business relevant tl 9000basic (loss)/earnings per share (€)-0.05 copq finance. 5degrees...
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Business Relevant TL 9000QuEST Forum
Great Lakes TL 9000 Special Interest GroupChicago – December’07
Dean Henderson ~ President5degrees Telecommunications Consulting Inc.
Ottawa, Canada
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5degrees Telecommunications Consulting Inc. 2
“The bitterness of poor quality is remembered long after the sweetness of low price has faded from memory.”
- Aldo Gucci
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“As budgets shrink, reducing the cost of poor quality will be
paramount to staying competitive.”
“Organizations require a method tosystematically manage and recoverthe costs injected into their business
due to supplier poor quality.”
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5degrees Telecommunications Consulting Inc. 4
Today’s Realities
• Intense Competition– Retaining revenue– Saturated markets– Cable, fixed line, wireless
• Complex Solutions– Open architectures, multi-media, multi-vendor
• Dynamic Relationships/Partnerships– Outsourcing, LCC migration, mergers,
divesting
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Cost-of-Poor-QualityFinance
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Annual Consolidated Financials
INCOME STATEMENT (€m)
Revenue 20,000
Cost of sales (14,000)
Gross profit 6,000
Selling, general and administration expenses (6,300)
Operating (loss)/profit (300)
Tax on (loss)/profit (60)
(Loss)/profit for the period (240)
SHARE INFORMATIONShares outstanding (m) 5,000
Basic (loss)/earnings per share (€) -0.05
CoPQ Finance
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Annual Consolidated Financials
INCOME STATEMENT (€m)
Revenue 20,000
Cost of sales (14,000)
Gross profit 6,000
Selling, general and administration expenses (5,500)Maintenance services (network) expense (450)CoPQ expense (350)
Operating (loss)/profit (300)
Tax on (loss)/profit (60)
(Loss)/profit for the period (240)
SHARE INFORMATIONShares outstanding (m) 5,000
Basic (loss)/earnings per share (€) -0.05
CoPQ Finance
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Annual Consolidated Financials
INCOME STATEMENT (€m)
Revenue 20,000
Cost of sales (14,000)
Gross profit 6,000
Selling, general and administration expenses (5,500)Maintenance services (network) expense (450)CoPQ expense 0
Operating (loss)/profit 50
Tax on (loss)/profit 10
(Loss)/profit for the period 40
SHARE INFORMATIONShares outstanding (m) 5,000
Basic (loss)/earnings per share (€) 0.01
CoPQ Finance
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Annual Consolidated Financials
INCOME STATEMENT (€m)
Revenue 20,000
Cost of sales (14,000)
Gross profit 6,000
Selling, general and administration expenses (5,500)Maintenance services (network) expense (150)CoPQ expense 0
Operating (loss)/profit 350
Tax on (loss)/profit 70
(Loss)/profit for the period 280
SHARE INFORMATIONShares outstanding (m) 5,000
Basic (loss)/earnings per share (€) 0.06
CoPQ Finance
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How can this happen?
• CoPQ poorly articulated• Operations impact unclear• Contract deficiencies• Measurement challenges• Lack of supply-chain cohesion• “Classical” Quality = Savings unbounded
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Cost-of-Poor-QualityEconomics
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CoPQ Economics“the extent of the due diligence”
€
InitialCapitalOutlay
Company X Product
Company Y Product
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CoPQ Economics“cheaper can be costlier”
€
InitialCapitalOutlay
time
Company X Product
Company Y Product
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CoPQ Economics“cheaper is costlier”
€
InitialCapitalOutlay
time
Company Y Product
Company X Product
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CoPQ Economics“now which one?”
€
NetPresent
Value
Company Y Product
Company X Product
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5degrees Telecommunications Consulting Inc. 16
CoPQ Economics“the fork-lift”
€
InitialCapitalOutlay
time
Company Y Product
Company X Product
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TL 9000 Value for Telecom Service Providers
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TL 9000 Value for Service Providers
• Common language to manage suppliers• Expected ownership cost requisite• Decision criteria for procurement teams• Managing post sales “quality” relationship• Cost recovery for SLA Non-conformance
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Cost-of-Poor-QualityManagement For Telecom
Service Providers
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Quality Risk Management
• Supplier poor quality is costing service providers millions/year
• Linking supply-chain entities is key• CoPQ framework
– Scaleable– Consistent– In-process– Recoverable
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Common Quality (TL 9000) Measurements Management System
Cost of QualityIntelligence
Technology
Supplier Management
Procurement
Managed SLA/PLA
Finance (Network)Operations
CoPQ Management Framework
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Technology
• Fuelled by a market need• Fulfilled by Technology• Guided by TL 9000 CoPQ intelligence
– operational impact– product/service availability– time to market risks
• Supplements RFI collateral€
time
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Procurement
• RFQ/RFP– TL 9000 specifics a bidding requirement
• Negotiate price (reductions)– Bargaining with monetary CoPQ values
• Contracting– RFQ/RFP feeds contract performance criteria– Non-conformance penalties clear and measurable
• Common language standardization
€
time
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Finance
• Process credits/discounts– Based on contracted penalties– Contract relevant penalties– Automatic– In-sync with Operations
• Penalty claims for non-conformance– Founded by the TL 9000-performance-indicators
measured by Operations– Systematic– Objective– Enforceable
Annual Consolidated Financials
INCOME STATEMENT (€m)
Revenue 20,000
Cost of sales (14,000)
Gross profit 6,000
Selling, general and administration expenses (5,500)Maintenance services (network) expense (150)CoPQ expense 0
Operating (loss)/profit 350
Tax on (loss)/profit 70
(Loss)/profit for the period 280
SHARE INFORMATIONShares Outstanding (m) 5,000
Basic (loss)/earnings per share (€) 0.06
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Network Operations
• Managing the effects of supplier non-conformance – TL 9000 provides a common language
• Service Level Agreements• Product Level Agreements
– One method for all suppliers– Used by Finance for penalty claims
• TL 9000 performance indicators– Delivery– Outages– Problems– H/W quality – S/W fix quality
Annual Consolidated Financials
INCOME STATEMENT (€m)
Revenue 20,000
Cost of sales (14,000)
Gross profit 6,000
Selling, general and administration expenses (5,500)Maintenance services (network) expense (150)CoPQ expense 0
Operating (loss)/profit 350
Tax on (loss)/profit 70
(Loss)/profit for the period 280
SHARE INFORMATIONShares Outstanding (m) 5,000
Basic (loss)/earnings per share (€) 0.06
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Maintenance Contracts & Service Level Agreements
• Insurance policy for defects• Responsiveness-based• No driver to reduce defects• Measurement ownership• Product Level Agreement coupling
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Supplier Management
• Supplier Qualification– TL 9000 used as a key entry criteria for
business• Supplier Optimisation
– TL 9000 performance levels drive programs• Strategic Partnerships
– TL 9000 used to understand partner quality• CoPQ / TL 9000 Organization “Glue”
– Maintain supply chain synergy
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Key Points
• Understanding the risk• Transferring the risk• Recovering the burden• Enabled by TL 9000
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Who is paying for your CoPQ?
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Dean HendersonPresident5degrees Telecommunications Consulting Inc.Ottawa, [email protected]+1.613.513.5334
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