outsourcing best practices - process efficiency
DESCRIPTION
Presentation from TAWPI 2009 annual meeting, Washington DC. Co-authors Arun Jain, ICT Group, and Candice Blom, JPMorgan ChaseTRANSCRIPT
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A Model for Optimizing Process
Efficiency in a Multi-stream Data
Keying Environment
Presented by:
Arun Jain, SVP/GM, Data Management Services, ICT Group
Candice Blom, VP, National Wholesale Lockbox, J.P. Morgan Treasury Services
Dan Hillman, VP, BPO Services, ICT Group
2
Summary
• Data Keying Challenges
• Root Causes and Obstacles to Change
• Co-mingling – The Key to Optimizing Processes
• Identifying the Best Strategy for Your Organization
• Case Study – Data Keying Co-mingling at J.P.
Morgan Treasury Services
• Question and Answer
3
ICT Group: Overview
• Leading global provider of outsourced
customer care and related technology &
business processing services
• $428.1 million revenue (2008)
– Publicly traded (NASDAQ: ICTG)
• Deep vertical expertise
• 40+ onshore/near-shore/offshore centers,
including India and the Philippines
• 18,000 employees worldwide
• ISO- and Six Sigma-guided operational best practices
4
Best Practices for BPO Projects
Typical Outsourced Services:
• Data entry/management • Remittance processing
• E-mail response management • Loan Modification
• Mailroom/Imaging • Claims/application processing
• Rapid start-up and accelerated turn-around
• Single domestic point-of-contact
• Dedicated project management
• Consistent, quality performance standards
• Secure, redundant global IT/data network
• Superior systems availability/uptime
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Enterprise Challenges: Data Keying
• Data management considered critical business function that crosses multiple LOBs
• Evolution/growth/M&As can result in multiple (and often duplicate) data management processes
• Metadata created during the work-stream life cycle further complicates ability to efficiently organize and manage data
Data
Capture
Data
Analysis
Data
Manipulation
Data
Storage
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Enterprise Challenges: Data Keying
• True costs of data management difficult to quantify and track
– Results in redundant costs and reduced productivity
• Difficult to understand full cost of enterprise-wide data management operations
– Inability to assess fixed and variable costs at process level
Results In:
• Overestimated efficiency levels
• Underestimated costs
• Lost opportunities for process improvement
7
Data Keying Inefficiencies: Root Causes
• Similar or identical processes performed in multiple
locations by separate management teams
• Decentralized processes tend to multiply over time:
• New products/services launched by multiple LOBs
• Varying turnaround times lead to over-segregation
of duties and inefficient resource utilization
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Obstacles to Change
Stay out of
my sandbox.
We don’t know
what we don’t
know.
We’ve always
done it this way.
Without a top-down or cross-functional inventory of data management processes, difficult to identify and leverage opportunities for process improvements.
Different management structures (by different LOB or geography) wish to maintain direct control of data and its use.
Ad-hoc process evolution to meet dynamic business rules leads to less effective ways of doing work.
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Process View of Back-Office Work
Batch ModeContinuous
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The Ideal Scenario
• Monitor overall SUR as key indicator of process efficiency
Goal: Utilize fewest workstations; maximize seat utilization rate (SUR)
Theoretical maximum monthly SUR = 585 hours (3 shifts, 7 day/week)
• Continuous processes rarely effective due to staffing constraints and
work availability limitations
3 shift, 7 day/week operation SUR = 375 hours/month considered “best-in-
class”
• Difficult to achieve and sustain for a single process operation
• Possible for some processes like lockbox and item processing that are
amenable to co-mingling
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Co-mingling Work-streams Improves SUR
• SUR can increase significantly by integrating multiple work-streams into a single processing site.
• Fixed infrastructure costs can be leveraged across additional volumes, improving efficiency.
Results:
1. Total staffing requirements will decrease
2. Added cost savings through:– Cross training
– Reduced supervisory requirements
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Developing Your Optimization/
Co-mingling Strategy
Assess the
Current State
Analyze the
Processes in
Detail
Evaluate
Alternatives
Document
Expected
Results
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Gap Analysis
Pre-workshop Scope Review
Clarify Business Scope
Develop Participant List and Project Plan
Document Current and
Desired Future State
Document Current State
Identify Current Processes and
Future Business Needs
Assess Gaps
Identify Gaps and Risks
Define Opportunities to
Bridge Gaps
Develop Roadmap And Business Case
Identify Quick Wins and Long Term Initiatives
Create Business Case
Implementation Roadmap
Refine Recommended
Solution
Define New Governance and
Operating Models
Prepare Migration Plan
for Future Process
Assess the
Current State
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Analyze the Processes
• Once candidate processes are identified from
gap analysis:
– Review existing and proposed process flows,
– Review quality and productivity goals, and
– Analyze options and alternate operating models.
Analyze the
Processes in
Detail
15
In
1 2
3 4
5 6
7 Out
Analyze the Processes
Document existing and proposed process flows(Document all touch points with adjacent processes)
Analyze the
Processes in
Detail
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Analyze the ProcessesAnalyze the
Processes in
Detail
Analyze options and alternate operating models
• Centralized Processing?
• Decentralized Processing?
• Review potential technology constraints
• Calculate seat requirements to maximize utilization
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Analyze the ProcessesAnalyze the
Processes in
Detail
Review cost, quality and output goals
(Identify potential conflicts and tensions)
Co
st
Quality Output
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Evaluate Alternatives
• What other frictional costs will impact alternatives?
• Identify organizational impacts
• Prepare change management plan
• Alert stakeholders and develop new governance
model
• Create implementation plan the selected optimal
solution
Evaluate
Alternatives
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Document Expected Results
• Baseline current fully loaded fixed and
variable costs as well as projected cost savings
from proposed solution.
• Plan for annual post-assessment/analysis after
reaching steady state.
• Plan for year over year productivity
improvement.
Document
Expected
Results
20
J.P. Morgan Overview:
• Global financial services firm with assets of $2.1 trillion
and operations in more than 60 countries.
• Leader in investment banking, financial services for
consumers, small business and commercial banking,
financial transaction processing, asset management, and
private equity.
• The Treasury Services business has more than 50,000
clients, a presence in 39 countries, and is one of the
world’s largest providers of treasury management
services.
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J.P. Morgan Receivables
Operations
• Originator of the first lockbox – offering the service for 60+ years, J.P.
Morgan maintains one of the most extensive lockbox networks today
anywhere in the world.
• Offers Receivables Edge that allow clients to consolidate all accounts
receivable transaction data and images into a single, secure repository,
that’s accessible 24/7 via the internet, which helps expedite exception
resolution and improve straight-through processing.
• Receivables operations has an extensive geographic presence, with
processing facilities in 16 sites domestically and 3 sites globally,
representing 4,000 employees.
• Wholesale lockbox business process more than 162 million payments and 2
trillion keystrokes annually, representing value in excess of $833 billion.
• ICT performs data key for 36% of Wholesale Lockbox volume.
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Data Keying Optimization Success StoryJ.P. Morgan Treasury and Security Services
Overview:
Four complimentary processes consolidated from multiple sites into
single co-mingled work-stream
Processes owned by different LOBs
Current seat utilization approximately = 340 hours/seat/month
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Four Processes: Original State
Fax Processing of
Loan Documentation (e.g. interest rate changes)
• 400K faxes per month from institutional lenders keyed at single-shift U.S. operation. Post system updates to loan parameter changes.
• 3 hour TAT, 24x5 day operation with very large monthly and quarterly volume fluctuations (up to 10x daily volume at quarter end).
Credit Card
Application Keying
• 400K applications per month.
• Keyed from image at multiple locations in single-shift.
• 24 hour turnaround, 24x6 day operation with steady volume throughout the month, 99% accuracy standard.
Retail Lockbox • Approximately 9M items processed per month.
• Pass 1 and Pass 2 keying performed at multiple locations.
• 24x7x365 operation. Multiple daily cut times, error standard <1:40,000.
• Business sold by J.P. Morgan Treasury Services, June 2009
Wholesale Lockbox • Approximately 90MM keystrokes per month.
• Invoice and amount keying performed at multiple locations.
• 24x7x365 operation. Multiple daily cut times, error standard <1:200,000.
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Four Processes: Current State
• All four processes co-mingled at ICT Group BPO
site in Manila, Philippines, with Hyderabad, India
site for load balancing and disaster recovery.
• Varying turnaround times and shift patterns
allows for very high seat utilization.
• Single-management structure promotes
accountability, quality and efficiency across
processes.
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0
20
40
60
80
100
120
140
160
180
Tota
l S
eats
Requ
ired
Seat Optimization Model
Data entry
Standalone Total
Spare WLBX
WLBX
Spare RLBX
RLBX
FaxApplication Data Entry
WLBX
Fax
168 seats required with no co-mingling
5,000 hrs per month unused capacity
RLBX
Local Time Manila, Philippines
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Co-mingling: Cost Savings Analysis
Stand Alone Model
Processhours/seat/
month
Example fully
loaded hourly
cost
Seats
required
Total
productive
hours/month
Cost
per month per year
Credit Card App. Entry 207 $7.50 45 9,324 $69,930 $839,160
Wholesale Lockbox 205 $9.50 55 11,300 $107,350 $1,288,200
Retail Lockbox 202 $9.50 66 13,311 126,454 $1,517,454
Fax Processing 198 $9.50 3 594 $5,653 $67,716
Total 204 169 34,529 $309,387 $3,712,644
Co-mingled Model
Processhours/seat/
month
Example fully
loaded hourly
cost
Seats
required
Total productive
hours/month
Cost
per month per year
Credit Card App. Entry
342
$7.00
101
9,324 $65,268 $783,216
Wholesale Lockbox $8.50 11,300 $96,050 $1,152,600
Retail Lockbox $8.25 13,311 $109,815 $1,317,789
Fax Processing $7.50 594 $4,455 $53,460
Total 34,529 $275,588 $3,307,056
Savings from Co-mingling (8%) $33,799 $405,588
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Success Story: Performance Results
• Standalone operations would have required 169 seats for steady state volume of all four processes.
• By co-mingling four processes at one site under a single management team, 68 seats were eliminated.
• Co-mingling supports a robust disaster recovery solution. An additional 25% capacity is available for short term disruptions at J.P. Morgan Treasury Services sites.
Reduction in total seats = 40%
At an average annual cost of $6,759 per seat/year, J.P. Morgan Treasury Services avoids over $400,000 in annual costs.
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Question & Answer
Arun JainSVP/GM, Data Management Services,
ICT Group
Dan HillmanVP, BPO Services, ICT Group
Candice BlomVP, National Wholesale Lockbox
J.P. Morgan Treasury Services
312-336-2829
www.jpmchase.com