Integrate BPM with Six Sigma at all five DMAIC stages

If an organization has implemented Six Sigma, BPM is a catalyst for further improvement in all of the phases of the methodology. Below is an overview of how one Fortune 1000 services company applied BPM to the Six Sigma DMAIC methodology in use across its organization to significantly improve operating performance in the cash flow and receivables process.

Define

Performance data in the cash flow and receivables process was looked at by a Six Sigma Black Belt in terms of key outputs, capabilities and need for improvement to meet business needs. It was identified through this step that the invoice preparation process was a semi manual process, which required inputs from service reports generated in several departments. Further data analysis revealed that 79 percent of the invoices were exceeding their targeted completion time of 10 days and 48 percent were

Accounts Receivable
Remote office
Remote office
Remote office
Invoice issued to customer
Service record
Reconciliation
Record
revisions

exceeding the upper limit of 15 days to issue the invoice to the customer. This created an undesirable outlay of cash, in the form of receivable averaging over 62 days, estimated at $5 million. The Black Belt determined the quickest impact was to create an improvement project to reduce the invoice preparation cycle time.

Measure

In this phase, BPM process maps expedited the task of characterizing processes. Through a highly intuitive set of tools, the Black Belt was able to lay out all of the activities, participants, business rules, technologies, and resources that comprised the invoicing process and illustrated the invoicing activities performed by all participants (people, systems, and resources) across multiple functional areas of the extended enterprise.

Analyze

The primary activity is to narrow down the number of potential contributors to a problem and to find the root causes. A detailed model of the process was used to discover and simulate how the existing process functioned and to determine where potential bottlenecks and other problems were occurring. Six causes were confirmed as major contributing problems, these were:

Services recording (17 percent had incorrect/missing information)
Invoice reconciliation (slow)
Manager review (failure to review in a timely manner)
Internal mail routing (inconsistent delivery location and time)
Queue method (first in first out). For example, a claim could sit in Accounts Receivables between one and 12 days before being worked on. Of the 36 activities identified in the process map, 21 were designated as non value added. The non-value added steps alone accounted for approximately seven days of the current cycle time.

Improve

Once the process was identified, mapped, modeled and the most likely root causes were identified, additional ‘what if’ scenarios were used to create the improvement solution. Based on the knowledge gained, it was decided that the process could be partially automated. Using BPM technology along with the process analytics led to four areas where improvement could be taken. The areas were:

Fourteen of the 21 non value-adding steps were recommended to be removed. This reduced the invoice process cycle time by three days.
Eighty-five percent of the customer services data was recommended for digital entry by the performing department as the service was provided. This reduced the service reporting errors to less than one percent from the previous 17 percent. Thus another two days was removed from the cycle time.
Using BPM it was no longer necessary to send hard copies of the services input forms through the office mail. The Accounts Receivable department was provided electronic access via EAI (Enterprise Application Integration). Cycle time was further reduced by one day. When human interaction was required to complete a process action, the BPM system automatically ordered the transactions into a first-in-first-out approach. This eliminated an additional two days of cycle time.

Control

The objective is to provide sustainability for the improvement solution. To assure that process performance would be consistent and manageable, a BPM web-based monitoring and tracking system was built to provide managers with real-time visibility up and down the process to maintain control of the invoicing. They could take specific actions when process activity was not meeting predetermined requirements. For example:

If the invoice reconciliation process exceeded one day, the affected invoices were aggregated together with an action email to the department manager for immediate intervention.
Services recording error rates were monitored within the system using statistical process control tools, again alerting management if the process lost control.
The total invoice volumes, invoice processing times, error rates and work in process volumes at key process steps were built into a dashboard system. These parameters were then monitored using SPC rules and reviewed by the team on a weekly basis.
A monthly process management summary report was automatically generated by the BPM system and reviewed at the company’s monthly operations review meeting to assure conformance and consistency. The Executive teams reviewed this data as it was considered a critical success factor for the company.

The performance of the process significantly improved by using the Six Sigma problem solving methodology in combination with the application of BPM. The business benefits included a total of seven days of average cycle time removed from the invoice preparation process, service recording errors reduced from 17 percent to less than one percent, and the number of invoices completed over the upper limit of 15 days decreased from 47.8 percent to 7.9 percent.

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