Applying Six-Sigma in the Service Industry: A Review and Case Study in Call Center Services Ayon Chakrabarty, K.C. Tan Department of Industrial and System Engineering, National University of Singapore Abstract— This paper presents an extensive review on the services, six-sigma, and application of six-sigma in services. In order to improve service quality focus on service process is necessary. Six-sigma is a philosophy which also concentrates on the improvement of process. So, six-sigma if properly applied can be useful for services. This study focuses on the application aspect of six-sigma to wider range of services. The wider applicability of six-sigma depends on identification of key performance indicators (KPIs) for different types of service processes. A case study is conducted in call center services to identify, analyze and compare critical to quality characteristics (CTQs) and KPIs with other types of services available in literature. This study will be helpful to both practitioners and researchers. Keywords — Services, Six-Sigma, Key Performance Indicators I. INTRODUCTION Quality management has long been established as an important management strategy for achieving competitive advantage. Traditional quality concepts like Statistical Process Control (SPC), Zero Defects and Total Quality Management (TQM), have been key player for many years. While six-sigma is a more recent quality improvement initiative to gain popularity and acceptance in many industries across the globe (Hendry and Nonthaleerak [14]). The basic elements of six-sigma like, SPC, Failure Mode Effect Analysis (FMEA), gage repeatability and reproducibility and other tools have been in use for some time. Actually, six-sigma provides a framework which unites these basic quality tools with high-level management support. However, most service industries still do not use the basic aspects of SPC. In fact they can benefit significantly by implementing both SPC and six-sigma. The implementation of six-sigma helped the industries like GE (Finance, Health Care), Citibank and a few other service industries to drive defects/errors out of their delivery process and create success stories for others to follow. The limitation of six-sigma in service industries is that the features of service industries are not uniform. The application of six-sigma and its benefits are limited to some specific type of services like health care and banks. This paper aims to identify the key performance indicators (KPIs) for a wider range of services. Understanding the control variables of a process will help in broadening the application of six-sigma in services. II. REVIEW OF THE SERVICES, SIX-SIGMA AND ITS APPLICATIONS IN SERVICES Service is defined in various ways, by different researchers. Service research is mainly dominated by the marketing. The service definitions, classification schemes, and models are mainly from the marketing perspective. The other major contributor in service research is operations management. A. Service Definition Even though the concept of service goes back to 1950s but still there are no accepted definition of service. The earliest approach to define service is by Shostack [9], in which the author feels that services are rendered, it is experienced. A service cannot be stored on a shelf, touched, tasted or tried on for a size. Services are generally obtained by engaging an interactive process with the provider, Harvey [11]. Vargo and Lusch [27] defines service as the application of specialized competences (skills and knowledge), through deeds, processes and performances for the benefit of another entity or entity itself. Woodall [28] feels that service can or could mean any or all of the following • The entire manifestation of a business or not-forprofit structure perceived to reside within the service sector (e.g. restaurant, insurance company, local council repair depot) – service as an organization. • The key commercial outputs of a service organization (e.g. bank account, insurance policy, and holiday) – service as core product. • Any peripheral activity designed to enhance the delivery of a core product (e.g. provision of a courtesy car, complimentary coffee) – service as product augmentation. • Any product- or customer-oriented activity that takes place after the point of delivery (monitoring, repair, up-dating) – service as product support. • Service as a mode of behaviour (helping out, giving advice) – service as an act. There are several other definitions but the most widely used definition of service is based on its characteristics of intangibility, heterogeneity, inseparability and perishability given by Parasuraman et al [2]. B. Service Classification The classification in manufacturing is quite pronounced, and this is mainly based on processes. This has helped in removing the myth that all manufacturing activities and problems are unique. Similar need has been identified for service sector and various researchers have come forward with different ways of classifying services. The need for classifying arised mainly as • Lack of exposure to marketing problems and strategies in different industries among managers in the service sector, Lovelock [7]. • Working only in one particular type of service industry limits the exposure of managers, which results in lack of ability to identify and learn from the experience of organizations facing parallel situations in other service industries, Lovelock [7]. • Classifications may lead to some cross fertilization of ideas and to an understanding of the management methods and techniques appropriate to each service type, Voss et al [6]. There is several classification schemes in research articles, selected few are tabulated below From 1984 to till date there are around 22 service models. These models are not 22 different models but are interconnected in some way to each other. The review of these models shows that there does not seem to be a wellaccepted conceptual definition and model of service quality nor there is any generally accepted operational definition of how to measure service quality. However, majority of models and definitions support the view of evaluating service quality by comparing their service quality expectation with their perceptions of service quality they have experienced, Deshmukh et al [26]. a k b c e TABLE 1 SUMMARY OF SELECTED SCHEMES FOR THE CLASSIFICATION OF SERVICES (Oakland et al [13]) Judd 1964 Rented; Owned; Non-goods Shostack 1977 Tangible/intangible service element d j n o g m l f Developments in IT front domination Sasser et al 1978 p Service/ facilitating goods emphasis Thomas 1978 Equipment-/ People-based delivery Chase 1978 High/low customer contact Kotler 1980 h People/equipment; customer presence; i q r s Fig.1. Lineage of service quality models (Deshmukh et al [26]) personal/business; public/private/profit/non-profit Lovelock 1983 TABLE 2 SERVICE QUALITY MODELS Nature of service; relationships; judgement; demand pattern; delivery method Johnston and 1985 b. GAP model 1986 Degree of interaction/customization; c. Attribute service quality model labour intensity Haywood – 1988 Farmer Labour intensity; contact with customer; customization Johnston et al 1989 Frequency of transaction Voss et al 1992 Professional services; service shop; mass services C. Service Models The service research is very rich in context of definitions, models and measurement issue. A model attempts to show the relationships that exist between salient variables. It is a simplified description of the actuality. The primary aims of the models reviewed are to enable the management to enhance the “quality” of the organization and its offering in a systematic manner. Each of these models is representative of a different point of view, Ghobadian [1]. Grönroos (1984) model Product/process basis Morris Schmenner a. Technical and functional quality Parasuraman et al (1985) Haywood – Farmer (1988) d. Synthesized model of service Brogowicz et al (1990) quality e. Performance only model f. Ideal value model of service Cronin & Taylor (1992) Mattsson (1992) quality g. Evaluated performance and Teas (1993) normed quality model h. IT alignment model Berkley & Gupta (1994) i. Attribute and overall affect model Dabholkar (1996) j. Model of perceived service quality Spreng & Mackoy and satisfaction (1996) k. PCP attribute model Philip & Hazlett (1997) l. Retail service quality and Sweeney et al (1997) perceived value model m Service quality, customer value Oh (1999) and customer satisfaction model n. Antecedents and mediator model Dabholkar et al (2000) o. Internal service quality model Frost & Kumar (2000) p. Internal service quality DEA Soteriou & Stavrinides model q. Internet banking model (2000) Broderick & Vachirapornpuk (2002) r. IT-based model s. Model of e-service quality Zhu et al (2002) Santos (2003) D. Six-sigma Six-sigma is a philosophy, a measure, and a methodology that provides the business with the perspective and tools to achieve new levels of performance both in services and products, Basem and Roy [4]. a) Philosophy Six-sigma is an operating philosophy that can be shared beneficially by everyone: customers, shareholders, employees and suppliers. Fundamentally, it is also a customer-focused methodology that drives out waste, raises levels of quality, and improves the financial performance of organizations to breakthrough levels. Six-sigma’s target for perfection is to achieve no more than 3.4 defects, errors or mistakes per million opportunities whether it involves the design and production of a product or a customer-oriented service process. It is from this target that the “Six-Sigma” name originated. A process with less variation will be able to fit more standard deviations or sigmas between the process center and the nearest specification limit than a process that is highly variable. The greater the number of sigmas within the specifications, the fewer the defects. The smaller the variation, the lower the cost. The higher the number of sigmas, the more consistent the process of delivering a good product or customer service. A six-sigma level of performance means that we can fit in six standard deviations or sigmas between the process center and the nearest specification limit, Chua [22]. There are around sixty-six tools and two major approaches to accomplish six-sigma levels of performance. When dealing with an existing process, the process improvement method, also known as DMAIC (Define, Measure, Analyze, Improve and Control), can be used and if there is a need for a new process, the design for six-sigma (DFSS) method can be used. b)Measure The roots of sigma as a measurement standard go back to Fredrick Gauss, who introduced the concept of normal curve or distribution. Walter Shewart introduced threesigma as a measurement of output variation in 1922 and stated that process intervention was needed when the output went beyond this limit. The three-sigma concept is related to process yield of 99.973 percent and represented a defect rate of 2,600 per million which was adequate for most manufacturing units until the early 1980s, Raisinghani et al [19]. In 1980s, Motorola introduced six-sigma, which revolutionized the scope and use of quality systems in business today. The basic elements of six-sigma are not new – statistical process control (SPC), failure mode effect analysis, gage repeatability and reproducibility studies and other tools and methodologies have been in use for some time. Six-sigma offers a framework that unites these basic quality tools with high-level management support. Presently around 66 six-sigma tools have been identified. There are also some classification schemes available, like one provided by ASQ (American Society for Quality) and another is Tool Matrix provided by Tague in 1995. c) Methodology DMAIC (Define, Measure, Analyze, Improve and Control) This is used mostly for existing processes. This approach not only makes use of six-sigma tools, it also incorporates other concepts such as financial analysis and project schedule development. TABLE 3 DMAIC METHODLOGY (CHUA [22]) Phase Define Description Identify, evaluate and select projects; prepare the mission; and select and launch the team Measure Measure the size of the problem, document the process, identify key customer requirements, determine key product characteristics and process parameters, document potential failure modes and effects; theorize on the cause or determinants of performance Analyze Plan for data collection; analyze the data and establish and confirm the “vital few” determinants of performance Improve Design and carry out experiments to determine the mathematical cause-effect relationships and optimize the process Control Design controls; make improvements, implement and monitor DFSS (Design for Six-Sigma) The DMAIC methodology is excellent when dealing with an existing process in which reaching the entitled level of performance will provide all of the benefits required. When a new process is to be implemented then DFSS provides a disciplined and rigorous approach to service, process and product design in order to meet customer requirements at launch. One of the various approaches for DFSS is tabulated below In the following part, the paper presents an analysis of the service process done as a case study in a call center, in an educational service environment. III. PROPOSED APPROACH TABLE 4 DFSS METHODOLOGY (Evans & Lindsay [12]) Activities Description Concept development Product functionality is established based on customer requirements, technology capabilities and economics realities Design development Products and process performance that is required to fulfill the product or service requirements Design optimization Seek to minimize the impact of variation Design verification Ensures the capability of the production system meets the customer requirements E. Application of Six-Sigma to Services Today more than 79 percent of the US workforce is employed by commercial businesses and almost similar percentages are involved in Europe and other countries as well. Despite the high number of service employees, some companies still believe that improving commercial processes is less important than improving industrial processes, or that seemingly intangible commercial processes cannot be controlled. Both beliefs are wrong. First, customers are more likely to take their business elsewhere because of poor service than a poor product, and second, companies like General Electric and Allied Signal have shown that improving internal and external commercial processes adds significantly to the bottom line and customer satisfaction, Harry and Schroeder [16]. Several researchers (Antony [10], Hensley and Dobie [24], Sehwall and Yong [15]) have tried to identify the factors which are helpful for successful implementation of six-sigma in services. Some of these factors include: • Organizational experience with improvement programs • Organizations with an established quality program • Linking six-sigma to business strategy • Customer focus • Top management commitment • Organizational infrastructure • Training and education • Focus on selecting and measuring the correct metrics • Identify the benefits and work to maintain the financial results Despite well developed methodologies and tools, it is felt that six-sigma is still not widely used in services. Its application is limited to some specific service industries like health care and banks. As services are not uniform, it is better to understand the process before applying the sixsigma tools and methodologies. As mentioned previously, the application of six-sigma is mainly limited to health care and banks. To some extent its application can be found in hospitality and call centers. The main focus of services as well as six-sigma is to improve processes. The process control variables or critical to quality (CTQ) characteristics are an important aspect to improving processes. Along with control variables the outcome due to the application of six-sigma is also a major aspect. The case study done here focuses on the above mentioned two aspects of CTQs and KPIs. A summary of KPIs from other services where six-sigma is already applied is presented, to understand the requirements for different types of services. Case Study The study done here is about the improvements to customer feedback process, for call center in an educational service environment. As it is an existing process so, the DMAIC methodology of six-sigma is applied. The CTQs identified for the process are: • User friendliness of the telephone system • Responsiveness in directing customer to the right source of contact • Department representatives responsiveness in answering the query • Customer service of the call center staff The KPIs for different type of services, compared are tabulated below. TABLE 5 COMAPRISON OF KPIs S.No 1 Health Care Throughput Bank Increased sale revenue Call Center Support cost per call* Man-hour* 2 Cost/Procedure Improved service and 3 Care Delighted customers Cycle time* 4 Wait Time Reduced cycle time for Customer mortgage application satisfaction* External and internal Days to close balance retention 5 Service Time call backs 6 Information The credit process Wait time Cost per Unit of Cycle time reduction of Transfers Service finance and leasing Conveyance Time 7 service 8 Labour Service time [3] Productivity 9 Customer Satisfaction 10 [4] Clinical Excellence 11 Patient Safety 12 Revenue [5] [6] Enhancement 13 Employee [7] Satisfaction [8] * (KPIs identified in the present study) [9] The analysis of KPIs for different services shows that though service may be varied, there are several indicators which are common across the services. The common KPIs identified are: • Efficiency • Cost • Time-to-deliver • Quality of the service • Customer satisfaction • Reduced variation [10] CONCLUSION [15] This paper is divided in two parts. The first part reviews about services, six-sigma and the application of six-sigma in services. The review identified that the application of six-sigma is still not wide spread in services as in manufacturing. Wherever applied, it is also limited to some particular departments like in health care. It is mostly applied to some particular laboratories and not in the overall hospital. The extent of application is more in developed countries than developing countries. The second part presents an ongoing case study. The case study done here provides an understanding of CTQs and KPIs in a different type of service environment. A summary and analysis of KPIs provides an understanding that irrespective of different services there is some uniformity in KPIs. 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