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Integrating Lean and Six SigmaWCBF Summit, 4/29/2008

Pete Abilla

Email: [email protected]

Blog: www.shmula.com

801-400-3895

Alex Bellabarba

Email: [email protected]

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LessonsLearned

ConclusioneBay

• Opening Remarks– On the Surface

– Beneath the Surface

• What does “Lean” really mean?

• Six Sigma

• Lean + Six Sigma

• Lessons Learned

• Conclusion

Agenda Lean Six Sigma

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ConclusionConclusionLessonsLearned

Agenda Lean Six SigmaLessonsLearned

eBayAgenda Lean Six Sigma

beneaththe surfaceon the surface

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beneaththe surfaceon the surface




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• The term “lean” does not find its origins in Toyota. The word was coined by Jon Krafcik, part of MIT’s International Motor Vehicle Program, which was led by Jim Womack. Krafcik came up with the term “lean” to describe Toyota’s system that managed to get by with “half of everything”: physical space, labor effort, capital investment, inventory, and with far fewer defects and safety incidents.

• Toyota describes its system as a triangle of Technical, Managerial, & Philosophy – with human development in the middle. All of this together combine to form a Lean Culture.

what we do how we manage what we do

what we believe

SummaryTechnicalPhilosophyWhat does Lean

really mean?Development& Managerial




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• It is important to define Lean in the context of the organization’s goals and objectives.

• For eBay, this means:

We are pioneering new communities around the world built on commerce, sustained by trust, and inspired by opportunity.






• We believe people are basically good.

• We recognize and respect everyone as a unique individual.

• We believe everyone has something to contribute.

• We encourage people to treat others the way they want to be treated themselves.

• We believe that an honest, open environment can bring out the best in people.

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• The technical side of Lean can be described as the tools and methods that we implement and use. This aspect of Lean is what we see most often in popular culture – the Cult of Lean, as it were – but is only one aspect. For example,

Lean Tool Definition

KanbanJapanese term for “signal”, a lean method for managing inventory

5SMethod for organizing workplaces to reduce clutter and wasted time for employees

KaizenJapanese term meaning “continuous improvement”, focused on workplace improvement by employees

Poka-YokeMethod for designing or improving processes so errors are less likely to occur

Visual ControlsMethod for making problems visible, providing for fast response and problem solving






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• Toyota leaders use the phrase “building people before building cars”, meaning that developing its employees is the key to improving its products and services.

• In true Lean fashion -- respect for people – is at the center of most activities.

• In addition to Philosophy and Technical aspects of Lean, there is also an emphasis on how we manage and train leaders throughout the company.

• The infrastructure – systems, processes, and people – are required to sustain improvements.






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• In summary, we can reduce Lean into two parts:1. Total Elimination of Waste

2. Respect for People

• We claim that a successful implementation of Lean – in any environment, transactional or manufacturing – requires a balanced approach on:



Total Elimination of Waste* &

Respect for People




* Waste, or Muda, refers to the 7 waste: transportation, motion, defects, inventory, overproduction, waiting, over-processing.

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belt? what Belt?what is it?

• Father of Six Sigma was Bill Smith, an engineer and scientist at Motorola.

• The characterization, measurement, analysis, and control of variation is the chief aim of Six Sigma.

• Customer experience is largely a function of “consistent” experience, of which the mathematical measurement is σ or “sigma”.

• “Consistent” doesn’t mean delightful. It can be consistently bad, but at least it’s consistent. Once variation is controlled, then it can be appropriately reduced.

• The methodology that is typically followed is Define, Measure, Analyze, Improve, and Control (DMAIC).




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belt?what belt?what is it?

In the beginning, there were no colored belts and we focused only on the end customer, reducing warranty costs and getting it right the first time. It was named six sigma and it was good.

Over time, we added black belts and increased the use of advanced statistical tools. This was called the six sigma way and it was better.

Soon we saw the need for more definition and including others to help the black belts in their quality quest so we added green belts. This made the black belts happy.

Eventually, the black belts grew numerous by order of the King. These black belts expanded their search for variation reduction to all corners of the kingdom including even processes in the Human Resources Department but still lacked direction. So we added Master Black Belts to lead them.

As we look across the kingdom today, we can now see yellow belts, gold belts, white belts, master black belts and even Grand Master Black Belts added to the royal order of belts. Everyone must have a colored belt to save the kingdom money regardless if it actually helps the end customer. And the only way to fix a problem is through a black belt project, green belt project or even a lime green project (in between a green belt level project and a yellow belt level project). I guess calling it a lime green project is better then calling it a pea green project.

But is this good? Maybe we should go back to the basics and focus on the customer, reduce warranty cost and getting it right the first time.

~ Mike Wroblewski




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supply chain infrastructure

• Our balanced strategy is simple:

Improve the Member Experience

and

Reduce the cost-to-serve

• Our Scope:1. Within-CS: We believe that participatory management leads to long-term organizational

learning. Our aim is to empower each customer service agent with the principles and tools of Process Improvement & to improve their work everyday. In sum, we believe that everyday, normal, down-to-earth CS Agents can do really big things.

2. Outside-CS: Our worldview is that Customer Service is a reflection of the customer pain and, that some or most, of the root causes are potentially – and usually – upstream in the value chain; upstream from the Customer Service function. Most projects of this type, will usually follow DMAIC, but always with our Lean hats on, just for good measure.

summarychange

managementgembastrategy

and scope stories




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unpaid items

supply chain infrastructure summarychange


and scope stories

list-to-sell

find-to-bid bid-to-win win-to-pay

paid-to-ship

ship-to-receive

seller

buyer

cs Customer Service




handle time

wait time

abandonment rate

policy issues

1st contact resolution

etc…

within-CS focus:

Why do we deviate from perfect customer service?

outside-CS focus:

Why do we receive CS contacts at all?

Item not received

significantly not as described

etc…

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within-cs beyond-csdrive out fear



and scope stories

Guiding Principles

• We want our CS Agents to:

– Focus on the customer

– Be involved, participate, & not be afraid; feel heard

– Be empowered to enhance their work in a systematic way and know how to apply improvement tools appropriately.

– Deliver and sustain results

– Share best-practice across other areas of the business and with global partners.

Expected Outcomes &

Key Deliverables

Gemba Program

Coaching on Lean Thinking

and Quality Tools

Increase Problem-Finding and Problem-Solving capability of

Agents

Improvement Activities &

Kaizen Events

Improvement Projects are team-based and that target

KPI's of the department

Visual Management

Expose Process and Customer Metrics, allowing for more timely response and will point to areas of improvement

Suggestion Engine

Encourages employee participation, ownership, and

point to opportunities for improvement




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within-cs beyond-csdrive out fear



and scope stories




ICVS

• Investigate, Change, Verify, and Share is a modification of Deming’s PDCA Model.

• The beauty of ICVS is that this approach can be applied by anybody to almost any situation.

• The wheel below is another representation of ICVS.

question

solve

experiment

reflect

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beyond-csdrive out fearwithin-cs



and scope stories




The Andon of Fear

• An Andon Cord is a cord that sits on both sides of a production line.

• It is designed to be pulled by the operator if a problem is observed.

• When pulled, the production line stops, the team gathers in the area, and quickly drive to root causes, brainstorm and implement countermeasures, and start the line again.

• But, in some places, workers are afraid to pull the Andon Cord.

• What are the consequences of fear in the workplace? What is the impact on the Customer?

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beyond-csdrive out fearwithin-cs



and scope stories




• Most outside-CS work is done primarily following DMAIC.

• From a global perspective, we view contact volume as symptoms and we aim to follow the volume to its potential root causes upstream.

• The critical success metric for us is to reduce contact volume through fundamental improvements in product, policy, and process.

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and scope stories




Style

Structure

Staff

Strategy

Systems

Skills

Shared values

Process Improvement Core Teams consists of people from Toyota, GE, Amazon, Porsche; backgrounds in both manufacturing and service.

Improve the Member Experience & Reduce the Cost-to-Serve.

Process Improvement Teams in EU & NA.

Teams are based in Customer Service, with close allies in other parts of the company.

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and scope stories




Aware is:

Knowledge of the emerging change, but unclear of the scope, depth, full impact, or even rationale for the change

The realization that you will be affected, but not sure how

Demonstrated Behaviors:

Shows resistance Displays uninformed

optimism and pessimism

Exit Criteria:

Describes change and the business rationale after active

questioning

Believe is:

Shows signs of buy-in for the change

Demonstrates a willingness to embrace the change in some fashion and continue the change process

“Try-out” of the new system or concepts


Displays optimism / sees positive implications

Shows Signs of sponsorship Commits time and energy Shows signs of support for the

change Makes a formal decision to

initiate the change Displays true committed action

Exit Criteria:

Attempts to implement the change

Act is:

Long-term, in-depth testing, trial and application of the change.

An examination of the extended implications of the change

The notion that the change is the status quo, not the deviation from it.

Where the belief is the implementation of the change is past the point of no return


Shows commitment/ ownership of the change

Works on creating ongoing commitment for the change among co-workers

change is treated as the norm Takes responsibility for own

actions related to the change Shows enthusiasm high-energy

involvement Initiates continuous

improvements

BELIEVE

UNDERSTAND

AWARE

UNAWARE

ACT

Understand is:

The comprehension of the nature and intent of the change as well as where you “fit in”


Displays anger Playing the game Shows resistance Bargaining Shows signs of Optimism Actively seeking information Shows denial Actively judging how the

change will affect the organization and employees

Exit Criteria:

Speaks positively of the change, at least conceptually

Participates actively in meetings to discuss the change

• Lack of knowledge of the change project and the first encounter or interaction with the change effort


Initial reaction Displays confusion

Exit Criteria:

The realization that the change will affect the status quo without understanding the full impact

Saboteurs

Fence Sitters

Fully Committed

Build Awareness Foster Understanding Obtain Buy-in Facilitate Ease-of-Adoption

Leadership Opportunity:

1. Set a Direction

2. Cope with Change

3. Cope with Complexity

4. Aligning People

5. Motivating and Inspiring

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resultsparticipation



and scope stories




• Our Visual Management RotoCube contains cards for metrics recording, suggestion forms, and a celebrate section for completed suggestion forms.

• Goal: Increase the Problem-Finding & Problem-Solving capability of our CS Agents.

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and scope stories




Why UPI Claims?

Justified

Wrongful

14.6%

Hyp

oth

es

is 1

eBay does not require Seller to state

shipping information in the shipping fields of the listing

shipping

Hyp

oth

es

is 2

Sellers that are active & then suspended & then reinstated,

have a higher rate of UPI Claims than other sellers.

suspension

6.25%

1.46%H

ypo

the

sis

3

Seller files retaliatory UPI Claim against Buyer in order to descore

negative feedback

feedback

Unpaid Item Claims

• UPI Claims leads to less or no buying activity on eBay.

• Verified 3 Root Causes of Wrongful Unpaid Item Claims.

• Eliminating these 3 root causes will bring eBay an estimated ~24MM lift in Gross Merchandise Bought (GMB).

• Round Robin contract to DC

• Creation of eFax number

• Placing an 800# on the contract

Chris’s improvements to the contract subscriptions process resulted in year-to-year revenue gains of $114,000!

0

5

10

15

20

25

30

35

40

Dates

Date Range From 3-12-2007 through 4-30-2007

Day

s to

Pro

cess

April 2007 - 7 days to process

0

5

10

15

20

25

30

35

40

Dates

Date Range From 8-23-2007 through 9-21-2007

Day

s to

Pro

cess

Sept 2007 – 2 days to process

Look at the Results!

Before After

What were the Changes?

$114,000$114,000

RevenueRevenue GainsGains




and scope stories




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Problem Statement: Wait times for follow-up phone calls for SEA members was up to 45 days. This extremely long wait time decreased customer satisfaction.

Root Cause: Workflow and scheduling of phone calls were not well-defined.

Solution: Elimination of redundant workflow (keep just the spreadsheet) and assignment of calls with a service level requirement.

Positive Results/Benefits:

1) Reduced cycle time of follow-up phone calls

2) Reduced redundancy within SEA Phone Call Process

After:• Elimination of kana email box storage• Phone calls now assigned• Service level attached to calls

Before:• Redundancy: calls stored in 2 areas (spreadsheet and email box)• Scheduling of calls not defined

Average of 22 days with backlog

-18 days

Average of3 to 4 days with decreased

variability

Average of 6 days without backlog

-2 days




and scope stories




• Created Kana workflows• Created process to

evaluate catalog entries• Tasked CSR’s and

trained

Adam Lund’s project addressed several problems in the Error, Addition, and Muze Portal work processes at Half.com that resulted in $72,000 growth of catalog GMV.

Look at the Results!

Before

After


MUZE• 50% Roll Through• Average Response Time : 9 Days• All Responses out of service level

MUZE• 95.6% Roll Through• Average Response Time: 54 hours• 70 % of responses in Service Level

Serv

ice

Lev

el R

ange

86420-2

10

8

6

4

2

0

Days

Frequency

Mean 2.261StDev 2.562N 23

Service LevelNormal

KANA• 7,500 abandon cases• Oldest case 10,802 hours

KANA• Cases worked within 72 hours




and scope stories




• Identified bad proofs (36%)• Defined IP related proofs and

appropriate actions• Developed/delivered IP

focused training for ATO reps

• IP related proofs did not accurately identify ATO and were causing WATO to occur.

• Accurate proofs and education led to reduction of WATO by 839/month

• This equates to $2.1M in revenue gains annually

Look at the Results!Before After


$2.1M$2.1M

Revenue Gains

0

500

1000

1500

2000

2500

3000

January February March April May June

0

500

1000

1500

2000

2500

3000

0

500

1000

1500

2000

2500

3000

July August September October November December

0

500

1000

1500

2000

2500

3000




and scope stories




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Problem Statement: A significant number of emails were being misrouted into the Daksh PH Investigation queue. This created extra routing costs and longer response times.

Root Cause: Lack of an audit process for the SH Triage Macro. As a result, some macro rules were outdated and had vague definitions.

Solution: Changed the current macro rules to remedy the problem and created an audit process for the future.


1) Reduced the number of misroutes by the Triage Macro

2) Created a process for continual improvements to the Triage Macro

3) Reducing misroutes by 50%, will save a minimum of 1,795 human touches. This generates an annual cost savings of $34,464.00.

Misrouted Emails

020406080

100120140160

12/2

2/20

07

12/2

9/20

07

1/5/

2008

1/12

/200

8

1/19

/200

8

1/26

/200

8

2/2/

2008

2/9/

2008

2/16

/200

8

2/23

/200

8

3/1/

2008

INVAppeal Shill/PSU Reports

Implemented solution January 29Implemented solution January 29 thth. .

The goal: reduce the misroutes by 50% or The goal: reduce the misroutes by 50% or approx. 1800 emails.approx. 1800 emails.




and scope stories




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Problem Statement: The pre-chat survey was only asking the member for some of the required information, slowing down the cycle time of verification.

Root Cause: Pre-chat survey asked for member details too often.

Solution: Changes to pre-chat survey to eliminate duplicate requests for information.


1) Reduced redundancy

2) Reduced cycle time of verification process within chat

Solution:Information Pushed:NameAddressTelephone #User ID

Problem:Significant amount of redundancyUser ID 2xEmail address 2xContact informationRequired waiting for information

3:42 minutes

- 45 seconds2:57 minutes




and scope stories




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Problem Statement: The GS POI process involves a long cycle time requiring the member to go through and inconvenient faxing procedure, verification by several CSR’s which often requires rework from support and the member.

Root Cause: The previous method used for POIs involved the member faxing in a large amount of documentation to verify their identity. For example, 32 POI approvals sent out by helpline over a 4-week period, only 2 members faxed their details and regained access to their accounts.

Solution: Implement tiered hard verification process


1. Data collection on the new process in GS chat shows an increase from 6 % to 95 % in successful account restorations

2. Standardized process for account holders who have lost their password/email access and contact GS chat

3. New cycle time for restoring an account is now measured in minutes

POI “Before” Process

Account Restored

Account Review

Fax sent in

Verification/POI Approval

Contact frommember

Complex process: 32 POI approvals sent out by helpline over a 4-week period,

only 2 members faxed their details and regained access to their accounts.

Member Contacts CS

Rep Verifies Member

Rep changes the Password for the

member

Account is Restored

The new cycle time for restoring an account is now measured in minutes;

impossible under the previous email and fax system.

POI “After” Process

General Support, Proof-of-Identity – Eliminate Steps & Reduced Cycle TimeRichard Wong and Scott Taylor




and scope stories




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and scope stories




• At eBay, our focus is on Improving the Member Experience and in Reducing the cost-to-serve.

• Our scope is within-CS and outside-CS.

• Within-CS, our approach is for broad participation and to teach CS Agents primarily Lean Thinking.

• Outside-CS, we always keep our Lean hats on, but do much more DMAIC work.

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• The Continuous Improvement team at eBay is only 10 months old.

• We’ve hit the ground running and are very focused.

• While true change happens from the ground-up, it sure helps to have key influential people throughout the company as allies.

• A focus on principles is key – that resonates with people. The Tools and Methodology will make much more sense once people understand the principles.

Next Steps:

• Keep on building people; keep on improving the member experience; keep on fundamentally reducing the cost-to-serve.

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• We started with Lean, then a little about Six Sigma.

• We explained our strategy, focused on Improving the Member Experience & Reducing the cost-to-serve.

• Our scope is within-CS and outside-CS. The former emphasizes participative management, lean thinking, and focused on within-CS metrics. The latter deals with why CS contacts are created and uses primarily the DMAIC methodology, but always with our Lean hats on for good measure.

• Next Steps – continue to do good, delight the member, build our people, and reduce the cost-to-serve.

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Thank You

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