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Project Selection Criteria for Transactional Projects

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  • #27461

    Finkelstein
    Participant

    I am transactional BB and helping my management team in selecting Trans-BB projects. It is very hard to relate these project to strategic goals, hard dollars. Every freaking book I read has project related to strategic goals, hard dollars..dont do a project if there is no savings. If I find a project like cost avoidance or soft dollars or increasing efficiency, its not worth doing is the answer I hear.

    What is criteria of selecting BB projects for Trans’al. What justification do I need to give my management to change their mentality of thinking.

    OR

    How do I select Transactional Projects with no hard savings?

    Please help. Seem very easy but is a night mare.

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    #67312

    Bruce Woloski
    Participant

    I am a Black Belt that went through training in January of 2000. I also live in the world of transactions. It can be extremly difficult to relate six sigma to the transactional world. I can give you a breakdown of what my first project was. I was assigned to develop a measurement system for our replenishment process. I work in a 350,000 distribution center. I applied the six sigma tools and at the end we took the replenishment group from 8 transactions per hour on average to 14 transactions per hour. This meant that we did not need as much labor in the process and we reassigned some associates to other deptartments. I then took this system to 2 of our other locations and applied them there with the same results.Bottom line was more transactions per hour meant less labor needed. This is very simplified and it took allot of hard work to do. The savings were $250,000 not much when you hear of some of the savings that six sigma genertates but our budget is not as big as a manufaturing site. It can be done but it is more difficult that production. I hope this helps.
    Bruce

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    #67316

    Hogg
    Participant

    The difference between manufacturing and transactional projects is profound, but the main point to note is that in any transaction the customer experiences the process real-time, and customer satisfaction comes from short-term related aspects such as speed, timeliness, reliability, accuracy, knowledge and safety in use.

    Internally focused Six Sigma will work in manufacturing since real savings typically can be made by removing material use and labor expenditure as well as time and inventory. Transactional processes rarely use much in the way of material, however the impacts of ‘defects’ are often felt hardest in the area of customer satisfaction and loyalty. Such projects will often tie half of the ‘savings’ back to soft benefits rather than hard – increased sales, reduced defection and attrition, higher spend etc.

    Companies selecting transactional projects must expect only a fraction of the benefits to be short term cost savings or realizable ‘future cost avoidance’ – the expectation must be for longer-term customer satisfaction leading to sales etc. This requires a corporate culture that focuses on the customer, invests for the longer-term, and seeks to proactively measure customer satisfaction and loyalty and realize and ascribe any improvement to the quality effort.

    For example – if customer wants speed at the check out, then going faster will make the customer happier and more people will shop, more can shop, and sales should go up. In the short term going faster will not save money, and this is a real challenge for the corporate culture!

    Projects should be selected if they are achievable, have impact and require low effort – and deal with an area of real pain felt by the company, or more particularly by the customer of the transaction, which has an affect on customer satisfaction and hence sales, use, loyalty etc.

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    #67326

    Gary Cone
    Participant

    Wow, what bad advice. First of all, never pick projects because they are easy. Second the difference between manufacturing and transactional is not profound. A process is a process is a process. The difference is that we have been scrutinizing manufacturing for 50 + years so we have some basic understandings and measures in place. By the way manufacturing is 70% transactional.

    Speed, flexibility and agility are the issues and it is usually transactional issues that stand in the way. Map the value stream, find the place where the overall stream will be most impacted by a sucessful project and do it. If the financial geeks don’t know how to value the gain, give them a copy of the Goal and Relevance Lost and ask them to get with the program. It is not the Black belt function to compensate for accountants that only know how to do the SEC routine.

    Increase the velocity of the value stream and you have a great project. Period.

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    #67334

    Hogg
    Participant

    The question was how to select a (first) transactional project to convince management that it is worth doing – selecting a difficult one is likely to lead to project failure which does not achieve anything. There are easier transactional and more difficult transactional projects – the tough ones often don’t succeed and are not good candidates when the project is a first or ‘on trial’!

    I went into two banks and a shop yesterday. I waited in a queue in each. I don’t like that, and the process (of serving) does not work for me, the customer.

    In this transactional process (nothing manufactured) I am not only the customer but also the supplier, and I experience the process from start to finish. The issue – speed – is actually not a problem for the companies involved, since if they went faster they would typically save almost nothing (from their side of the transaction).

    To get a transactional project done on, something like, service speed requires a different corporate culture and attitude than that required to get a manufacturing project done on the making-process speed. Just consider how each are measured for a start. If a manufacturer makes a widget in half the time, output can double or labor costs can halve and this can be easily seen/measured. If a bank/shop serves customers quicker this is more challenging to measure and ascribe benefit back to profits.

    Transactional projects will succeed only when the company actively seek out the true customer of the process and measure soft benefit costs from satisfaction and loyalty. Even for internal customers.

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    #67376

    Bruce Woloski
    Participant

    Well by now I am sure that Nathan is totally confused. I have done a transactional project and while they are difficult they are able to take costs out of a process. You first need to understand what a transaction costs. I feel it is the Black Belts role to make it clear for the finace world to see savings.If you can lower the cost of a transaction you are saving the company money. Speed although very important is not the only factor. You need to look for non-valued added steps in the process and see if you can eliminate them without effect on the process. Speed can lead to quality issues and errors that you will end up paying for in the long run.

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    #67382

    Hogg
    Participant

    What Nathan wanted to know was how to justify or select transactional projects where there are no hard cost savings.

    Sure you can save some hard costs in almost any project, but that is quite a narrow approach to starting a project – save us (the company) hard money now.

    The real benefit for many transactional projects is that you don’t save hard money today, but reap reward by better satisfying the customer and making more sales tomorrow. Speed is a very strong factor in customer satisfaction in transactions – go faster and the customer is better satisfied (and spends more money and remains more loyal). However as you say, speed can have negative impact elsewhere, and often the delay is mostly ‘fresh air’ with no work being done. In this case, improve speed and you save nothing. If Nathan wants to select and run these sorts of project then a fresh attitude is required that looks at the cost of lost sales and customers rather than just process non value-add.

    The singularly most spectacularly successful project I was ever involved in reduced a transaction cycle time from 170 minutes to 45 minutes – but saved absolutely nothing.

    Business went up by 20%. Staff moral went up. Customer satisfaction went up.

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    #67385

    Bruce Woloski
    Participant

    Geoff
    This first message has sparked some good discussion. You reduced the time per transaction by 29% and no costs associated to the bottom line in hard savings. Was this a process that was working to capacity? You also bring out allot of other factors that play a part in everyones world, morale, customer satisfaction and speed. My reference to speed as being a watch out was that I work in an eviroment where speed is glorified and valued. What I am seeing right now is that when you value speed other things can creep in like errors. Without a good system to monitor errors speed can mask the overall process and it’s effectivness. Thanks for the feedback.

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    #67399

    Peter Williams
    Participant

    Nathan,

    We are in the first wave of BB’s within our organisation and are probabaly one of only a few truly transactional based organisations (Financial Services) that have implemented Six Sigma.

    The problems you are facing are the ones we are coming up against every day. The challenge is only use the tools needed (often they will have to *******ised), and not use everything.

    Many of our projects involve reduction in cycle times, defects and ultimately improved efficiency. All of which are underpinned by improved customer satisfaction, and as such the “Hard Dollar” savings in many instances are minimal. In all of our projects, we have followed the proven framework and are achieving results.

    We are also attempting to use many of the tools for improved sales performance in a number of our divisions. However given the nature of our business we need to gauge the effectiveness overtime and used the tools in a refined manner (Historical DOE’s etc).

    Can take off line and discuss.

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    #67400

    Hogg
    Participant

    Nicely put – what I was trying to say all along!

    Where the transaction and not the product is what the customer is interested in, then cycle time is important, and in the ‘worst’ cases this does not involve hard costs. Project selection and justification then becomes very interesting!

    Bruce – the process was capacity constrained but only at peak load times. The project concentrated on removing the no-work delay only, which analysis showed contributed to the cycle time and was not associated with the capacity constraint. No benefit was realised by increasing capacity, since it was not changed. Virtually nothing was taken out of the actual work either.
    The project target was set at a mid point between current performance and best of the local competition, since the nearest competitor offered a faster process but was noted for poor performance and inability to deliver to expectation. As you say – speed and product/service quality often counterpoise and this had to be considered!

    By the way – GE Capital was the first entirely non-manufacturing company in the world to take on Six Sigma back in 1996, most of the projects were financial transactional with real consumer and commercial end-customers. This prompted a re-evaluation of many aspects of the (then) manufacturing approach, which lead to several changes (the D in DMAIC being one, use of tools, project selection) which often went back to the rest of GE as best practice. Since then most of the major financial companies of the world have taken on Six Sigma to some degree…

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    #67407

    Darron
    Participant

    Where can I find examples or case studies of transactional projects, especically ones from GE capital?

    Thanks.

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    #67410

    anon
    Participant

    One of the first truely transactional? Where have you been. They are everywhere!

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