THURSDAY, APRIL 17, 2014
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New to Six Sigma DMAIC Using a DMAIC-Style Approach to Win Service Contracts

Using a DMAIC-Style Approach to Win Service Contracts

In today’s competitive environment, companies are looking for service providers that offer a lower cost and a trusted partnership. This is a need that can turn the request-for-quotes (RFQ) process into more than a bidding war. It is especially true when companies are looking to outsource major activities and are concerned about losing control. For service providers bidding on these contracts, it is necessary to exceed the client’s expressed and hidden needs while ensuring their own ability to deliver at the desired margin.

Service providers can use Six Sigma in these critical selling situations through the use of a DMAIC-structured sales tool. This tool is formulated using a typical Six Sigma quality improvement process, modified to align with the major steps of the sales process. It is designed to assure alignment to the client goals, internal ability to meet them and a proven methodology.

The DMAIC sales structure includes the following steps:

  • Define: Identify scope and expressed critical-to-quality (CTQ) elements.
  • Measure: Define CTQ performance for client, competition, own capability and goal.
  • Analyze: For each CTQ goal, develop processes, timeline and risks.
  • Improve: Present proposal in terms of capability, cost and launch plan with metrics.
  • Control: Complete detailed launch plan with responsibilities, milestones, corrective actions and management reviews.

Define Phase

The RFQ provides minimum specifications and details the services and functionality required by the client. From there, a determination of the scope and priority of the specifications or CTQs is needed. This is accomplished through interviews with the client’s functional experts, where several critical elements are collected. Use a comprehensive questionnaire to ensure all necessary information is captured including such elements as existing organization structure, headcount, IT systems profile, volume and frequency data, and any other details needed to fully define the client requirements expressed in the RFQ. It also is critical to collect pertinent transaction-level data for measurement and analysis. A complete profile from the Define phase provides a solid structure for a truly knowledge-based quote.

Measure Phase

The Measure phase provides a framework for potential success. For each CTQ identified during the Define phase, it is necessary for the service provider to measure its own current performance capabilities as well as those of the client and the client’s competitors. This provides a view of any gaps between the client requirements and the service provider’s capability to meet or exceed them.

The following is an example of a service provider’s performance capability gap analysis.

Client’s
CTQs

RFQ
Requirement

Client’s
Current

Best of
Competition

Provider’s
Capability

Capability
Gap

Coding Errors

200

480

120

140

+60

Payment < 90 Days

550

955

110

630

- 80

Wait Time < 3 Mins.

200

750

120

350

-150

Obtaining this information may require significant resources, especially if time is short. The client’s current performance is obtainable through the questionnaire and raw data acquired during the Define phase investigation. Competitive data is typically available through industry and trade publications or benchmarking services. In some instances, a competitor will disclose one or two metrics where it considers itself a market leader and may even provide basic information on how it achieved its level of expertise. The service provider’s capability is derived from previous contracts of similar scope and size, where information such as comparative size, time to achieve, control, the systems used and operating cost are available. The capability to meet additional perceived CTQs or exceed stated ones also is obtained from previous contract information, providing a statement of competitive advantage.

Analyze Phase

During the Analyze phase, the service provider must develop a plan to meet or exceed the RFQ requirements. To accomplish this, a full analysis of the required sub-functions and drivers is needed, including an analysis of each CTQ and the development of the personnel, systems and structure necessary to deliver them within budget. Once completed, this analysis allows determination of costs for the proposed plan, which may require trade-offs in the investment needed for each CTQ. The goal is to develop a detailed structure that provides a realistic, achievable and attractive plan. A good cost accounting tool is usually needed to manage this balance of dependent variables. Also critical is the assurance of the service provider’s operations management that the plan is achievable given the assumptions provided. This process should include a sensitivity analysis to highlight the effects of drivers such as volume and variability.

Improve Phase

The Analyze phase provides the final structure required to support the client’s needs. In the Improve phase, the service provider develops a launch timeline to implement that structure. This gives the client a view of the service provider’s capability and sets expectations for management of the change and implementation process to be used. The Improve phase should present the service provider’s entire knowledge and data-driven plan, reflecting an understanding of the client’s goals and giving assurance that the service provider is structured to achieve them. The service provider should remain focused on the RFQ requirements (CTQs), highlighting capability versus minimum requirements and offering a comparison with the client’s known competitors. This also is an opportunity to review additional processes where the service provider’s expertise will provide leadership and competitive advantage for the client. Where applicable, the service provider should furnish guarantees based on critical assumptions, and should establish trust by supporting its capability calculations with an overview of the DMAIC process it followed in preparing the bid.

Control Phase

The Control phase includes a partnership with the client to complete the launch/change plan and manage changes. A plan that is agreed to and jointly managed by the client and service provider is essential. Included in the pre-implementation process are the identification of detailed roles and responsibilities, a timeline including major milestones, an escalation procedure, corrective actions and management reviews. A constant review of the CTQ requirements versus their achievement is prudent to ensure the client of a successful plan delivery. While delays may occur, implementing a culture driven by metrics and elevating concerns wherever necessary, will reduce the likelihood of hidden problems becoming disasters.

Conclusion: DMAIC-Style Selling Raises the Bar

As companies continue to outsource non-core activities, they look for skillful service providers who understand their business and are capable of delivering to their bid. DMAIC-style selling raises the bar by employing a proven bid-development process. Data-driven analysis, sub-process development, robust work plans and cost refinement are the keys to its success. Through a Six Sigma approach, service providers offer a view of the excellence and capability of their organization and differentiate themselves from their competition.

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