and as far as possible customer visit to be separated from Micro market visit Branch Sales Manager7710490

QDE to be made immediately upon customer meet without failTeam Leader (Sales Team)6810480

CRM to be kept only for servicing existing customersBranch Manager5810400

Back up in form of buffer and quick repairsTeam Leader (Sales Team)679378

Repeated intimation to customer after credit loginConcerned SFE and Team leader678336

Set team as well as individual responsibility and empowermentBranch Manager587280

Direct entry in the form of QDEArea Manager4510200

Dissemination of information to customer regarding providing correct informationSFEs447112

Not required as the majority of queries are related to deviations Area Manager52770

Standardizing of format of document sequencing which will ensure submission of completed docs onlyBranch Manager, Branch Credit Manager, Ops executive33763

Greater care to be taken Credit assistant 42756

Not requiredNot required21714

Standardized scanner resolutionBranch Credit Manager and Ops Executive21714

Standardized scanner resolutionBranch Credit Manager and Ops Executive21714

5.4.1. Pareto Chart based on Risk Priority Number

Figure5.12: Pareto Chart of Factors based on Risk Priority NumberUpon estimation of Risk Priority Number corresponding to each identified failure mode a Pareto chart of same has been made for alignment of the root cause analysis process as combination of Fishbone Diagram, Pareto Chart and FMEA analysis. Such combination helps to extract an exhaustive list of failure modes/problems which are acting as a bottleneck in the current process or are non-value adding and thus liable to be made extra venous and discarded from the improved/to- be process implemented after improve phase.

5.5. TRIZ MATRIX

Table5.2: Inventive Principles and Improvement action

Identified ProblemInventive PrincipleImprovement action

Complete docs not collected in one visitLocal quality:3Service Quality can be customized according to customer's needs and preferences. As such customers can be intimated beforehand regarding the visit. In case of incomplete documents the customers can be given the choice to submit the same within given time period in office itself instead of repeat visit. Different from service staff, customer as one of the unique elements in service delivery can play a vital role to improve the quality of service offerings by proactive approach; SFE allocation to be based on past/expected productivity to ensure that work load is balanced across each lean cell team.

Self-service:25

Asymmetry:4

Non availability of SFEsDynamics:15The SFEs can be rotated shift wise to stay in the office on a compulsory basis, This will ensure that client servicing needs are met without any waiting time and at the same time micro market visits are not affected. Tracking of the same by Team leader, BSM

Another dimension:17

Non availability of CustomerPartial or excessive actions:16Service Quality can be customized according to customer's needs and preferences. As such customers can be intimated beforehand regarding the visit. In case of incomplete documents the customers can be given the choice to submit the same within given time period in office itself instead of repeat visit. Different from service staff, customer as one of the unique elements in service delivery can play a vital role to improve the quality of service offerings by proactive approach.

QDE made at a later stage Periodic action:19Employee can be trained during periods of low customer demand regarding the relevance of making QDE initially itself and thus preventing rework during periods of high demand

Long queue at CRM's deskSegmentation:1The queue at CRM's desk can be completely eliminated by removal of CRM from the process and directing the Walk-in Customer directly to the SFE. The rationale behind this recommendation being duplication of efforts and resources due to superficial query resolution and entry into CSM which serves no purpose with QDE being made by the SFE and information being available in Telesmart.

Mobile N/A with the available SFEsPeriodic action:19In the operations of front office inspection of Working condition of Mobiles with SFEs should be regular (periodic) to inform regional office regarding the same and continue with follow-up on the same.

Non availability of MMR, PDC, ECSPreliminary action:10A possible solution to the problem can be intimation to customer regarding the submission of Margin money, PDC beforehand which will help to bring the waiting time to almost "zero". This is akin to the practice of slipping in the hotel bill in the room of the customer during the last night of their stay.

Overlooking of minute details by various executives due to association with different department Nested doll:7Chola Training Academy- Lean cell Realignment-Multitasking results in sharing work load which in turn ensures better back up management, Cross training and resource optimizations.

Query Resolution and Query Checklist not referredUniversality:6Listing down of major sources of query for both credit and ops separately and review of the same to save time that is usually wasted in checking of all documents

Nested doll:7new tab QUERY CHECK module in QDE , Dedupe , CIBIL , FI , DDE ,UND & P-DOC screen, Query raised in QDE stage can be updated as resolved in subsequent stages & vice versa, Similarly queries raised & updated as resolved in Dedupe, CIBIL & FI stages would get reflected in the subsequent stages

Scanning of documents which are not requiredTaking out:7Separation of docs requiring and those not requiring scanning. Only documents as required per the norms i.e Disbursal letter, sanction letter, agreement are to be scanned, Also App ID has to be mentioned on all these back documents/papers to be scanned without fail which will help deal with the problem of missing documents.

Lack of document sequencingUniversality:6All back documents/papers including FI report & route map to be serially numbered, OPS executives will scan SFE/TL/On Roll FI report along with route map at the time of disbursement

External FI Universality:6The process of First Investigation by external investigation agency increases TAT by 2 days. On the other hand if Internal Investigators will be used (i.e empanelled FI) it will reduce the same. Empowerment to SFEs for Investigation will ensure lower cost and eliminate the need for external FI

All EncompassingEnvisaged combined Application + Term Sheet-Reduction in scanning docs, No additional training required to the SFEs, Reduction of repeated check points, Reduction of repeated check points.

Table5.3: Improving and Worsening Features

S.noIdentified ProblemInventive PrincipleA)B)Improving FeatureWorsening Feature

1Complete docs not collected in one visitLocal quality:3Change an object's or systems structure from uniform to non-uniform; change an external environment (or external influence) from uniform to non-uniform Make each part of an object or system fulfill a different and useful functionSpeedManufacturing Precision

Self-service:25Make an object or system serve itself by performing auxiliary helpful functionsDevice Complexity

Asymmetry:4If an object or system is asymmetrical, increase its degree of asymmetryDifficulty in measurement and detection

2Non availability of SFEsDynamics:15Divide an object or system into parts capable of movement relative to each otherAdaptability or versatilityEase Of Operation

Another dimension:17Use a multi-story arrangement of objects or systems instead of a single-story Device Complexity

3Non availability of CustomerPartial or excessive actions:16If 100 percent of an object or system is hard to achieve using a given solution method then, by using 'slightly less' or 'slightly more' of the same method, the problem may be considerably easier to solveEase Of OperationDuration of action of moving object

4QDE made at a later stage Periodic action:19Use pauses between impulses to perform a different action.Productivity Loss of Time

5Long queue at CRM's deskSegmentation:1Divide an object or system into independent parts. Increase the degree of fragmentation or segmentationLoss of time Loss of Information

6

Mobile N/A with the available SFEs

Periodic action:19

Use pauses between impulses to perform a different action.

Ease of Repair

Loss of time

7Non availability of MMR, PDC, ECSPreliminary action:10Pre-arrange objects or systems such that they can come into action from the most convenient place and without losing time for their deliverySpeedManufacturing Precision and Object generated harmful factors

8Overlooking of minute details by various executives due to association with different department Nested doll:7Make one part pass through a cavity in the other.Adaptability or versatilityLoss of time

9Query Resolution and Query Checkli