We all need payment for the work that we do. It is really that simple. If contracted out to do a job by somebody, you need to be able to count on compensation for the work done on that job within a reasonable amount of time. Contractors that worked on street maintenance projects for the City of San Antonio were having to wait longer than a month for payment of completed work. This caused a lot of frustration and threatened to have a negative impact on the city’s infrastructure.
The City of San Antonio was able to prevent what would essentially be a strike of its street maintenance contractors by utilizing DMAIC to come up with a solution that increased the on-time payments of the contractors by nearly 20%.
The City of San Antonio Had a Problem
In 2014, the City of San Antonio received numerous complaints from its network of on-call contractors that were utilized for street maintenance projects. These complaints alleged that it was taking significantly longer than normal for the contractors to be paid for the work that they were doing. In many cases, contractors were reporting that payments for their work for the City of San Antonio were taking longer than 30 days after completion to be processed.
This was a major problem.
If contractors cannot anticipate a payment timeline and plan accordingly, they are also unable to compensate the subcontractors that worked on the city projects from the payout within a reasonable amount of time. In some cases, this would mean that contractors would pay the subcontractors out-of-pocket while they awaited reimbursement from the city. This, of course, was not a sustainable solution since a contractor needed to be able to put food on their own table as well. Inevitably, if something was not done by the city to improve the delayed payout situation, contractors would no longer accept bids on City of San Antonio projects, which would have a major impact on the time it would take for addressing street maintenance issues throughout the city. This could not only negatively affect the infrastructure of San Antonio but also lead to safety issues among the area’s population.
The City of San Antonio needed a solution, so it turned to Six Sigma.
The City of San Antonio Decided to Utilize the DMAIC Process
This would not be the first time that the City of San Antonio turned to Six Sigma to help with street maintenance issues. One example would be back in 2014 when the city did a survey of the community to rate resident satisfaction with its timeliness in responding to potholes.
With its survey, the City of San Antonio expected to have an exceptionally high satisfaction percentage with regard to potholes in the region. After all, within 48 hours of notification of a pothole, the city responded to the issue 98% of the time. How could it possibly do better than that?
The City of San Antonio put some Six Sigma tools In order to find out what was leading to the low satisfaction percentage, the city decided to listen to the Voice of the Customer. Relying on their own satisfaction measures would do little to improve the satisfaction of the customer, so it was time to understand what the residents truly wanted. The City of San Antonio spent the next several months gathering data and asking a lot of questions. They inquired about the equipment they were using, the effectiveness of their repair methods, and how proactive they were about repairs.
The city was surprised by the results of their inquiry.
What the City of San Antonio found out was that the residents did not want to have to report the potholes in the first place. In response to this, the City of San Antonio began utilizing city employees to spot potholes and fix them before there was even a complaint. This led to a 480% increase in pothole repair over the next few years, which had a major impact on the satisfaction of the city’s residents.
These kinds of previous results led the City of San Antonio to feel confident that Six Sigma could be helpful in its street maintenance contractor issue.
When addressing the street maintenance contractor issue, the team tasked with solving the problem utilized DMAIC, a cornerstone process of the Six Sigma method. This process consists of five phases: Define, Measure, Analyze, Improve, and Control.
Defining the problem would seem rather simple in this case. Contractors needed payment in a shorter amount of time. Moving forward with this as the problem statement, however, would not be good enough. It does not provide scope, so it takes looking at the Voice of the Customer to fully understand what it is that the contractors are looking for in order to be satisfied.
If looking at the average processing time, the city typically processes payments for its contractors within 13 days. Surely, this is a suitable amount of time. Well, that time period only takes into account when all the necessary paperwork is provided for proper processing. There were issues that prevented a significant amount of payment for completed work from being processed within that timeframe. If the city could reduce the number of rejected invoices, it could increase the number of payment requests processed within an acceptable amount of time.
For the Measure phase, the project leader made a data collection plan. The data gathered included the total number of task orders, the number of payments processed, the timeliness of the payments, the rejection rate, the types of rejections, and the total number of rejections by type.
In the Analyze phase, several root causes emerged for why payment requests were being rejected. Using the 5 Whys, the team established that contractor quantities that were in payment requests were not lining up with the verified quantities agreed to by the City of San Antonio. The reason for this was that verified daily quantity information was not easy to access or provided consistently for confirmation. This could be attributed to the variance in documentation and delivery consistency among inspectors throughout the city. Going through the 5 Whys in this manner led to the understanding that there needed to be standardized documentation and reporting among the inspectors. Though several root causes emerged, addressing this root cause was singled out as being within the city’s control.
For the Improve phase, the City of San Antonio updated its project management operating system’s workflow to do things like furnish copies of rejected orders to the contractors so that they were kept up-to-date. That way, the issues could be addressed and there were no surprises. Another improvement with the project management software tool was to add the City of San Antonio as a submitter for the request of payments. A tolerance threshold for quantity yield calculations was also built into the project management software to reduce the number of rejections. Perhaps most notable was the implementation of a daily standardized quantity log for documenting quantities as well as a set way for reporting them.
The final part of DMAIC is the Control phase, and the way this team controlled the improvements made was to set up a clear and defined monitoring and response plan. Some of the things being watched during the monitoring process were the set upper control limit for the number of rejections as well as the set upper control limit for the amount of time allotted for processing.
The Outcome Was Beyond Expectation
The team working on this project for the city would have considered the improvements a success if the overall average of processed monthly payments increased by 10%. Instead, the team saw an increase in overall payments, jumping from an average of 97 processed payments to an average of 116. This was a percentage increase of almost double what would be considered a success. Furthermore, the improvements reduced the average number of rejected payments from 17 to 12. Rejections that were due to disputed quantity amounts decreased from a 58% average to a 42% average.
In a show of commitment to continuous improvement, the City of San Antonio planned to extend the success of the project to roll out standardized daily inspection and invoicing procedures for all of its other capital contracts. It would also collaborate with local utilities for similar processes to be followed on city utility projects. The city also planned to have quarterly meetings to check up on progress and identify ways to make improvements on any related issues that may arise.
3 Best Practices When Implementing the Six Sigma Method at Your Organization
The City of San Antonio got further confirmation of the lessons that come with utilizing the Six Sigma method. These lessons include:
1. Listen to the Voice of the Customer
In previous City of San Antonio Six Sigma projects, the city was shown just how important it is to look outside of internal qualifiers of success. Hearing what it is that your clients are actually looking for is a major step toward improving the quality of the services that you provide. In this example, the city could have chosen to just look at its average payout time of 13 days, deciding that it was good enough and the contractors should be happy. What this would ignore, however, is that this number only reflected the average payout time if no issues held up the processing. Too often, the contractors were having to wait longer than 30 days for a payout, and the city needed to examine why that was happening and what it could do to fix it.
2. Look at what you can control
When you analyze your data, it is possible for several root causes to emerge as to why issues are happening. When this is the case, it is important to look at the solutions that will have the biggest impact, are the most cost-effective, and that you actually have control over. It is not worth it to spend too much time examining root causes that are simply out of your control. By looking at what could actually be done, the City of San Antonio had a significant impact on improving the overall average payment processing time for the total number of submitted orders by its contractors.
3. Continue to improve
The City of San Antonio realized that the improvements made could be taken further than they were by the end of the project’s scope. The standardization established during the process could be extended to utility work and other contracts. Continuing to find ways to improve as well as fine-tuning the improvements that you have already made can have a massive effect on the quality of service your organization is able to provide clients, increasing the overall success of your business.
Building Upon Your Six Sigma Success
The City of San Antonio has utilized Six Sigma for a number of improvement projects. This project is an example of taking the lessons from previous projects, making improvements, and then building upon those improvements by finding other areas where the new processes can also fit. This could be applied in your own organization. Find a project where Six Sigma could be beneficial, even if it’s a small one. Once you have seen a project through to completion, build upon its success by looking for ways to apply the improvements made to other projects within your company. Soon enough, you could have a wealth of areas in your organization that have improved quality, efficiency, customer service, and profitability.