RPM Certification Training

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Transforming Six Sigma Into A Service
MethodologyJohn Karolenko, Director of Project
Development PHH Arvaljohn.karolenko_at_phh.com410-7
71-3738September 15, 2005
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Welcome

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

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Who is PHH?
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PHH Corporation

• PHH Arval is part of PHH Corporation
• Mortgage and vehicle management operations
  efficiently provide outsourced services to
  corporate customers
• PHH Mortgage is the sixth largest retail
  originator of residential mortgage loans in the
  United States
• PHH Corporation (NYSE PHH) has 7,800 employees
  in North America

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Business Profile

• PHH Arvals business history and culture are all
  about innovative customer service
• Industry leaders and innovators since 1946
• Recognized leader in developing technology that
  enhances customer service
• Diverse and experienced team of customer service
  professionals
• Consistent track record of successful
  relationships

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Business Scope

• PHH Arval is an industry leader in outsourced
  fleet management services for corporate clients
  and government agencies throughout North America
• Over 1,300 employees
• 600,000 vehicles under management
• Provide services worldwide with global marketing
  partners
• Purchase more than 80,000 vehicles annually

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Strategic Relationships

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

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What Exactly Does PHH Do?

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

The Lifecycle of a Vehicle
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Six Sigma Service Delivery
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Three Years Ago

• PHH detected a shift in our clients focus. They
  wanted to know
• PHH what are you doing to improve yourself?
• How will you know that you have improved?
• What they really meant was
• Were working to improve ourselves
• We only want to partner with organizations who
  can help us meet our improvement goals

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Industry Changes

• More and more Six Sigma focused clients and
  prospects
• Becoming more common in every visit
• Increased interest in PHHs metrics that are
  displayed throughout our building
• Service Level Agreements (SLAs) becoming more
  common
• Ascendancy of purchasing managers
• Clients want to know how they perform against the
  baseline

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Opportunity

• This was an opportunity to gain a competitive
  advantage

• Differentiate our service from competitors
• Move PHH from Good to Great
• Establishing PHH as the clear service leader in
  our industry
• Competitors include GE

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Opportunity

• The timing was right
• PHH is a thriving organization, not one under
  threat
• No desperate times and desperate measures
• Having a solid foundation ensured that we had
  time to do this right
• Building on a strong service delivery culture

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Our Response

• A Six Sigma based program for improvement
• We chose Six Sigma for its
• Proven track record
• Largely in manufacturing
• Readily available supply of
• Knowledge
• Skills
• Tools

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Our Challenge

• Recognized immediately that PHH would have to
  adapt 6? to the service world
• PHH does not manufacture anything
• Much of our service delivery is done through
  networks of service providers outside of our
  building
• Our networks are often the visible face of PHH to
  our customers

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PHHs Approach
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PHHs Approach

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

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PHHs Approach

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

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PHHs Approach

• The service challenge
• How to keep service flowing while using the same
  resources to improve it?
• Organizational readiness
• Leading change
• If were doing fine, why do we need to do this?
• No traditional top down implementation
• Started with our service delivery organization
• Build wins interest, then expand

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PHHs Approach

• Specific focus on making the client central to
  our improvement effort
• Typically, efforts are focused on the adopting
  organization
• Client benefit is often, at best, an after
  thought
• PHH still expects to benefit from 6?, but the
  client focus directs where our efforts should be
• If we focus on the right metrics, the dollars
  will follow

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Challenges
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Challenges In The Service World

• Perceptions against Six Sigma
• Gathering Data
• Client Customization

Some are unique to service, some are not
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Challenges In The Service World

• Perceptions against Six Sigma
• This isnt manufacturing Six Sigma doesnt
  apply here
• We never do anything the same way twice
• How can you document a process when everything
  is an exception?
• We do whatever it takes to satisfy the client.
  Thats our process

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Challenges In The Service World

• Gathering Data
• Legacy systems
• Hybrid of system reporting and manual methods
• Lack of recognition for the need to gather the
  data
• I know where the problem is

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Surveys

• We do make extensive use of client driver
  surveys
• While we incorporate this into our improvement
  efforts, surveys represent lagging information
• Since we enforce clients policy, not always a
  true measure

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Challenges In The Service World

• Client Customization
• In customized service delivery Everything is an
  exception
• The standard process is the most frequently
  occurring exception
• This is a fundamental issue for PHH
• Our willingness to provide highly customized
  service is a strength over our competitors
• Its also a source of variability in our service
  delivery

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Services vs. Products

• Service delivery is significantly more fragile
  that products
• It lives from experience to experience, based on
  perceptions
• At PHH long intervals between contact with
  drivers
• Because you can only experience a service as
  opposed to touching a product
• There is always some level of apprehension
  surrounding its reliability and availability
• Vulnerable to misperceptions about service levels

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• Client Focused
• A differentiator from our competitors

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Client Focused

• In service delivery, PHH cant
• Measure material waste
• Test product output
• Instead, we focus on those things that matter
  most to clients
• Were only as good as our last service delivery
  experience!

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Program Focus

• Rally to Results is focused on
• Speed
• Reliability
• Value

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Program Focus

• Speed of service delivery
• Reliability of our service
• Value that PHH brings to the customer

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Metrics

• Speed
• How long does the process take?
• How long should it take?
• Reliability
• How often does it fail?
• Why does the process fail?
• Value
• Have we saved the customer money?

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Metrics
The Metric Hierarchy
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SM
Vehicle Accident Services
A Case Study in Reducing Cycle Time
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Vehicle Accident ServicesKey Objectives

• Increase Driver Productivity
• Ensure driver safety
• Get them back on the road as soon as possible
• Manage Costs
• Minimize repair time
• Manage the cost rental vehicles
• Choose the best repair/replace option
• Maximize recovery of damages

Property of PHH Arval
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Vehicle Accident ServicesThe Process

Property of PHH Arval
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Define The Problem

• The VAS Days to Shop component of cycle time is
  impacted by slow driver response time in
  obtaining estimates or scheduling repairs.
• The average cycle time for the months of August
  and September 2003 was 15.7 days.

Property of PHH Arval
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Define The Detailed Process Flow

Property of PHH Arval
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Define Begin the Business Case
Property of PHH Arval
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Measure

• Ran report to determine cycle time
• Manually tracked volume of mailings

Property of PHH Arval
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Analyze
Property of PHH Arval
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Analyze

• Average Days to Shop cycle time 14.4 days
• Annual volume of mailings 11,124
• Time spent on mailings 742 hours annually

Property of PHH Arval
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Improve

• Implementation Plan
• Driver follow up letters will be emailed instead
  of mailed whenever possible.
• The follow up time between communication attempts
  will be reduced from 3 weeks to 1 week.
• Goals
• Reduce driver mailings by 70
• Decrease Damage Control cycle time by 5
• Increase Damage Coordinator productivity by 3

Property of PHH Arval
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Control
Property of PHH Arval
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Control

• Results
• Reduced annual volume of mailings by 76
• 5,200 to 1,500
• Decreased cycle time by 35, from 14.4 days to
  9.3 days
• Decreased touch time by 57

Property of PHH Arval
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Six Sigma Still Applies

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

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Sustaining The Effort
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Client Visits
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Client Visits

• An opportunity to ensure clients understand what
  were working to achieve on their behalf
• Process improvement is central to every client
  visit
• We typically meet with clients before they see
  our service areas
• Lead with our metrics by posting them in every
  service area
• 10 Displays All focused on Speed, Reliability
  Value
• Almost 50 key metrics visible to anyone who walks
  in the door
• Requires courage to take this risk

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Client Visits

• A dialogue with our visitors
• PHHs approach to process improvement
• What clients can expect from PHH
• Encourage clients to ask our managers
• What are you working on?
• How will my drivers benefit?
• Discuss a case study illustrating our efforts

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Recognition

• R2R Stars Are Awarded For

Bronze    Quantifiable financial benefit between 1,000 and 5,000 or Observable improvement in one or more process metrics
Silver    Quantifiable financial benefit between 5,000 and 25,000
Gold    Quantifiable financial benefit above 25,000   
Craig Pijanowski ASE Certified Mechanic Maintenanc
e Team Leader
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Key Thoughts

• Six Sigma is still highly effective in the
  service realm
• Need to be flexible in adapting it to services
• Must focus on whats important to the customer

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Questions