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Transforming Six Sigma Into A Service Methodology John Karolenko, Director of Project Development PHH Arval 410-771-3738 September 15, 2005. Introduction Background on PHH Process Improvement in Service Delivery Why is PHH doing this? Challenges in the service sector

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Transforming Six Sigma Into A Service MethodologyJohn Karolenko, Director of Project Development PHH Arvaljohn.karolenko@phh.com410-771-3738September 15, 2005


Background on PHH

Process Improvement in Service Delivery

Why is PHH doing this?

Challenges in the service sector

The focus on the customer

Progress to date

phh corporation
PHH Corporation
  • PHH Arval is part of PHH Corporation
    • Mortgage and vehicle management operations efficiently provide outsourced services to corporate customers
    • PHH Mortgage is the sixth largest retail originator of residential mortgage loans in the United States
    • PHH Corporation (NYSE: PHH) has 7,800 employees in North America
business profile
Business Profile
  • PHH Arval’s business history and culture are all about innovative customer service
    • Industry leaders and innovators since 1946
    • Recognized leader in developing technology that enhances customer service
    • Diverse and experienced team of customer service professionals
    • Consistent track record of successful relationships
business scope
Business Scope
  • PHH Arval is an industry leader in outsourced fleet management services for corporate clients and government agencies throughout North America
    • Over 1,300 employees
    • 600,000 vehicles under management
    • Provide services worldwide with global marketing partners
    • Purchase more than 80,000 vehicles annually
strategic relationships
Strategic Relationships
  • PHH Arval partners with thousands of organizations worldwide.
    • Over 100 clients have been with PHH for 20 years or more
what exactly does phh do




What Exactly Does PHH Do?

PHH provides services for:

  • Lease funding
  • Vehicle specification design & order processing
  • Management of vehicle delivery, title & registration
  • Comprehensive suite of maintenance & repair services
  • Vehicle sale
  • Consulting

The Lifecycle of a Vehicle


Six Sigma &

Service Delivery

three years ago
Three Years Ago
  • PHH detected a shift in our client’s focus. They wanted to know:
    • PHH what are you doing to improve yourself?
    • How will you know that you have improved?
  • What they really meant was:
    • We’re working to improve ourselves
    • We only want to partner with organizations who can help us meet our improvement goals
industry changes
Industry Changes
  • More and more Six Sigma focused clients and prospects
    • Becoming more common in every visit
    • Increased interest in PHH’s metrics that are displayed throughout our building
  • Service Level Agreements (SLA’s) becoming more common
    • Ascendancy of purchasing managers
    • Clients want to know how they perform against the baseline
  • This was an opportunity to gain a competitive advantage
  • Differentiate our service from competitors
  • Move PHH from “Good” to “Great”
  • Establishing PHH as the clear service leader in our industry
    • Competitors include GE
  • The timing was right
    • PHH is a thriving organization, not one under threat
      • No desperate times and desperate measures
    • Having a solid foundation ensured that we had time to do this right
    • Building on a strong service delivery culture
our response
Our Response
  • A Six Sigma based program for improvement
  • We chose Six Sigma for its:
    • Proven track record
      • Largely in manufacturing
    • Readily available supply of:
      • Knowledge
      • Skills
      • Tools
our challenge
Our Challenge
  • Recognized immediately that PHH would have to adapt 6 to the service world
    • PHH does not manufacture anything
    • Much of our service delivery is done through networks of service providers outside of our building
    • Our networks are often the visible face of PHH to our customers
phh s approach
PHH’s Approach
  • We follow the basic DMAIC steps
    • Data-driven
    • Metrics-focused
phh s approach1
PHH’s Approach
  • We do employ trained Black Belts to customize our approach with the various processes that we support
phh s approach2
PHH’s Approach
  • The service challenge
    • How to keep service flowing while using the same resources to improve it?
  • Organizational readiness
    • Leading change
      • “If we’re doing fine, why do we need to do this?”
    • No traditional top down implementation
      • Started with our service delivery organization
      • Build wins & interest, then expand
phh s approach3
PHH’s Approach
  • Specific focus on making the client central to our improvement effort
    • Typically, efforts are focused on the adopting organization
    • Client benefit is often, at best, an after thought
    • PHH still expects to benefit from 6, but the client focus directs where our efforts should be
      • If we focus on the right metrics, the dollars will follow
challenges in the service world
Challenges In The Service World
  • Perceptions against Six Sigma
  • Gathering Data
  • Client Customization

Some are unique to service, some are not

challenges in the service world1
Challenges In The Service World
  • Perceptions against Six Sigma
    • “This isn’t manufacturing… Six Sigma doesn’t apply here”
    • “We never do anything the same way twice”
    • “How can you document a process when everything is an exception?”
    • “We do whatever it takes to satisfy the client. That’s our process”
challenges in the service world2
Challenges In The Service World
  • Gathering Data
    • Legacy systems
      • Hybrid of system reporting and manual methods
    • Lack of recognition for the need to gather the data
      • “I know where the problem is…”
  • We do make extensive use of client & driver surveys
    • While we incorporate this into our improvement efforts, surveys represent lagging information
    • Since we enforce client’s policy, not always a true measure
challenges in the service world3
Challenges In The Service World
  • Client Customization
    • In customized service delivery “Everything is an exception”
    • The standard process is the most frequently occurring exception
    • This is a fundamental issue for PHH
      • Our willingness to provide highly customized service is a strength over our competitors
      • It’s also a source of variability in our service delivery
services vs products
Services vs. Products
  • Service delivery is significantly more fragile that products
    • It lives from experience to experience, based on perceptions
    • At PHH long intervals between contact with drivers
  • Because you can only experience a service as opposed to touching a product
    • There is always some level of apprehension surrounding its reliability and availability
    • Vulnerable to misperceptions about service levels
Client Focused

A differentiator from our competitors

client focused
Client Focused
  • In service delivery, PHH can’t
    • Measure material waste
    • Test product output
  • Instead, we focus on those things that matter most to clients
  • We’re only as good as our last service delivery experience!
program focus
Program Focus

Rally to Results is focused on:




program focus1
Program Focus

Speedof service delivery

Reliabilityof our service

Valuethat PHH brings to the customer



  • How long does the process take?
  • How long should it take?


  • How often does it fail?
  • Why does the process fail?


  • Have we saved the customer money?








Cycle Time

First Run Yield



Speed of



Received to










On Time

VMA Savings

Sub Level




Process Improvements






Vehicle Accident Services

A Case Study in Reducing Cycle Time

vehicle accident services key objectives
Vehicle Accident Services:Key Objectives
  • Increase Driver Productivity
    • Ensure driver safety
    • Get them back on the road as soon as possible
  • Manage Costs
    • Minimize repair time
    • Manage the cost rental vehicles
    • Choose the best repair/replace option
    • Maximize recovery of damages

Property of PHH Arval

define the problem
Define: The Problem

The VAS “Days to Shop” component of cycle time is impacted by slow driver response time in obtaining estimates or scheduling repairs.

  • The average cycle time for the months of August and September 2003 was 15.7 days.

Property of PHH Arval

define begin the business case
Define: Begin the Business Case

Property of PHH Arval

  • Ran report to determine cycle time
  • Manually tracked volume of mailings

Property of PHH Arval


Property of PHH Arval

  • Average Days to Shop cycle time = 14.4 days
  • Annual volume of mailings = 11,124
  • Time spent on mailings = 742 hours annually

Property of PHH Arval

  • Implementation Plan:
    • Driver follow up letters will be emailed instead of mailed whenever possible.
    • The follow up time between communication attempts will be reduced from 3 weeks to 1 week.
  • Goals:
    • Reduce driver mailings by 70%
    • Decrease Damage Control cycle time by 5%
    • Increase Damage Coordinator productivity by 3%

Property of PHH Arval


Property of PHH Arval



  • Reduced annual volume of mailings by 76%
    • 5,200 to 1,500
  • Decreased cycle time by 35%, from 14.4 days to 9.3 days
  • Decreased touch time by 57%

Property of PHH Arval

six sigma still applies
Six Sigma Still Applies
  • Fundamentals of Six Sigma still apply
    • DMAIC
    • Five Whys
    • Data driven
    • Pareto tool
    • Reducing variability in processes
    • Shifting the mean


The Effort

client visits1
Client Visits
  • An opportunity to ensure clients understand what we’re working to achieve on their behalf
    • Process improvement is central to every client visit
    • We typically meet with clients before they see our service areas
    • Lead with our metrics by posting them in every service area
      • 10 Displays – All focused on Speed, Reliability & Value
      • Almost 50 key metrics visible to anyone who walks in the door
        • Requires courage to take this risk
client visits2
Client Visits
  • A dialogue with our visitors
    • PHH’s approach to process improvement
    • What clients can expect from PHH
    • Encourage clients to ask our managers
      • “What are you working on?”
      • “How will my drivers benefit?”
    • Discuss a case study illustrating our efforts
R2R Stars Are Awarded For:Recognition

Craig Pijanowski

ASE Certified Mechanic

Maintenance Team Leader

key thoughts
Key Thoughts
  • Six Sigma is still highly effective in the service realm
  • Need to be flexible in adapting it to services
  • Must focus on what’s important to the customer