Outsourcing Life Cycle: Integrating DMAIC Controls. WCQI Concurrent Session: M09 Monday May 21, 1:30 2:30 PM Presenter: Daniel Zrymiak

(1)

Outsourcing Life Cycle:

Integrating DMAIC Controls

WCQI Concurrent Session: M09 Monday May 21, 1:30 – 2:30 PM

Presenter: Daniel Zrymiak

(2)

Introduction

• This presentation combines knowledge of an Outsourcing Life Cycle consisting of

distinct phases with …

• Common problems encountered in Outsourcing in order to …

• Determine a Six Sigma DMAIC approach to resolving and controlling these

outsourcing problems at suitable times.

________________________________________________________

Daniel Zrymiak (Accenture): ASQ Fellow Member, QMD Member-Leader Outsourcing Life Cycle: Integrating DMAIC Controls

(3)

Learning Objectives: 1. Evaluate

Evaluate an outsourcing initiative (i.e.

software technical support, business processes) to identify Six Sigma

opportunities for common outsourcing problems.

Can you describe an outsourcing scenario that would benefit from Six Sigma?

(4)

Learning Objectives: 2. Design

Develop and design a DMAIC (Define- Measure-Analyze-Improve-Control)

approach that addresses and prioritizes improvement activities.

Can you describe how DMAIC would help to focus and prioritize improvements?

________________________________________________________

(5)

Learning Objectives: 3. Understand

Understand some of the common failure modes and effects characteristic of

outsourcing or offshoring work, and how to resolve them using the DMAIC approach.

Can you describe one potential quality

problem caused by improper outsourcing?

(6)

Learning Objectives: 4. Recommend

Leverage experiences across the entire effort in order to recommend enterprise- wide system controls for outsourcing.

Can you describe one advantage of establishing enterprise-wide controls?

________________________________________________________

(7)

Overview

• This presentation covers an Outsourcing Life Cycle consisting of distinct phases:

– Assessment – Engagement – Reengineering

– Operations and Logistics Modification – Execution

– Maintenance and Support

(8)

Outsourcing Fusion with DMAIC

• At each phase, common outsourcing problems can be addressed with:

– Define – Measure – Analyze – Improve – Control

________________________________________________________

(9)

Relevance and Application

• Method of analysis to reveal specific improvements to outsourcing

• Pertinent for management of service and software quality with global supply chain

• Linked to Six Sigma, failure modes, metrics, analysis, improvement, and control methods within outsourcing.

(10)

Outsourcing Life Cycle

• Recognition that Outsourcing is progressive and constructive

• Life cycle has distinct phases emphasizing particular actions and objectives.

• Generic phases defined to reflect the

purposes and objectives for that portion of the outsourcing sequence.

________________________________________________________

(11)

Outsourcing: Assessment

• Determine the outsourcing strategy

• Initial evaluations to select business

functions and entities to be outsourced.

• Justifications to outsource are determined

– cost reduction,

– service availability,

– capability enhancement – strategic partnership

(12)

Outsourcing: Engagement

• Identify the departments and touchpoints

• Set expectations and delivery levels

• Strategy meets operational realities

• Determine how to adjust the enterprise to accommodate outsourcing changes.

• Ranges from “business as usual” to a

“managed service” with significant change

________________________________________________________

(13)

Outsourcing: Reengineering

• Modify the value stream and high-level architecture to incorporate outsourced entities.

• Identify tasks for transition and transformation.

• Modify the workflow to a “new normal”

• Rationalize or eliminate wasteful processes that do not add value.

(14)

Outsourcing: Operations and Logistics

• Exchanging knowledge and resources to support transition to new model.

• Modify operations and logistics to support knowledge transfer and proficiency

• Acquisition of necessary infrastructure and licenses to support outsourced resources

________________________________________________________

(15)

Outsourcing: Execution

• Confirmation of outsourcing changes into the “new normal” mode of operations.

• Stabilization where baselines for

operational and delivery commitments are established.

• Transition and transformation should be complete.

• Resources should perform independently.

(16)

Outsourcing: Maintenance and Support

• Ongoing corrective and preventive

maintenance to outsourcing arrangement

– Address and correct problems – Anticipate and prevent incidents – Adapt to external changes

– Optimize systems and processes

________________________________________________________

(17)

Outsourcing Problems & Improvements

• Examples of outsourcing problems

– Skill Level

– Critical Requirements – Process Compatibility

– Interfaced Tools/Applications – International Norms

– Governance

– Late or Incorrect Delivery

(18)

Problem: Skill Level

• Define: Inadequate skill levels

• Measure: Losses, Cost of Poor Quality. Cost of escalations or interventions

• Analyze: Cost-benefit of qualifications. Investment in premium personnel

• Improve: Set explicit qualifications. Conduct Design of Experiments with treatments at Intermediate, Senior, Expert levels to evaluate significance

• Control: Define controls at outsourcing life cycle phases

________________________________________________________

(19)

Problem: Critical Requirements

• Define: Critical requirements are missed

• Measure: Losses, Cost of Poor Quality. Cost of

unsuccessful validations, noncompliance penalties, delays, rework time and materials charges

• Analyze: Cost-benefit of a structured and accountable Knowledge Transfer and Transition approach

• Improve: Conduct knowledge transfer, seamless transition of tasks. Commit to joint accountability between subject experts and knowledge recipients

(20)

Problem: Process Compatibility

• Define: Outsourced resources have processes that are incompatible with core organization and clients

• Measure: Losses and Cost of Poor Quality from process gaps. Inconsistent delivery, inadequate provision of

goods and services, rework and corrective adjustments

• Analyze: Cost-benefit of common methodology and similar definitions for frequently used terms.

• Improve: Establish a common approach. Enforce with clear expectations, touchpoints, gates, and outcomes.

________________________________________________________

(21)

Problem: Interfaced Tools/Applications

• Define: Interface or connectivity errors between outsourced and core tools or applications

• Measure: Losses, Cost of Poor Quality. Cost of

inadequate technical solutions. Time lost due to delays or interruptions from system rework or restoration.

• Analyze: Cost-benefit of common architecture and shared toolset for core and outsourced users.

• Improve: Common infrastructure to simplify details, documentation, and reduce variation between teams.

(22)

Problem: International Norms

• Define: Outsourced operations conflict with business expectations due to international norms (i.e. holidays)

• Measure: Losses, Cost of Poor Quality from interruptions or unplanned termination of services.

• Analyze: Cost-benefit of deploying a rolling 12 month calendar including outsourced holiday and staffing

patterns. Identify cultural hazards within the operation.

• Improve: Avoid surprises and mitigate cultural irregularities or offset with contingencies.

________________________________________________________

(23)

Problem: Governance

• Define: Governance is misaligned between outsourced and core functions, causing breakdowns in decisions and authority patterns.

• Measure: Losses, Cost of Poor Quality from interruptions or delays while waiting for decision, or reversals of

decisions due to inappropriate authorization.

• Analyze: Cost-benefit of setting up a framework of

authority channels for reports, decisions, and references.

• Improve: Map common functions and authority levels, ensure frequent contact for mutual accountabilities.

(24)

Problem: Late or Incorrect Delivery

• Define: Outsourced outcomes are late or incorrect

• Measure: Losses, Cost of Poor Quality from deficient deliveries including late charges, overtime, expediting premiums, wasted project expenses.

• Analyze: Cost-benefit of deploying a strategic delivery management approach, track and prioritize work, assign based on criticality to appropriately skilled resources.

• Improve: Designate and direct work to right resources at right times. Minimize waste, resource misuse, backlog.

________________________________________________________

(25)

Problem: Continuity and Improvement

• Define: Outsourced resources do not improve over time but decline due to attrition and poor replacements

• Measure: Benchmark improvement, innovation, productivity growth. Track comparative progress.

• Analyze: Cost-benefit of retention program for

outsourced employees, support growth and proficiency.

• Improve: Establish targets to keep outsourced employees engaged to improve outcomes and deliverables to clients and colleagues.

(26)

Revisit the Outsourcing Phases

• Identify the Outsourcing Life Cycle phases where improvements should occur:

– Assessment – Engagement – Reengineering

– Operations and Logistics Modification – Execution

– Maintenance and Support

________________________________________________________

(27)

Problems and Life Cycle Phases

“X” indicates the suitable phase for action

(28)

Outsourcing: Assessment

• Initial evaluations to select business

functions and entities to be outsourced.

• DMAIC Project: International Norms

– Infuse outsourcing with correct assumptions and expectations from the start.

________________________________________________________

(29)

Outsourcing: Engagement

• Determine how to adjust the enterprise to accommodate outsourcing changes.

• DMAIC Project: Governance

– Map the core and outsourced organizations early as part of the engagement process to define decision frameworks and reporting.

(30)

Outsourcing: Reengineering

• Modify the value stream and high-level architecture to incorporate outsourced entities.

• DMAIC Projects: Skill level, Process

– Skill levels and process compatibility can be clarified from value stream analysis when outsourced components are considered.

________________________________________________________

(31)

Outsourcing: Operations and Logistics

• Modify operations and logistics to support knowledge transfer and proficiency

• DMAIC Project: Interfaced Tools

– The tools and applications used by the core and outsourced entities can be synchronized early to minimize costs and complexity.

(32)

Outsourcing: Execution

• Confirmation of outsourcing changes into the “new normal” mode where baselines for operational and delivery commitments are established.

• DMAIC Projects: Critical Requirements, Late or Incorrect Delivery

– Execution reveals gaps and failure effects of outcomes needing correction and baselines.

________________________________________________________

(33)

Outsourcing: Maintenance and Support

• Ongoing corrective and preventive

maintenance to outsourcing arrangement

• DMAIC Project: Continuity & Improvement

– The outsourcing arrangement is not static but must continually adapt and evolve.

Development and engagement must be

sustained to avoid back-sliding or regressing.

(34)

Conclusion

• DMAIC can be applied to address common Outsourcing problems.

• Outsourcing can be segmented into life cycle phases.

• Controls can be applied throughout the outsourcing life cycle.

• Outsourcing corrective measures can be proactively addressed by life cycle phase.

________________________________________________________

(35)

Interactive Review and Questions

• Revisit common outsourcing problems and life cycle phases

• Revisit Learning Objectives

• Confirm the core WCQI presentation questions

• Address individual questions with remaining time

(36)

Problems and Life Cycle Phases

The matrix summarizes both items.

________________________________________________________

(37)

Learning Confirmation: 1. Evaluate

Evaluate an outsourcing initiative (i.e.

software technical support, business processes) to identify Six Sigma

opportunities for common outsourcing problems.

Can you now evaluate outsourcing failures for potential Six Sigma opportunities?

(38)

Learning Confirmation: 2. Design

Develop and design a DMAIC (Define- Measure-Analyze-Improve-Control)

approach that addresses and prioritizes improvement activities.

Can you now describe how to focus and prioritize outsourcing improvements?

________________________________________________________

(39)

Learning Confirmation: 3. Understand

Understand some of the common failure modes and effects characteristic of

outsourcing or offshoring work, and how to resolve them using the DMAIC approach.

Can you now describe how DMAIC can be used to improve outsourcing failures?

(40)

Learning Confirmation: 4. Recommend

Leverage experiences across the entire effort in order to recommend enterprise- wide system controls for outsourcing.

Can you now describe an approach for enterprise-wide outsourcing controls?

________________________________________________________

(41)

Presentation Business Context

What is the business context and how does it improve upon the existing

knowledge base?

This presentation fused the practices of Six Sigma and DMAIC into outsourcing in a phased manner.

(42)

Presentation Practical Applications

What are the practical applications

towards the participants’ jobs, functions, projects, or departments?

This presentation defined the outsourcing function into manageable phases in order to position the improvement activities to be timed for optimal effectiveness.

________________________________________________________

(43)

Presentation Integration or Connection

How can this knowledge be integrated or connected to other areas?

This presentation is tied to overall supply chain and quality management, and

continual improvement. Six Sigma

practitioners will benefit from observing the application of DMAIC to outsourcing.

(44)

Presentation Business Context

What are the expected gains, and the risks and implications of omission?

This presentation provides awareness of potential outsourcing problems and a

structured approach to correction, with the risks being expanded losses and Cost of Poor Quality from undesirable outcomes.

________________________________________________________

(45)

Questions and Comments

Daniel Zrymiak Accenture

Surrey, British Columbia, Canada dzss@shaw.ca

daniel.zrymiak@accenture.com (604) 862-4808

(46)

________________________________________________________