operations management - cost reduction process re-engineering

Cost Reduction InitiativeProcess Re-engineering

Prepared By: Manohar M. M. IyerVAS2010XMBA15P005

Cost Reduction Initiative: Process Re-engineering


Introduction

• Cost Reduction – Reducing existing unit cost of the goods

manufactured or services rendered without compromising on the quality

• Process Re-engineering– Analyzing the current sequence of related tasks

which make up a business activity and redesigning the workflow to achieve increased efficiency and effectiveness of the process.



Case Study

Duplicate Bill dispatch Process of a Telecom firm


Disclaimer note: This study is taken from a real life challenge faced by me (Manohar) on around May 2004, while I was working with a telecom firm between 2003 & 2006. At that time, I was a Senior executive in the Offline Department, handling the unit for Legal & TRAI related communications.

The Duplicate bill dispatch unit, another unit within offline department was faced with severe challenges. During that time , coincidently the operation manager, the process manager & the team leader for the Offline department were on unavoidable long leaves.

As a senior member of the offline department, I took the responsibility of solving the crisis in the Duplicate bill dispatch unit.

Most of the figures mentioned in the study are real practical figures. However, since this study is presented 6 years after the incident, few figures may vary.


Facts

Case Study follows………



The activity Duplicate Bill dispatch Unit

• Every month postpaid mobile users are sent hard copy of the usage bills as per their billing cycle.

• Some users require duplicate copy of the bills.• Such users request for the same at the call centre. • Front office executives raise request Cases in CRM

with SLA of 4 working days.• Back office executives– Take the dump of such cases from the CRM.– Open the relevant bills & shoot printouts.– Stuff bills in envelopes , dispatch & Close the case in CRM.



ChallengesAs on May 2004

• Queue of 34,000 backlog cases• Constant inflow of 2000 new cases per day .• Average time taken to log one case in CRM was 1.5

minutes.• Only 9 back office executives to handle this queue

with 8 man hours per person per day.• Average time taken to solve one case was 8 minutes.• Total productivity of the unit was closure of 540 cases

per day .



Projections

• With the prevalent trend the projections of inefficiency were as follows:


Day Opening balance

Average New cases

per day

Total number

of AgentsMan minutes

per personMinutes reqd Per

case

Cases closed per

person

Total cases closed

Closing balance

Day 1 34000 2000 9 480 8 60 540 35460

Day 2 35460 2000 9 480 8 60 540 36920

Day 3 36920 2000 9 480 8 60 540 38380

Day 4 38380 2000 9 480 8 60 540 39840

Day 5 39840 2000 9 480 8 60 540 41300

Day 6 41300 2000 9 480 8 60 540 42760


Costs of Operation


Cost Per seat Per hour in $

Cost Per seat Per hour in

Rs.

Cost Per seat Per minute

Rs.

Salary per person

per month Rs.

Average Number

of working days per month

Man hours available

per day for work per person

Cost of wages

per hour Rs.

Cost of wages

per Minute

Rs.

Total Cost of

attending a Case Per minute Rs.

2.5 120 2 7000 25 8 35 0.58 2.58

Time taken to log per case in

minutes

Time taken to Solve per case

in minutes

Total time to Attend a case

in minutes

Total Cost of

attending a Case Rs.

Average Printing cost per case Rs.

Stationery & Dispatch Cost per case Rs.

Total cost per case

Rs.

1.5 8 9.5 24.54 1 30 55.54

Every day 2000 new cases are created; i.e. Rs.1,11,083.33/- is required to process them


Operations analysis




Key Problem Areas

1. High inflow of requests2. High processing time3. Less Man power



Root causes

1. High Inflow of requests– The AHT target for the front office executives were reduced from 6

minutes to 4 minutes leading to lesser available time for customer interaction and cases were created in CRM without proper probing.

– The process guidelines for front office executives emphasized on how & where to create cases for Duplicate bill requests. Due emphasis on when to create cases & probing were not given.

– Provision for FTRs were not available in the process.– Alternative solutions for the customers were not built in the system.– Customers are already sent Original copies of the bill. Scenarios on

why a customer will require a duplicate copy were not studied.



Root causes

2. High Processing Time– Each Back office executive was taking dump individually from the

CRM and working on it.– The existing CRM which was built using Java & Oracle was slow in

downloading the copies of the bills in PDF format from the billing server. Each bill took on an average 4 minutes to open.

– Few back office executives were not using advance MS-Excel options and Keyboard short cut keys for processing the cases.

– There were no dedicated Printer available for the duplicate billing unit. The available printer was shared by the entire floor operations. This affected the print wait time & the system resources.

– The executives were also involved in less intelligent tasks like collecting the printouts, stuffing the bills in envelopes and Zone wise segregation of mails, etc.



Root causes

3. Less Man Power– Duplicate billing unit was not treated as an individual unit.– The basis of Man power requirement calculations, made for other back

office units, were replicated for the duplicate billing unit.– The domino effect of a policy change in the front office operations

were not foreseen.



Solutions




Reducing Inflow

• Scenarios/ Actions to take: – Customer has not received Original bill

• May be the customer is not aware of the 10 day wait period for receiving the bills after bill generation - Inform the customer to wait.

• Wrong Customer address in the system - Make corrections to avoid repeat request from the customer in future.

• Lost in transits - Check the trail & Inform the dispatch unit about the errors.

– Customer has lost Original bill • Provide. Add a nominal charge for the second copy

– Customer requires one more copy• Customer wants to submit a copy to his office & keep original for his records -

Customer should informed about the time taken for the delivery of duplicate copy & the cost involved. Advise the customer to take photocopies.



Reducing Inflow

• Alternative FTR options– Customer can walk into the nearest local customer service

centre of the telecom firm and request for the same.– The soft copies of the bill can be sent as an email to the

customer & print outs of the same can be taken.– The website of the telecom firm can have a provision from

where customer can log in to his account & take printout of the bills.



Improving Process time

1. Taking the dump from the CRM – This task was taken over by the supervisor (Me), work sheets for each

individual back office executive were prepared & allocated to them. This avoided replication of a case & increased the time available for the back office executives.

2. Direct access to the billing server (mirror view)– Instead of viewing the bills from the CRM, a mirror view of the billing

server was created in coordination with the billing team & IT and the link for the same was provided to the back office executives. This aided the back office executives to access the bills in less than a minute.

3. Training– Back office executives were trained on using advance MS-Excel options

and Keyboard short cut keys.Prepared By: Manohar M. M. Iyer

VAS2010XMBA15P005


Improving Process time

4. Printer– In coordination with the Administration & IT, all the existing printers in

the floor were reallocated to various departments & one dedicated printer for the Duplicate billing unit was recognized. This reduced the print wait time & provided more system resources.

5. Less Intelligent tasks– Less intelligent tasks like collecting the printouts, stuffing the bills in

envelopes and Zone wise segregation of mails, etc were allocated to office boys (with lesser salaries) in the dispatch unit after due training. This aided the back office executives to concentrate only on processing the cases.



Man powerfor existing challenge & BAU operations

– The HR was educated on the operational differences between Duplicate billing unit & other back office units

– Also the importance that how a policy change in the front office operations can affect the back office operations was demonstrated.

– To handle the existing challenges in the unit the HR was ready to provide extra man power to the unit by way of new recruits.

– Instead of new recruits the HR was advised to allow an option to existing workforce in other units to work on over time basis before or after their regular shifts @ Rs.40/- per hour per person. An average of 75 CSRs volunteered for 2 hours every day.

– The supervisor (me) took the onus of providing process training to them.



Results




Effects on the Inflow

• Repeat calls for the same request, from all those customers educated & habituated with alternative routes for obtaining the duplicate bills, were almost nil.

• The CRM was constantly updated with corrected address of the customer leading to increase in receipts of original bills

• New FTRs made available in the system• All this resulted in drastic reduction in the number of cases for

Duplicate bills logged in the CRM. Within a month the daily inflow reduced by 50% on an average.



Effects on Process Time

• The only task left for the back office executives were to Open the relevant bills & shoot printouts as the dump were readily provided to them & post printout tasks were handled by office boys.

• The access time for opening the relevant bills was reduced by 3 minutes per case due to direct read access on the billing server .

• More system time was available for shooting printouts, since the print wait time was reduced due to availability of a dedicated printer.

• Also the executives were more skilled & quicker in processing the requests to the training provided on advance MS-excel options.

• Due to all this the process time for the back office was reduced by 60%.• However due to inclusion of probing in the front office process, their

process time increased by 1 minute per case.• The overall process time per case was reduced from 9.5 minutes to 5.7

minutes.



Revised costs of Operation


Cost Per seat Per hour in $

Cost Per seat Per hour in

Rs.

Cost Per seat Per minute in Minutes Rs.

Salary per person

per month Rs.

Average Number

of working days per month

Man hours available

per day for work per person

Cost of wages

per hour Rs.

Cost of wages

per Minute

Rs.

Total Cost of

attending a Case Per minute Rs.

2.5 120 2 7000 25 8 35 0.58 2.58

If 2000 new cases are created everyday, Rs. 91,790.00/- is required to process them i.e. Rs. 19,293.33 lesser.

Time taken to log per case in

minutes

Time taken to Solve per case

in minutes

Total time to Attend a case

in minutes

Total Cost of

attending a Case Rs.

Cost of wages per Minute of office boy

@ Rs. 2000 per month

Average Printing cost per case Rs.

Stationery & Dispatch

Cost per case Rs.

Total cost per case

Rs.

2.5 3.2 5.7 14.73 0.17 1 30 45.90


Comparison of Costs


Intial After one month

Difference saved per day

Average cost to slove per case 55.54 45.90 9.65

Number of cases created per day 2000.00 1000.00 1000.00

Total Cost per day 111083.33 45895.00 65188.33


Thus due to Cost reduction initiatives & the process

reengineering the telecom firm started saving on an average

Rs.65,188.33/- per day on the cost of operations of Duplicate bill

dispatch unit.Prepared By: Manohar M. M. Iyer

VAS2010XMBA15P005


I thank one and all who have provided me with the opportunity to handle this responsibility and the knowledge & support to prepare this Presentation. Please feel free to forward your valuable feedback, comments, queries and suggestions related to this presentation at [email protected] Thank you, Warm regards, Manohar M. M. Iyer


operations management - cost reduction process re-engineering

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