Operations Management

Q1) Pradeep Dutta (Dutta), proprietor of Xtra Power Group, found himself on the horns of a

dilemma. He was expecting a surge in the demand for batteries in India – both for the new line of

open shielded batteries as well as for the reconditioned batteries (which had more margins), but

wondered whether he would be able to meet the demand considering the supply chain issues he

was facing.

Some of Xtra Power’s prominent retail partners were unhappy about the used batteries that they

had collected from customers for reconditioning and how these were piling up at their facility,

increasing their warehousing costs. Upon further investigation, Dutta found that the major

problem lay with its longstanding transportation services provider, Cretto Logistics (Cretto),

which had a low cost structure, but a lead time that was above the industry average.

a. Comment on Issues and concepts in supply chain management.

Answer:

Traditionally, Supply Chain Management (SCM) has been a melting pot of various
aspects, with influences from logistics and transportation, operations management and
materials and distribution management, marketing, as well as purchasing and
information technology (IT).

Supply chain management is a vital, yet often underappreciated facilitator of trade that
fosters customer convenience, business success, and societal development. Consumers
benefit greatly from supply chain management, yet few people think about the planning, cost,
or activities involved in getting fuel to the filling station, fresh foods to the store shelf, or
essential medical supplies to the hospital emergency room. People just assume that products
will be readily available without worrying about how much their quality of life depends on
productive, efficient supply chains.

The same situation exists within many organizations. Despite the ability of supply chain
management to facilitate cost-savings and a competitive advantage, relatively few individuals
in marketing, finance, or manufacturing pay much attention to it. They primarily think of
supply chain management in terms of operational activities that occur behind the scenes to
complete a customer transaction. The only time that these individuals focus on the supply
chain is when a supply disruption, manufacturing shutdown, or delivery delay occurs. We
expect supply chain managers to quickly resolve the issue, return the organization’s supply
chain to a state of balance, and take steps to prevent future occurrences.

The good news is that savvy organizations such as Amazon.com, McDonald’s, and Unilever
recognize the importance of supply chain management and make it a strategic priority. They
understand that it is impossible to compete effectively in isolation of their suppliers,
customers, and other entities in the supply chain (Lummus & Vokura, 1999). This is critical in
a complex global economy where our suppliers and customers may be on different
continents, omnichannel fulfillment capabilities are needed, and service expectations are
rising. Taking the time to develop efficient and agile supply chain capabilities to respond to
these dynamic market requirements is the difference between great success and utter chaos.

The first step in the journey to supply chain management success is to understand its
foundation concepts. A discussion of what supply chain management is, why it is important,
and how it benefits the organization is needed to get everyone on the same page for the
pursuit of supply chain excellence. Hence, this chapter provides a level-setting discussion of
key terminology and definitions. The focus then turns to the purpose and goals of supply
chain management to clarify the essential objectives that supply chain managers must
pursue. Next, a review of the evolution of supply chain management and its key participants
is provided. The chapter closes with an introduction to the value proposition of supply chain
management and its capability to drive organizations toward better, faster, and cheaper
demand fulfillment.

Key Terminology and Concepts

A fundamental challenge in supply chain management is the lack of a common “language”
that is used across organizations and industries. Unlike financial accounting and other long-
established business fields, there is not yet a universally accepted set of definitions and rules
that drive supply chain management. For example, asking a group of business executives to
simply define the term supply chain would lead to a long and potentially contentious
discussion.
Such a situation is not unusual in a relatively new field like supply chain management.
Initially, there will be a lack of consensus as to its definition or consistency in its application
(Ballou, Gilbert, & Mukerjee, 1999). While this is to be expected, it is not desirable. Consistent
definitions are essential for understanding the basic characteristics and scope of supply chain
management. They provide clarity regarding what supply chain management is and is not,
drive acceptance of its key elements, and facilitate its application (Gibson, Mentzer, & Cook,
2005).

This section reviews the popular definitions of essential supply chain management terms,
evaluates their common components, and highlights the scope of the field. Having this solid
frame of reference will help you avoid the dangers of defining the field too narrowly or too
broadly. A narrow perspective will limit the potential value of supply chain management to
your organization. In contrast, an overly broad conceptualization will make it difficult to
establish control over the processes, foster collaboration, and control performance.

Supply Chain Concepts

Before an organization tries to focus on supply chain management, its leaders must
determine what the supply chain encompasses. Just as we can’t manage what we don’t
measure, we can’t plan and execute what we haven’t clearly defined. Hence, it is important to
articulate the overall purpose, scope, and components of a supply chain. Following are useful
supply chain definitions that highlight critical aspects of a supply chain.

 From the Council of Supply Chain Management Professionals (2010)—The

material and informational interchanges in the logistical process, stretching from
acquisition of raw materials to delivery of finished products to the end user. All vendors,
service providers, and customers are links in the supply chain.
 From Christopher Martin L. (1992)—The network of organizations that are
involved, through upstream and downstream linkages, in the different processes and
activities that produce value in the form of products and services delivered to the
ultimate consumer.
 From Coyle, Langley, Novak, and Gibson (2013)—A series of integrated
enterprises that must share information and coordinate physical execution to ensure a
smooth, integrated flow of goods, services, information, and cash through the pipeline.

One important feature of these definitions is the concept of an integrated network or system.
A simplistic depiction of a supply chain, as featured in Figure 1-1, suggests that a supply
chain is linear with organizations linked only to their immediate upstream suppliers and
downstream customers. It also focuses on only one-way material flow, which fails to consider
vital information and financial flows, as well as reverse material flows. Such misconceptions
oversimplify reality and fail to reveal the dynamic nature of a supply chain network.

Figure 1-1 Linear representation of a supply line

In truth, supply chains require a multiplicity of relationships and numerous paths through
which products and information travel. This is better reflected by the conceptual diagram of a
supply chain in Figure 1-2, in which the supply chain is a web or network of participants and
resources. To gain maximum benefit from the supply chain, a company must dynamically
draw upon its available internal capabilities and the external resources of its supply chain
network to fulfill customer requirements. This network of organizations, their facilities, and
transportation linkages facilitate the procurement of materials, transformation of materials
into desired products, and distribution of the products to customers.
Figure 1-2 Network representation of a supply chain

Simple representations aside, it is critical to understand that no two supply chains are exactly
alike. An organization’s supply chain structure and relationships will be influenced by its
industry, geographic scope of activity, supply base, product variety, fulfillment methods, and
demand patterns. Consider, for example, a multinational manufacturer and a local farm-to-
table restaurant. Both organizations would benefit from strong and stable supply chains.
However, the manufacturer’s network is at greater risk of disruption and must integrate
geographically diverse suppliers with multiple selling channels.

Supply Chain Management Perspectives

Introduced in the early 1980s, the term supply chain management began to take hold in the
mid-1990s and is now part of the everyday business lexicon. Whereas a supply chain is an
entity that exists for the fulfillment of customer demand, supply chain management involves
overt managerial efforts by the organizations within the supply chain to achieve results
(Mentzer et al., 2001). These efforts can be strategic or operational in nature, though the vast
majority of respondents to a Council of Supply Chain Management Professionals survey
indicate that the primary role of supply chain management within an organization is a
combination of strategy and activity (Gibson, Mentzer, & Cook, 2005).
Defining supply chain management would seem to be a straightforward task, yet it has been
a vexing challenge with the introduction of many alternatives. A Google search for “supply
chain management definition” quickly yields about 12,000 results. Among this plethora of
descriptions, you will find professional associations, consultants, and academicians
addressing similar issues but providing their own interpretations and areas of emphasis.
Following is a sampling of relevant definitions:

 From the Council of Supply Chain Management Professionals (2011)—The

planning and management of all activities involved in sourcing and procurement,
conversion, and all logistics management activities. More important, it also includes
coordination and collaboration with channel partners, which can be suppliers,
intermediaries, third-party service providers, and customers. In essence, supply chain
management integrates supply and demand management within and across companies.
 From Gartner (2013b)—The processes of creating and fulfilling demands for goods
and services. It encompasses a trading partner community engaged in the common goal
of satisfying end customers.
 From LaLonde (1997)—The delivery of enhanced customer and economic value
through synchronized management of the flow of physical goods and associated
information from sourcing to consumption.
 From Stock and Boyer (2009)—The management of a network of relationships
within a firm and between interdependent organizations and business units consisting of
material suppliers, purchasing, production facilities, logistics, marketing, and related
systems that facilitate the forward and reverse flow of materials, services, finances, and
information from the original producer to the final customer with the benefits of adding
value, maximizing profitability through efficiencies, and achieving customer satisfaction.

Although the definitions vary in length and complexity, they collectively focus on three
themes: activities, participants, and benefits (Stock & Boyer, 2009). That is, organizations
must plan and coordinate supply chain activities among their network of suppliers and
customers to ensure that the end product is available to fulfill demand in a timely, safe, and
cost-efficient manner. When this is accomplished, the benefits of enhanced customer
satisfaction and retention will be achieved.

Related Terms and Concepts

Supply chain management encompasses a number of business processes, activities, and
goals that are discussed throughout this book. Before moving forward, it is valuable to clarify
their meanings and relevance to supply chain management.

Logistics Management
Logistics is a fundamental set of supply chain processes that facilitates fulfillment of demand.
The goal is to supply the right product or service, at the right place, at the right time. The
Council of Supply Chain Management defines logistics management as “that part of supply
chain management that plans, implements, and controls the efficient, effective forward and
reverse flow and storage of goods, services and related information between the point of
origin and the point of consumption in order to meet customers’ requirements.” Whether
provided internally, by a supplier, by the customer, or by an external logistics services
provider, these capabilities are essential for achieving supply chain success.

Supply Management
Supply management focuses on the identification, acquisition, access, positioning,
management of resources, and related capabilities the organization needs or potentially
needs in the attainment of its strategic objectives (Institute for Supply Management, 2010).
For most organizations, logistics controls the distribution of products; whereas supply
management controls the strategic sourcing of direct materials, finished goods, services,
capital equipment, and indirect materials. Both are needed to ensure optimal performance of
the supply chain.

Value Chain
The concept of a value chain was developed as a tool for competitive analysis and strategy. It
is composed of primary activities (inbound logistics, operations, outbound logistics, marketing
and sales, and service) and support activities (infrastructure, human resource management,
technology development, and procurement) that work together to provide value to customers
and generate profits for the organization (Porter, 1985). A value chain and a supply chain are
complementary views of an extended enterprise, with integrated supply chain processes
enabling the flows of products and services in one direction, and the value chain generating
demand and cash flows from customers (Ramsey, 2005).

Distribution Channel
Distribution channels support the flow of goods and services from the manufacturer to the
final user or consumer (Council of Supply Chain Management Professionals, 2010). An
organization can establish direct channels to consumers or rely upon traditional
intermediaries such as wholesalers and retailers to facilitate transactions with final users. The
rapid expansion of the Internet as a key selling platform is forcing manufacturers and retailers
to develop innovative and flexible “omnichannel” capabilities in their supply chains to fulfill
customer demand from stores, distribution centers, and production locations.
Three Key Issues in Supply Chain
Management
Key Issue #1: Globalization
Globalization presents several critical supply chain management challenges to
enterprises and organizations:

First, to reduce costs across the supply chain, enterprises are moving manufacturing
operations to countries which offer lower labor costs, lower taxes, and/or lower costs of
transport for raw materials. For some companies, outsourcing production involves not
only a single country, but several countries for different parts of their products.

However, outsourcing not only extends the production process globally, but also the
company’s procurement network. Having suppliers in different geographic locations
complicates the supply chain. Companies will have to deal with, coordinate, and
collaborate with parties across borders regarding manufacturing, storage, and logistics.
Furthermore, they have to extend or maintain fast delivery lead times to customers who
want to receive their products on schedule despite the increased complexity in the
manufacturer’s supply chains. Finally, they also have to maintain real-time visibility into
their production cycle — from raw materials to finished goods — to ensure the efficiency
of their manufacturing processes.

Second, as companies expand sales into global markets, localization of existing products
requires a significant change in the supply chain as companies adapt their products to
different cultures and preferences.  There is an inherent risk of losing control, visibility,
and proper management over inventory , especially if enterprise applications are not
integrated.  This requires managing diverse structures of data across geographies
effectively.

For example: many manufacturers in Asia still handle trading partner communications via
fax and email while suppliers in North America and Europe have utilized EDI for decades.
As technology matures, suppliers in emerging markets may skip EDI altogether and
move to a more modern API driven approach to communication just as developing
countries have skipped land lines in favor l phones.

Supply chain practitioners need to ask if their enterprise technology is prepared to

handle these diverse forms of communication that arise from Globalization, and build a
business case to stay prepared.

Key Issue #2: Fast-changing Markets

According to EduCBA, consumer behavior is affected by cultural, social, personal, and
psychological factors that are quickly being changed by technology and globalization.
Social media is creating new pressures for consumers to conform while putting pressure
on enterprises to utilize these sources of information to respond to changing preferences
in order to stay interesting and relevant.

Like globalization, the fast-changing consumer market also brings with it supply chain
management challenges:

First, products have shorter life cycles due to rapidly changing market demands.
Enterprises are under pressure to keep up with the latest trends and innovate by
introducing new products, while keeping their total manufacturing costs low because
they understand that trends will not last for a long time. This also demands a flexible
supply chain that can be utilized for manufacturing other products and for future
projects.

Second, aside from new products, companies also need to constantly update product
features. Enhancing product features requires enterprises to redesign their supply chain
to accommodate product changes.

Finally, innovation presents a challenge in forecasting demand for new products. The
constant innovation necessitated by fast-changing markets also means enterprises will
constantly have to anticipate demand for new products. Enterprises need to create and
maintain an agile supply chain that can respond well to spikes and dips in demand and
production needs.

Companies should be asking if they have all the data needed to make planning decisions
to address challenges created by fast-changing markets.  For example, if stated lead
times from suppliers are longer than actual times, this will lead to higher inventory levels
than are actually required and affect costly decisions around network planning and
optimization.  Omnichannel retail has reated silos of sales data that have to be blended
and harmonized to detect demand signals earlier in the planning process as well.

Key Issue #3: Quality and Compliance

Aside from influencing consumer behavior, social media highlights the importance of
having high-quality products. According to research conducted by eMarketer, reading
reviews, comments, and feedback is the top social media activity that influences online
shopping behavior. Furthermore, social media has not only raised consumers’
expectations of product quality, but has also amplified the damages caused by product
recalls. Thus, enterprises are under increasing pressure to create high-quality products
and to create them consistently. They can do so by addressing quality at every level of
the supply chain, such as raw materials procurement, manufacturing, packaging,
logistics, and product handling.

Product quality often goes hand-in-hand with compliance. Enterprises need to ensure
that they meet local and international regulatory standards in manufacturing, packaging,
handling, and shipping of their products. Aside from passing quality control and safety
tests, enterprises are also required to prepare compliance documents such as permits,
licenses, and certification which can overwhelm them and their supply chain
management systems.

Emerging capabilities like IoT, Smart Packaging, and Blockchain are changing how
compliance is enforced and measured.  However, these innovations will produce streams
of data that can’t be handled with the enterprise technology of the past 20 years.
Managers should carefully consider where these investments make sense and asking IT if
the business is utilizing platforms based on micro-services and big data to support these
heavy data lifting requirements.

Overcoming Three Key Issues in

Supply Chain Management
Key Issue #1: Globalization
Globalization presents several critical supply chain management challenges to
enterprises and organizations:
First, to reduce costs across the supply chain, enterprises are moving manufacturing
operations to countries which offer lower labor costs, lower taxes, and/or lower costs of
transport for raw materials. For some companies, outsourcing production involves not
only a single country, but several countries for different parts of their products.

However, outsourcing not only extends the production process globally, but also the
company’s procurement network. Having suppliers in different geographic locations
complicates the supply chain. Companies will have to deal with, coordinate, and
collaborate with parties across borders regarding manufacturing, storage, and logistics.
Furthermore, they have to extend or maintain fast delivery lead times to customers who
want to receive their products on schedule despite the increased complexity in the
manufacturer’s supply chains. Finally, they also have to maintain real-time visibility into
their production cycle — from raw materials to finished goods — to ensure the efficiency
of their manufacturing processes.

Second, as companies expand sales into global markets, localization of existing products
requires a significant change in the supply chain as companies adapt their products to
different cultures and preferences.  There is an inherent risk of losing control, visibility,
and proper management over inventory , especially if enterprise applications are not
integrated.  This requires managing diverse structures of data across geographies
effectively.

For example: many manufacturers in Asia still handle trading partner communications via
fax and email while suppliers in North America and Europe have utilized EDI for decades.
As technology matures, suppliers in emerging markets may skip EDI altogether and
move to a more modern API driven approach to communication just as developing
countries have skipped land lines in favor cell phones.

Supply chain practitioners need to ask if their enterprise technology is prepared to

handle these diverse forms of communication that arise from Globalization, and build a
business case to stay prepared.

Key Issue #2: Fast-changing Markets

According to EduCBA, consumer behavior is affected by cultural, social, personal, and
psychological factors that are quickly being changed by technology and globalization.
Social media is creating new pressures for consumers to conform while putting pressure
on enterprises to utilize these sources of information to respond to changing preferences
in order to stay interesting and relevant.

Like globalization, the fast-changing consumer market also brings with it supply chain
management challenges:

First, products have shorter life cycles due to rapidly changing market demands.
Enterprises are under pressure to keep up with the latest trends and innovate by
introducing new products, while keeping their total manufacturing costs low because
they understand that trends will not last for a long time. This also demands a flexible
supply chain that can be utilized for manufacturing other products and for future
projects.

Second, aside from new products, companies also need to constantly update product
features. Enhancing product features requires enterprises to redesign their supply chain
to accommodate product changes.

Finally, innovation presents a challenge in forecasting demand for new products. The
constant innovation necessitated by fast-changing markets also means enterprises will
constantly have to anticipate demand for new products. Enterprises need to create and
maintain an agile supply chain that can respond well to spikes and dips in demand and
production needs.

Companies should be asking if they have all the data needed to make planning decisions
to address challenges created by fast-changing markets.  For example, if stated lead
times from suppliers are longer than actual times, this will lead to higher inventory levels
than are actually required and affect costly decisions around network planning and
optimization.  Omnichannel retail has reated silos of sales data that have to be blended
and harmonized to detect demand signals earlier in the planning process as well.

Key Issue #3: Quality and Compliance

Aside from influencing consumer behavior, social media highlights the importance of
having high-quality products. According to research conducted by eMarketer, reading
reviews, comments, and feedback is the top social media activity that influences online
shopping behavior. Furthermore, social media has not only raised consumers’
expectations of product quality, but has also amplified the damages caused by product
recalls. Thus, enterprises are under increasing pressure to create high-quality products
and to create them consistently. They can do so by addressing quality at every level of
the supply chain, such as raw materials procurement, manufacturing, packaging,
logistics, and product handling.

Product quality often goes hand-in-hand with compliance. Enterprises need to ensure
that they meet local and international regulatory standards in manufacturing, packaging,
handling, and shipping of their products. Aside from passing quality control and safety
tests, enterprises are also required to prepare compliance documents such as permits,
licenses, and certification which can overwhelm them and their supply chain
management systems.

Emerging capabilities like IoT, Smart Packaging, and Blockchain are changing how
compliance is enforced and measured.  However, these innovations will produce streams
of data that can’t be handled with the enterprise technology of the past 20 years.
Managers should carefully consider where these investments make sense and asking IT if
the business is utilizing platforms based on micro-services and big data to support these
heavy data lifting requirements.

Supply Chain Challenges with Data

Management and Integration
At the core of all these supply chain challenges, from globalization to compliance, is the
need for better data management and integration.

Faced by global operations, market expansions, and stricter quality and regulatory
standards, enterprises are getting overwhelmed by massive amounts of information
coming from different suppliers and customers in varying geographic locations that they
need to properly manage. This includes data from every stage of the supply chain such
as pricing of direct and indirect materials, labor agreements, rental contracts, tax
documents, freight bills, and compliance certificates, among many others.

Data management and integration is key to solving these challenges by connecting the
manufacturer’s supply chain management systems with those of their suppliers and
partners. Data management and integration give manufacturers much-needed visibility
and control over all of their supply chain processes such as procurement, manufacturing,
storage, and logistics.
Raw information coming from suppliers, partners, and even customers are also often
composed of both structured and unstructured data which makes it even more difficult
for enterprises to consume, analyze, and generate insights from these disjointed pieces
of information. Proper data management and integration transform these raw
information into compatible formats required by different supply chain management
systems to ensure their seamless flow.

Data management and integration address supply chain management challenges at the
most basic level of the value chain and in every activity. Furthermore, providing visibility
not only to manufacturers, but also to suppliers and partners can potentially improve
trust and long-term relationships.

B) Evaluate on Issues and challenges in managing a reverse supply chain:

Answer: Reverse supply chain refers to the movement of goods from customer to
vendor. This is the reverse of the traditional supply chain movement of goods from
vendor to customer. Reverse logistics is the process of planning, implementing and
controlling.

1. 5. Challenges to be faced in reverse logistics Since reverse logistics involves

many to one distribution point there are more challenges need to be faced.
forecasting more difficult compared to forward logistics. Tracking the defectives is
more complex. Transit losses/damages need to look after in a serious manner.
CID(customer induced damage)Ensure support services
2. 6. which do not match to the expectation of the defectives standard from
OEM. Which in turn creates a huge loss to the logistics provider. Poor screening
and repairing process. Efficient time management. Warehousing – allocation of
resources for quick accessing. Ensure support services
3. 7. How to overcome the challenges Reverse logistics framework should be
designed in such a good manner for better process. Since the origin of the
defectives are many frequent tracking and follow ups should be done. TAT should
be calculated at all the sectors right from the customer returns to the
refurbishment of the defectives. From which the delay in the process can be
diagnosed easily. Ensure support services
4. 8. Everything should be systemized. manual data maintaining may lead to
some errors in tracking and stocking the goods. System should be framed in a
manner which provides clear tracking of the goods right from providing delivery
report to the sender and the receiver. Ensure support services
5. 9. One of the major challenge in handling fragile items are the transit
damages. Which results in huge loss to the logistics provider. To overcome the
above packing standards should be improved and the transporters need to be
taught how to handle fragile goods. Ensure support services
6. 10. Once when the transit losses/damage occur the same should be
communicated to the respective client on urgent basis seeking some tolerance or
solution. CID creates a huge burden to logistic provider since it involves technical
knowledge the same cannot be identified by logistics person. To overcome this
 loss engineers and service persons need to be educated well so that the defective
standard will be equivalent to the expectation fromEnsure support services
7. 11. Transportation of the goods should be framed in a systematic manner so
that the tracking of the consignment becomes easier and legible. Poor servicing
results in the loss of transportation costs for the logistics provider. Hence the
serviced defective parts should be equivalent to good standard. Ensure support
services
8. 12. Efficient time management should be maintained right from collection of
the defectives to repaired parts. Warehousing plays an important role in
maintaining the stocks. Binning each items in a locator helps to identify the parts
easily. Frequent internal audits should be performed on regular basis in order to
ensure the variance in stocks. Ensure support services
9. 13. Conclusion On following the above the challenges in reverse logistics can
be minimized to some extent. Incase of any loop holes found in the entire chain
the same should be eradicated without any further delay.

With regards to the above case study below are my findings:

1. BATTERY INDUSTRY IN INDIA  By the end of 2012 , India was viewed as the
main battery producer in Asia.  Demand for batteries increase due to growth in
the industrial sector.  Batteries market growing at a rate of 25%.  Lead acid
batteries were in great demand. Different players like Exide industries ltd, Amara
raja batteries ltd, Luminous power technologies Pvt. ltd, Su-kam power systems
ltd.
2. 5. Cond..  Lead considered as the most important raw material.  India
accounted for only 1% of lead production.  The manufactures have a strong
supply chain and a dynamic distribution network.  Battery manager had to focus
on efficient logistics, competitive pricing and better after sale service.
3. 6. ABOUT XTRA POWER SYSTEM  Xtra Power Group started their operations
in 2005.  By 2013, it became one of the leaders in supplier of Automotive
products.  Xtra Power Groups had 2 divisions:- 1. Xtra Power Auto Industries 2.
Xtra Power Energy System
4. 7. Xtra Power Energy System  Products – New & reconditioned Batteries 
Assembly types- Open shielded, Heat shielded  According to Dutta, the batteries
are dependable and economical & perform under extreme working conditions. 
Made of high quality polypropylene material, which ensure protection against
damage & abrasion.  Battery life  Contribution in net revenue
5. 8. COSTS & MARGINS  Average Prices  Profit Margin  Reconditioning &
Resale
6. 9. FORWARD SUPPLY CHAIN Manufacturer Supplier Retail Store Consumer
Components of battery Internal plates Electrolyte Lead terminals Resilient
plastic terminals
7. 10.  Suppliers Avani international Galaxy electricals Overhead total cost
for the battery is 250/unit  Cretto Oldest logistics service provider 20%
market share Lead time of 12 days Cretto ‘s condition.
8. 11. PROBLEMS & THE TRADE OFFS  Quarterly Feedback  Situation becoming
worse-Dashmesh Power system(lajpat nagar) Surya electricals (karol bhag) 
Alternative service provider  DLSP proposal of sole supplier of lead plates and
battery acid used in xtra power.  Reconfiguration attempt-Haley power and
electrical, supplier resilient plastic casing and lead terminal.
9. 12. THE OPTIONS Possible options for reconfiguration-  Go ahead with
existing suppliers  Replace Galaxy Electricals  Contract with DLSP & Dolphin
Power  Remove all existing suppliers

Q.2 )The case focuses on the problems faced by Dr. Reddy’s Laboratories (DRL), a leading
Indian

pharmaceutical company, with respect to its Mexico plant in 2011. The company had acquired
the

plant, which supplied these bulk drugs to other pharmaceutical companies in the West, from

Roche. DRL received a warning letter from the US drug regulator, USFDA, for violating current

good manufacturing practices.

USFDA inspected the plant and found it non-compliant with the manufacturing practice norms

for APIs. The FDA sought an answer from DRL within 15 days of the letter. Though the

company managed to submit a report to the USFDA within the stipulated time, a ban was

imposed on the import of products from the Mexico plant as USFDA was not satisfied with the

company’sresponse.

a. Understand the issues and challenges in competing on low cost and sustaining the low

cost competitive advantage.

 Answer:
Sustainable competitive advantages are company assets, attributes, or
abilities that are difficult to duplicate or exceed; and provide a superior or
favorable long term position over competitors.

Types and Examples of Sustainable

Competitive Advantages
Low Cost Provider/ Low pricing
Economies of scale and efficient operations can help a company keep competition
out by being the low cost provider. Being the low cost provider can be a significant
barrier to entry. In addition, low pricing done consistently can build brand loyalty be
a huge competitive advantage (i.e. Wal-Mart).
Market or Pricing Power
A company that has the ability to increase prices without losing market share is said
to have pricing power. Companies that have pricing power are usually taking
advantage of high barriers to entry or have earned the dominant position in their
market.
Powerful Brands
It takes a large investment in time and money to build a brand. It takes very little to
destroy it. A good brand is invaluable because it causes customers to prefer the brand
over competitors. Being the market leader and having a great corporate reputation
can be part of a powerful brand and a competitive advantage.
Strategic assets
Patents, trademarks, copy rights, domain names, and long term contracts would be
examples of strategic assets that provide sustainable competitive advantages.
Companies with excellent research and development might have valuable strategic
assets.
Barriers To Entry
Cost advantages of an existing company over a new company is the most common
barrier to entry. High investment costs (i.e. new factories) and government
regulations are common impediments to companies trying to enter new markets.
High barriers to entry sometimes create monopolies or near monopolies (i.e. utility
companies).
Adapting Product Line
A product that never changes is ripe for competition. A product line that can evolve
allows for improved or complementary follow up products that keeps customers
coming back for the “new” and improved version (i.e. Apple iPhone) and possibly
some accessories to go with it.
Product Differentiation
A unique product or service builds customer loyalty and is less likely to lose market
share to a competitor than an advantage based on cost. The quality, number of
models, flexibility in ordering (i.e. custom orders), and customer service are all
aspects that can positively differentiate a product or service.
Strong Balance Sheet / Cash
Companies with low debt and/or lots of cash have the flexibility to make opportune
investments and never have a problem with access to working capital, liquidity, or
solvency. The balance sheet is the foundation of the company.
Outstanding Management / People
There is always the intangible of outstanding management. This is hard to quantify,
but there are winners and losers. Winners seem to make the right decisions at the
right time. Winners somehow motivate and get the most out of their employees,
particularly when facing challenges. Management that has been successful for a
number of years is a competitive advantage.

Value Investing and Sustainable

Competitive Advantages
Companies with one sustainable competitive advantage might be successful. Finding
companies with multiple sustainable competitive advantages will greatly improve the
chances you have found a real value stock.

All of us, at one time or another, are confronted with a low-cost

or low-price competitor. The solution isn't to lower your prices
and engage in a price war, because the result is lowered
profitability for everyone involved.

So, what can you do to compete?

Before you decide on your strategy, you need to do some research, which
should begin with both an objective analysis of where you stand in
relation to your competition and an analysis of market needs and
preferences.

Use the results of your research to determine what segments you serve
and which ones the low-cost competitor serves, to better understand
whether you are serving the same segment of the market or different
ones.

If you are truly serving different parts of the market, then stay the course.
But if you believe the low-cost competitor will eventually enter the
segment you serve, now is the time to prepare for when this competitor
and you are attempting to win the same segment.

The Best Defense Is a Good Offense

In 1799, George Washington wrote that "offensive operations, often times,
[are] the surest, if not the only (in some cases) means of defence." That
approach has been applied to various competitive theaters, including
business.

The following five tactics will help make sure you'll have a fighting chance
against competitors.

1. Differentiate

Differentiation is your first line of defense. It is fundamental to long-term

success. Differentiation is defined as finding a significant point of
difference that facilitates a sustainable competitive advantage. It is at the
heart and soul of your positioning.

2. Be customer-centric

Clearly understand exactly what your customers want and what they will
pay for. Focus your efforts on excelling in those areas of demand.
Customer-centric marketing requires placing the customer at the center of
your marketing strategy in an effort to create and extract customer value.
It is the essence of enabling Marketing to serve as a value creator. Don't
guess. Ask. Invest in voice-of-customer research, win/loss analysis, and
customer advisory boards.

3. Price based on value

Value-based pricing is based on understanding the overall value of an

offering to any one buyer. Establish a solid pricing process that will enable
you to differentiate your pricing across distinct market segments.
Understand how you create value for your customers and what that value
is worth. Of course, do everything possible to bring your costs in line with
the level needed to compete effectively and to support the innovation and
development you are pursuing.

Differentiation, the right product and feature set, and the price initiatives
must be executed simultaneously.

Rather than lowering the price on your product, which may be better than
the competitor's but more than what the customer needs, you may need
to develop a specific product that will compete head-on with the
competitor's product that you can provide at a lower price point. It will be
important to do so in a way that won't cannibalize the rest of your product
portfolio.

4. Create a low-price subsidiary

Consider creating a low-price subsidiary or finding a partner that has a

low-price offering. This strategy will be successful only if you will become
more competitive as a result of having set up the low-cost subsidiary. And
for this approach to work well, some basic principles must be followed.

A successful low-cost-subsidiary strategy requires that the low-cost

subsidiary use a separately recognizable brand name, with a limited
product offering, intend for the sole purpose of competing with the low-
cost competitor. The idea is to change the expectations of the subsidiary's
customers to reflect the lower service levels or fewer product benefits and
features that come with the lower pricing.

Focus on the specific needs of the market and limit the efforts of the
subsidiary to only those that are necessary and sufficient to make it
profitable. Do not include all the services and accommodations that the
parent company can offer.

In addition, to reinforce the differences, the lower-price subsidiary needs

to be segregated from the higher-price parent.

If you take this approach, you must launch a subsidiary with the idea that
it is a real business that must make a profit. If the subsidiary simply
occupies the space opposite a low-cost competitor, but is not intended to
make a profit, it is highly likely that it will not make a profit. It will end up
being a drag on the parent at a time when it is most difficult for the
parent.

In short, if you decide to take this approach, the subsidiary should actually
be able to compete in the market with its parent as well as the other
suppliers in the market.

5. Sell a solution, not a product

When several low-cost players enter a market, the result could be the
commoditizing of the products in question. Be prepared for that possibility
by thinking in terms of solutions rather products.

Integrate products and services into a single offer. Services are much
harder to evaluate on an apples-to-apples basis. In addition, services
provide a vehicle for developing a deeper understanding of your
customer's business. It is much harder for low-cost players to offer
solutions. If you don't have the ability to provide the services, find a
partner.

Summary

Beyond those five strategies there are other tactics you can use to offset
a low-cost competitor. The key is to take action and not stick your head in
the sand.

The Challenges of Maintaining a Competitive

Advantage
 
You are well on your way to a solid differentiation strategy once you
know what sets you apart from your competitors. Especially if you
can explain — and prove — it in a way that is relevant to your target
audience. But you are not done yet.

The marketplace doesn’t stand still. Shrewd competitors will look at

your success and attempt to copy it. Over time, what was once a
distinctive characteristic may be neutralized. Your competitive
advantage will be lost.

To build a sustainable differentiation strategy you need to build your

reputation around those distinctive characteristics and make your
expertise exceptionally visible to your target audience. This “Visible
Expertise” will become the foundation of your professional services
brand.
Why Visible Expertise Matters to Professional
Services Firms
 
This brings us to the topic of expertise and why it is so critical to
professional services.

In the professional services, expertise is what you sell.

Clients aren’t buying your services because they like them. They are
buying your services to solve a business problem or seize an
opportunity. For example they may need help complying with a
regulatory requirement or solving a critical strategic challenge.

Our research into professional services buyers describes what

criteria companies use to select one service provider over another.
The most common selection criterion is expertise, and it is the factor
that most often tips the scale in favor of the contract-winning firm.

But what about the argument that professional services are “a

relationship business”? Well, that assumption is partially true. Good
business relationships are certainly helpful. As we outline in Inside
the Buyer’s Brain, both buyers and sellers of professional services
understand the importance of an existing relationship, but sellers
consistently underestimate the role their reputation plays in the final
selection.
Also, a strong reputation for expertise is the one factor that can
overcome an existing relationship. If a company does not believe
their current provider can solve a problem, they will look for a firm
that can.

Not long ago, a prospective client came to us for our marketing

expertise. Previously, he had hired a life-long friend to help with his
marketing. Despite their close relationship, he had fired his friend
(and hired Hinge) because his friend could not solve his marketing
challenge. Our strong reputation for solving the specific marketing
challenges faced by professional services firms was more important
than their personal relationship.

According to our most recent study of referral marketing, visible

expertise plays the single most significant role in driving referrals.
Relationships — both social and professional — are still important,
but only when there is an awareness of your expertise.

Overcoming the Problem of Invisibility

 
Developing expertise as a differentiation strategy sounds like a
great idea, but there is a catch. Clients are notoriously uninformed
when it comes to judging actual expertise. Consequently, your firm’s
expertise is often unseen by the marketplace.

And if your firm’s expertise is not visible, for all practical purposes it
doesn’t exist.

Fortunately, it is possible to make intangible expertise visible and

real.

We conducted extensive research on highly visible experts and the

professional services buyers who hire them. As we outline in The
Visible Expert, there are certain strategies and techniques that can
elevate the visibility of your expertise in the marketplace.
Public speaking, writing blog posts and articles, and publishing
books are all effective ways to demonstrate your expertise. And
there are many others. The value of these different techniques,
when put together as part of a differentiation strategy, has been
proven time and again by clients that go through our Visible
Firm® or Visible Expert® programs.

But the only proven to make your expertise visible and turn it into a
credible differentiator is to have a clear strategy.
Building Your Differentiation Strategy
 
Developing and implementing a differentiation strategy is a five-step
process.

1. Start with an understanding of exactly what you want to be

known for.
What are you expert in? Your area of expertise or other differentiator
should be broad enough to be enduring and relevant to your clients. But
that breadth must be balanced. The narrower and more specialized your
expertise, the easier it is to make it visible and defend against potential
competitors.
2. The next step is research.
Research will help you align your firm’s offerings with the desires and
preferences of potential clients. It will also inform your selection of issues
to write about to make your expertise more visible to your target
audience. We have found that firms that research their target client group
tend to grow faster. In fact, the fastest growing firms (those that grow at
least 20% year over year) are twice as likely to conduct research than
their no-growth peers.
3. Develop your differentiators and focus.
What sets you apart from competitors and delivers exceptional value to a
segment of the market? Build a list of potential differentiators and put
them to the three-step test. If you end up with three to five differentiators,
that’s great. One strong one can even be plenty.
However many differentiators you have, you’ll need a focus. That focus,
along with the supporting differentiators, will inform your positioning
statement. Your positioning statement is a short statement that
describes what your firm does, who it does it for and why a prospect
should choose you. Think of it as the DNA of your differentiation strategy.
4. Build your story.
Next you’ll need to tell your story to your target audience. Most
prospective clients check you out on your website, so that’s a great place
to start. First impressions matter. Help visitors answer the question, is this
firm for me?
But your website is only the beginning. You need to make that all-
important expertise visible to the outside world. How? Publications,
webinars, workshops, speaking engagements. How about video? The list
goes on.
The point is you need a plan to turn the strategy into a reality. Then you
need to build the tools to make that plan happen.
5. Tell the world.
Now it’s time to tell the world, or more specifically your target audiences,
the story of your firm. Implement the plan. Track your efforts and their
impact. Monitor the new business pipeline. Then test and adjust. The
message gets better and the brand gets stronger each time you make
results-driven adjustments.
 
Evaluating Your Differentiation Strategy
 
The research on evaluating a differentiation strategy is still evolving.
However, we’ve learned some important things already. For
example, we know that highly visible experts accelerate the growth
of a firm by 1) attracting new leads and 2) making it easier to close
them as clients. We also know the fastest growing, most profitable
firms use strategies and marketing techniques that raise the
visibility of their expertise.

A well-thought-out differentiation strategy and a commitment to

implementing your plan will accelerate your firm’s visibility and
perceived expertise. Figures 1, 2 and 3 show the average increase in
visibility, perceived expertise and new business leads experienced
by firms that went through Hinge’s Visible Firm program, which is
based on the principles we’ve outlined in this article. These data will
give you a feel for what is possible when a comprehensive
differentiation strategy is fully implemented.

b) b. Understand the issues and challenges for a company from an emerging market

competing in the global markets, particularly markets in the West.

Answer:

8 Challenges for Companies Going

Global?
Posted by Dynamic Language on December 09, 2014
Going global is usually a worthy
endeavor, but it does bring with it
some challenges. If you are
interested in taking your business
global, it is crucial you have a plan in
place to address some of the main
hurdles you will need to overcome to
succeed.  We've outlined 8 main
challenges for companies going
global that will help prepare you for
global expansion.

1. The Physical Distance

Although you may have the Internet

and telephones to communicate
overseas, nothing is quite the same as being there in person to talk to
your prospects and your distribution partners, not to mention costs
related to freight, logistics and shipping. At some point, you will have to
figure out the costs involved in doing business “long distance” in the
regions where you want to expand.

2. Unfamiliar Cultures

Do you know the most common behaviors in the country you are looking
to expand into? What about the way in which people interact with each
other in a social setting? Overcoming this cultural challenge is important
for taking your business global so that you can assimilate with the people
who will become your customers. 

Learn more about Cultural Consulting Services

3. Mastering Marketing

Are you familiar with the buying process in the country that you wish to
expand into? Learning the best way to reach your prospective customers
is an important element of taking your business global. This will allow you
to establish the kind of customer base that is necessary to be successful
with globalization in the long term. One key ingredient to successful global
marketing is transcreation. Transcreation will allow you to adapt your
marketing content to a new foreign market.

4. Organizational Communication

The way team members handling your globalization efforts communicate,

report, and track their efforts will have a big impact on how well you can
succeed at taking your business into foreign markets. You need to have
an effective system and set of protocols in place so that company
leadership can keep tabs on what is going on with your international
expansion since they will not be there to manage in person.

5. Tariffs and Export Fees

Most countries have some type of tariff or fee that is charged to

companies bringing goods into their country. You need to know about
these tariffs so you can incorporate them into the financial planning
element of your globalization plans. Also remember the legal side of
globalization: you may have to pay different kinds of fees depending on
the shipping and logistics laws in place in that specific country.

6. Human Resources

When taking your business global, it is important to consider how you will
meet the manpower requirements for operating in a foreign country. You
may need to hire new team members which will require an additional
investment. If you decide to send some of your existing team members to
new global markets, you have to account for the roles that they will leave
vacant.

7. Choosing the Right Countries

You need to have done enough research to understand where the best
place to expand is. If there are several options, analyze the relative
benefits and drawbacks of each country to determine which markets are
most ideal for globalization.

8. Properly Adapting Documents and Content to the Culture

You have to come up with a way your prospective customers can read and
understand your sales materials, instructions, and other documentation
that is important for your business. Ideally, you will be able to do more
than just translate them; you will have them adapted to the culture so
that they are optimally understood and relatable by locals.

Identifying a True Market Need

A key to success in business is offering products and services for which customers
have a compelling need. The customer has a problem that needs to be solved, and
the product or service provides the solution in such an effective way that its benefits
are not difficult to communicate. Identifying the true needs of large numbers of
people in a foreign country is not easy. Not having lived in their culture experiencing
their day-to-day lives, American marketing executives can err by assuming that what
people in other countries want or need exactly matches the wants and needs of
American consumers.
Dilution of Brand-Name Power

Due to the Internet, movies and other forms of entertainment, American culture and
the corporate symbols of that culture – brand names – are well known across the
globe. This does not mean the American companies' products will be popular when
introduced in other countries. Being aware of a brand name isn't the same as
preferring it. It can be a long and expensive process to gain the trust of consumers
who have used their own local companies' products for years or even generations.
The American companies can be perceived as attempting to take over the position
long held by local companies, causing resentment.

Cultural Nuance Differences

Consumers are influenced to purchase products by marketing messages delivered

through the media, including print media such as magazines. Humor is often used in
commercial messages to get the consumer to pay attention. But what is considered
extremely funny in one culture can be perceived as confusing or insulting in another.

To produce effective advertising requires more than accurate translation of the

message from one language to another. It requires a deep understanding of the
culture, customs, morals and even religious views that predominate in that country.
What motivates consumers to buy products varies from country to country.

Communication Style and Language Differences

Business executives from different countries can encounter several barriers to

effective communication besides obvious language differences. The traditional pace
of business negotiations can be different. Americans sometimes want to hurry
negotiations along, whereas in some other countries emphasis is placed on building
relationships before a business deal is seriously considered. Executives from other
countries may place a higher value on things such as facial expression instead of just
the words that are being said.

Distance and Time

Even with technologies such as video conferencing, executives in other countries

may prefer to establish relationships on a personal level. For a smaller American
company, this can mean a significant investment in travel costs and having key
executives out of the office for extended periods. Time zone differences can make it
difficult to coordinate projects where collaboration is required. Executives on the
West Coast of the U.S. are just getting to work in the morning when their European
counterparts are winding down for the day.

Finding Reliable Partners

American firms often establish relationships with distributors located in the countries
whose markets they are seeking to enter. They hire sales reps based in those
countries. They may engage local marketing and public relations firms to assist
them. Because the American firm might have no prior experience in that country,
finding people who are trustworthy and competent can be a challenge.

With reference to the above case study what happened was he month of July was usually pleasant in
Hyderabad. But in 2011, temperatures were soaring at Hyderabad, and the city was bracing for a
prolonged hot and dry spell. GV Prasad (Prasad), the chairman of Dr. Reddy’s Laboratories (DRL) had
just had his morning coffee, when he received the news that US Food and Drug Administration
(USFDA) had imposed an import ban on products manufactured at DRL’s Mexico plant for violation
of good manufacturing practice norms.

Before him was an envelope addressed to him from the US Food and Drug Administration (USFDA)
dated June 14, 2011, stating that the American drug regulator would impose an import ban on
products made at DRL’s Mexican arm -- IndustriasQuimicas Falcon de Mexico SA -- if corrective
action was not taken and communicated to USFDA within 15 days......

DRL’s Mexican arm, which the company bought from Swiss pharmaceutical major Roche in 2005,
produced intermediates and Active Pharmaceutical Ingredients (APIs). After going through the letter
twice, Prasad was convinced that he had to take immediate corrective actions (See Exhibit I for a
copy of the letter). Though the company had taken some corrective actions following the warning
letter and also replied back to the USFDA, it faced this ban. As Prasad looked back at the fond
memories following the acquisition in 2005, he wondered what went wrong at the Mexico plant and
how could he address them without upsetting the current stakeholders of DRL.

DRL And Its Business Segments

An Indian pharmaceutical multinational, DRL started as an API manufacturer in 1984 for India and
later international markets. The company was committed to producing affordable and innovative
medicines. It started its formulation operation in India in the year 1987. Since the 1970s, the Indian
pharmaceutical industry had been flourishing as the Patents Act of 1970 which came into effect in
1972 only recognized process patents and not product patents.

This enabled Indian drug manufactures, such as DRL, to grow by focusing on reverse engineering the
drugs developed by research-based pharmaceutical companies in the West (also referred to as Big
Pharma). These generic versions of the drugs were sold at a fraction of the price of the proprietary
drugs offered by the research-based pharmaceutical companies.

or

or

PayPal (7 USD)
After consolidating its position in domestic market DRL started its globalization initiative in 1991.
Within two decades, DRL established a presence in over hundred countries. There were three core
businesses of DRL (See Exhibit II for Consolidated Business Wise Performance of DRL)innovators. As a
consequence DRL enjoyed the first mover advantage to launch a generic product by leveraging on IP
strengths. The API global team had to ensure timely product development and supply in accordance
with all regulatory and quality requirements. The CPS business took care of the serving several
innovators comprising both, Big Pharma and emerging biotech; offering speed and flexibility. Its
value proposition of providing end to end services and competitive pricing and capability to supply
both small scale and commercial scale quantities had provided DRL with an edge over the other
players in the game. DRL was known for its process expertise and operations strength.

Excerpts...

Competing Globally

In 1984, the US became a lucrative market for Indian companies following changes to the Hatch-
Waxman Act in that country. Under this new law, manufacturers of generic drugs no longer had to
go through a lengthy period of clinical trials in order to market a generic drug. It also allowed
generics companies to challenge the originator companies long before patent expiration and also
established a 180-day exclusivity period for the first company to file an Abbreviated New Drug
Applications (ANDA) under this provision.

Struggling with rising healthcare costs many other countries in the West also formulated similar
favorable policies for generic drugs. Indian pharmaceutical companies viewed markets such as the
US and Europe as major opportunities. Companies such as Ranbaxy, Sun, and DRL were trying to tap
the lucrative US generic market as several blockbuster drugs (with sales of more than US$1 billion
per annum) were going off-patent .....

or

or

PayPal (7 USD)

Acquisition Of Roche's Mexico Plant

On November 8, 2005, DRL announced that an agreement had been signed by the company to
acquire Roche’s API plant in Cuernavaca, Mexico, including all employees and business supply
contracts. It was an all-cash deal with the Indian drug maker shelling out US$59 million for the
acquisition, which included working capital as well. Roche, headquartered in Basel, Switzerland, was
one of the world’s leading research-based pharmaceuticals and diagnostics companies.......
The Import Ban

In June 2011, DRL received a warning letter from the USFDA relating to the plant in Mexico. At the
same time it was being probed by the Indian directorate of factories over the alleged safety
violations that contributed to the demise of two workers at facilities close to its Hyderabad
headquarters......

Next Steps

As Prasad looked out of the window of his office, he could still see no signs of rain. Since 2006, the
DRL found itself facing a spate of troubles. The risky acquisition of the German generics company
betapharm, patent litigations in the US market, quality problems at its Mexico unit, falling revenues
in key markets, and a string of fatal accidents at its facilities were some of the serious issues nagging
the company

Q3) The case discusses the master franchise model of the US-based Domino's Pizza Inc

(Domino's). Domino's, which was started in the 1960s, expanded in international markets mainly

through its master franchise model. Under this model, the franchisees were provided with

exclusive rights to operate stores, or to sub-franchise them in a particular area. Domino's

recruited franchisees with business experience and knowledge of local markets as master

franchisees, and was able to mitigate the risks associated with entering and operating in

international markets. Under master franchising, in markets where there was high potential for

development, Domino's transferred market exclusivity to an individual/company, who had a

significant presence and knowledge about the local markets.

These individuals/companies in turn invested in establishing the master franchise, whose

responsibilities include building stores, sub-franchising, operating distribution system, etc. The

case discusses in detail the store operations of Domino's and the benefits of its master franchise

system.

a. Evaluate the master franchise model of Domino's and its advantages. (10)

Answer:

A master franchise is a franchising contract in which the master franchisor (the owner of
the brand name) hands over the control of the franchising activities in a specified territory to
a person or entity, called the "master franchisee"

Master franchising is a form of the franchisor-franchisee relationship in

which the master franchisee essentially becomes a mini-franchisor for a
specified territory. Within that territory, the master franchisee recruits,
trains, and provides ongoing support to each franchisee they sign.

In exchange, the master franchisee receives a large percentage of the

initial franchise fee and ongoing royalties, typically 50 percent, though it
varies. The master franchisee usually agrees to a development schedule,
which can include owning and operating their own units.

For U.S. franchise companies, master franchising is most commonly used

for international expansion, although it is also used domestically, most
commonly by commercial real estate service and maintenance companies
to develop territories in major U.S. cities.

Finding a qualified master franchisee for international expansion saves a

franchisor the expense (and headaches) of setting up an infrastructure
overseas to sell, train, and support franchisees. Partnering with a qualified
overseas master franchisee also solves problems of linguistic and cultural
differences, and of finding local employees, suppliers, real estate, etc.

Surrendering half of the franchise fee and ongoing royalties to let the
master franchisee do all the heavy lifting is well worth it for U.S.
franchisors seeking expansion overseas. Master franchise partners usually
have an existing business and infrastructure, experience in sales and
marketing, and contacts with local financial institutions.

Both franchisor and master franchisee spare the other the need to
reinvent the wheel: the master franchisee buys a proven system and
known brand, and the franchisor takes advantage of the master
franchisee's existing business, contacts, and expertise. More than other
forms of franchising, this is a partnership. And both are using other
peoples' money to grow.

Benefits to the franchisor also include rapid market penetration and brand
dominance, since the master franchisee is motivated to sell as many units
as possible to qualified candidates. Since master franchisees are
responsible for training and supporting the franchisees they sign, they
also are motivated to select the best they can find. And since they are
paid a significant percentage of the royalties, they want to have the best
operation possible.
Master franchising is not for beginners. It requires significant capital, not
only for the master franchise license, but also to introduce a brand into a
new country or region. However, for the successful master franchisee, the
rewards are greater than for multi-unit franchisees, area developers, and
area representatives. But so are the headaches and responsibilities.

Whether abroad or domestically, successful master franchising works to

build out a territory quickly, much as an area development or area
representative agreement is intended to do. The critical difference is that
with a master franchise agreement, the franchisor does not have to add
new infrastructure. Everything is, essentially, outsourced to the master
franchisee. The franchisor has no need to add staff for franchise sales,
training, site selection, hiring, ongoing support, etc. The master franchisee
handles it all.

Master franchisors should possess strong management skills and/or the

organization to provide them. Experience in the specific industry is
desirable, but not essential; as is experience in franchising. The individual
or organization should also possess strong sales, marketing, and
operational skills, and be able to train their franchisees to manage their
own unit economics to provide maximum cash flow for all parties.

The master franchisee, for their part, receives a great deal from the
franchisor. In addition to the proven operating system and brand name,
the master franchisee benefits from international marketing, ongoing
access to the franchisor's newest systems and technologies, and in some
cases, to increased profits on products and supplies (as in a hair salon, for
example). Along with all that, the master franchisee teams up with a
partner who is very interested in their success, and who can offer support
in management, leadership, and other high-level skills to help run the
organization.

Master franchising takes the traditional two-tier franchisor-franchisee

relationship and adds a third tier, taking the relationship from win-win to
win-win-win. When all parties are contributing as agreed, and the
marketplace cooperates, the cash flows faster for franchisees, master
franchisees, and franchisor alike.

Characteristics of master franchisee

Very few customers: The customers are the franchisees. He
supports a small number of franchisees who typically own several
franchise units.

Very few employees: Typically he will operate a master franchise

by himself and then expand to have an administrative assistant, a
trainer or other support person and a franchise sales person. As
he grows bigger, he adds more of these positions into the staff
and perhaps a general manager to run the whole operation and
can back away almost completely, if desired. Many master
franchisees, after working for three to seven years, retire and live
off with extremely good income, spending one or two days a
month in the office.

Faster rate of building equity than a normal business: Once he

sells a few franchises or opens own stores, he increases the value
of his business significantly. Not only does he have an existing
business with cash flow, but has additional franchise opportunities
to sell which gives the master franchise a higher value earnings
instead of normal business earnings.

Option of setting up own franchises at reduced rates: Own outlets

create another asset of value. He now has a master franchise with
a specific value and also his own franchise with its value. As the
value of the franchise increases, it increases the value of the
master franchise. These are separate assets which can be sold
whenever required.

Supporting this Chandra Gopalan, Master franchisee, Contours

Express India, said," The pilot location is managed by the master
franchisee but other outlets can be developed by the master
franchisee on his own."

Own exclusive territory: Only he and his designated franchisees

will be allowed to develop franchises in the territory. Speaking
about the territory rights, Kapoor says," You have better grip of
the market, know other territories also and master franchisee's
stock is also distributed to other franchisees, so there is no stock
dumped in the store." More freedoms in a master franchise than a
normal franchise: Master franchise helps set the standards of
franchise in his area.

Stay up to date on the latest technology: Being part of a larger

franchise system allows the best ideas to flow into the corporate
office and then into the field. Industry-specific training and
support from the corporate office.

Better success rate: Franchises as a whole enjoy a 95 per cent

success rate. Master franchisees typically have a better success
rate than the normal franchise. All that is required is to find the
right franchisor

Master franchise model

Domino’s Pizza (DPZ) has master franchise agreements
with international market restaurants that are in charge of
developing business in a given region. Master franchises can sub-
franchise or run another pizza restaurant themselves.

The chart below shows the international restaurant count, most of

which are developed through master franchise agreements.

he master franchise agreement also gives the master franchisee

operating rights to a supply chain in a given region. Needless to say,
the potential master franchisee must
demonstrate certain requirements such as knowledge of local laws,
understanding of local consumers, and an appreciation of real estate
restrictions in the region. Among other things, potential master
franchisees also need to have access to capital.

Independent domestic franchise

In the domestic market, Domino’s Pizza grants independent
franchise owners the right to open additional franchised stores.
According to the company, about 90% of its domestic independent
franchise owners started their careers either in-store or as a delivery
 driver. But when it comes to expanding internationally, Domino’s
uses the master franchisee approach.

Franchise terms
Domino’s, like other restaurant companies, charge a royalty fee
for its franchise. Royalty fees average 3.1% in international markets,
but Domino’s fee is  5.5%, and it’s charged as a percentage of sales.

Papa John’s (PZZA) royalty fee is 5% of sales, and Pizza Hut’s parent,
Yum! Brands (YUM), charges between 4% and 6% of sales.

Domino’s franchise royalty revenue accounts for 12% of total

revenue. In comparison, McDonald’s (MCD) franchise revenue
accounts for about one-third of the company’s total. MCD makes
up between 3% and 4% of the Consumer Discretionary Select Sector
SPDR (XLY) and the iShares U.S. Consumer Services ETF (IYC).

Franchise term and other fees

Domino’s franchise agreement is typically for a ten-year term,
renewable for another ten years. According to company filings,
Domino’s renewal rate is 99%.

Besides the royalty fee, Domino’s also collects a 6% marketing and

advertising fee based on sales from domestic franchisees. These
funds are used for advertising, commercial production, public
relations, market research, and other brand promotional activities.

Domino's Digital Platforms Take 45% of US Sales

By Adam JonesMar 26, 2015 | 7:08 PM




Digital platforms
Product innovation and international expansion aren’t the only
reasons for Domino’s success. The company has embraced
technology—one of the most important catalysts sparking Domino’s
sales.
About 45% of Domino’s Pizza (DPZ) sales in the US were made
on digital platforms in 2014. The company’s digital platforms are
compatible with about 95% of tablets and smartphones in the US.
The photo below shows a Domino’s iPad application that gives you a
personalized pizza ordering experience.

n 2014, the company launched a first-of-its-kind ordering platform in

the restaurant industry known as “Dom.” Dom is a voice-order app
that allows customers to place orders without clicking or tapping on
their digital devices. They just need a voice.

The company also launched a digital feature that allows customers

to recall past orders, so next time they can place an order in as
quickly as 30 seconds.

Starbucks (SBUX) has by far been the most successful restaurant

chain at implementing technology alongside its loyalty program.
SBUX makes up about 3% of the Consumer Discretionary Select
Sector SPDR Fund (XLY).

Tracker
You may also be familiar with the famous Domino’s tracker that
tracks your pizza step by step from order to delivery. It wouldn’t be
a lie to say that Domino’s is a pioneer in pizza-industry technology.

Back-end technology
Besides making advances with customer-facing technology,
Domino’s has also used technology to improve things at the back
end and at the store level.

Domino’s introduced a point-of-sale system called

PULSE that brings operational efficiencies and can train or assist
franchisees to manage their business independently. About 99% of
domestic franchises and 60% of international franchises are
equipped with PULSE

Pizza Hut, under the umbrella of Yum! Brands (YUM), made over

40% of its US sales via digital platforms and 35% of sales in
international markets. YUM accounts for about
Other restaurants are also trying to integrate technology into their
businesses. McDonald’s (MCD), for example, has introduced self-
ordering and payment kiosks in its European stores.

ttracting the new generation

Restaurants are continually innovating to keep up with ever-
changing trends and customer preferences. Some restaurants
chains, such as McDonald’s (MCD), Wendy’s (WEN), and Burger King
(QSR), are updating stores to appeal to the Millennials. Others, such
as Chipotle Mexican Grill (CMG) and Panera Bread (PNRA),
promote food quality to attract customers.

The Pizza Theater

The Pizza Theater is a reimagined design for Domino’s (DPZ)
restaurants. It allows customers to watch as their orders are
prepared, as you can see in the image above. The company plans to
have all its stores remodelled according to this design by the end of
fiscal 2017.

McDonald’s had redesigned ~70% of its domestic store interiors and

60% of exteriors by the end of 2014. But while remodelling is all the
rage with restaurants, the effectiveness of this strategy is still
questionable. In the US market, McDonald’s same-store sales growth
fell to 4% in February.

What does this mean for Domino’s?

Investing in renovation and regular repairs are part and parcel of
every retail business. But in its company filings, Domino’s
specifically states that it’s investing $50 to $60 million in capex
for technology and the redesign program.

Yet given that about 45% of orders in the US and 35% of orders in

the international markets are placed via digital platforms, is this
redesign investment worthwhile? If the customer doesn’t see the
pizza-making process 35% to 45% of the time, where’s the benefit?

Also, unlike a fast-casual restaurant such as Chipotle Mexican Grill

(CMG), where you have to be present while your order is prepared,
Domino’s is more of a casual sit-in restaurant. So you don’t really
need to be at the counter watching your food being prepared.
Basically, the effectiveness of the Pizza Theater strategy is a bit of a
question mark.

To mitigate these kinds of company-specific risks when you’re

investing, you may want to look at a broader portfolio such as the
Consumer Discretionary Select Sector SPDR Fund (XLY) or the
iShares U.S. Consumer Services ETF (IYC). XLY and IYC respectively
invest 10% and 12% of their portfolios in restaurant stocks.
or the fiscal year 2008, the US-based Domino's Pizza Inc. (Domino's), the #1 pizza delivery company
in the US3, reported global retail sales of US$ 5.5 billion, which included the retail sales of its
company-owned and franchise stores. The company reported revenues of US$ 1.425 billion of which
the revenues from company-owned stores stood at US$ 357.7 million, domestic franchise stores at
US$ 153.9 million, and revenues from international stores at US$ 142.4 million. Domino's operated
through 489 own stores and 4,558 franchised stores in the US. Internationally, it operated through
3,726 franchised stores.

Domino's was started in 1960, and its first

franchise store was opened in 1967. With
rapid expansion, the number of stores
reached 200 by the end of 1970s. Domino's
began its foray into non-US markets in 1983,
with a store in Canada. It then began
expanding in the international markets, mainly
through its Master Franchise model. Through
this model, the franchisees were provided with
exclusive rights to operate stores, or to sub-
franchise them in a particular area. Domino's
recruited franchisees with business
experience and knowledge of local markets.
Through its Master Franchise model,
Domino's was able to reduce the risk
associated with entering and operating in
different international markets.

This model also helped Domino's to localize its products to suit the needs of different markets.

The Master Franchise model proved to be highly successful as the master franchisees, with thorough
knowledge of local markets, were able to establish the brand quickly in the international markets. By
the end of 2008, Domino's was present in 60 countries across the world. International sales
contributed significantly, accounting for 40% of global retail sales and 33% of operating profits of
Domino's. During the quarter ending December 2008, the international operations of Domino's
registered sixty consecutive quarters of positive same store sales (Refer to Exhibit I for selected
financial data of Domino's).

Commenting about the Master Franchise model, David A. Brandon (Brandon), Chairman and CEO of
Domino's, said, "We're in nearly 60 countries around the world. We operate using a Master Franchise
model, which means that we partner with local operators in those various countries and provide them
with the expertise, the brand, the operating platform, the oversight, and the support they need to
combine with their capital and their operational execution to create results. And for that, they pay us a
royalty of their sales...

Background Note

Domino's Pizza originated as a small pizza

store owned by Dominick Di Varti at the
Michigan University campus in the US under
the name 'DomiNick's Pizza'. In 1960, the
pizza store was bought by two brothers,
Thomas S. Monaghan (Tom) and James S.
Monaghan (James) who were students at the
University...

Store Operations

Domino's domestic stores did not offer dine-in

facilities and very few of its international
stores did so. Hence, they did not require
restaurants and staffing facilities.

As the business was focused and the menu limited and consisted only of pizzas and a few side
dishes, the stores were small and inexpensive to build. Running a Domino's unit did not require
expensive infrastructure or large stores...

The Model

The business model of Domino's focused on delivering high quality pizza in a timely manner. One of
the components of this model was the franchise system, which Domino's considered critical for its
success...

OPENING A FRANCHISE
Domino's provided two types of franchises - internal and external. Employees of Domino's who had
worked at the stores as general manager for at least one year were eligible to become internal
franchisees...

SUPPORT PROVIDED
Domino's helped the franchisees in the US to select store sites and set up the stores according to the
company's specifications. Domino's also provided the design plans, equipment, and fixtures. The
franchisees were also required to provide adequate training to the store employees...

MASTER FRANCHISING
Master franchising helped Domino's establish a significant presence in a short span of time, as the
master franchisees were well versed with the local markets. In 1982, Domino's established DPII to
look after the international expansion activities of the company...

Domino's Master Franchise in the UK

The UK was one the largest international
markets for Domino's. The master franchise in
the UK was one of the most successful
master franchisees of Domino's, and had the
right to operate and franchise Domino's stores
in the UK and Ireland. Domino's was the
leading home delivery pizza company in the
UK and Ireland...

A Mutually Beneficial Relationship

When franchisees came up with suggestions,

the company deliberated upon them and
accepted them if it found them beneficial.

One such suggestion from a franchisee led to the Heat Wave bags in Domino's which helped keep
pizzas hot for a longer time. The suggestion came from Richard Mueller, who in the early 1990s saw a
vendor at a trade show selling bags that could keep pizzas at 170 degrees temperature for 30
minutes. He planned to use the bags and informed Domino's about it...

Advantages:

Top 10 Benefits of Being a

Master Franchisee
Are you ready to step up your game and enjoy the benefi ts of
being a master franchisee? Here are some tips from DetailXPerts.

Top 10 Benefits of Being a Master

Franchisee
img src: unsplash

Are you ready to step up your game and enjoy the  benefi ts of
being a master franchisee? If you have strong management,
marketing and operations skills, then you may well be ready.
Experience in franchise sales would of course be an added bonus
as being a master franchisee is a huge responsibility. With it
being such a huge role to fi ll, what’s in it for you?

Being a Master Franchisee: Top 10

Benefits
1. Franchise fee and royalty fee percentage
One of the benefi ts of being a master franchisee is the profi ts
gained from it. You will be busy recruiting, training and providing
support to your franchisees. This will not be for free. You will
receive a signifi cant percentage of the initial franchise fees and
the ongoing royalty fees. The percentage of a master franchisee
from fees varies. Franchising.com says typically it is 50%. Now
that sounds very promising!
2. Proven business model
Another one of the benefi ts of being a master franchisee is that
you get a ready-made franchise package with an established
brand recognition. You wouldn’t have to reinvent the wheel as you
will be taking on a proven business model with a system that is
already successful. There’s nothing for you to worry about. You
can hit the ground running as everything is already in place.

3. Prestige and influence

The prestige that comes with being a master franchisee can
provide you with enormous satisfaction and fi nancial leverage.
Consequently, you can become infl uential in the business.  If you
do your work as a master franchisee right, not only will it be very
profi table for you, you will also be an infl uential part of your
franchise’s network. As the business develops and grows, the
master franchisee will become a core strength in the business as
a whole. It will also add to your personal growth.

4. Additional profits in additional services

Off ering add-on services to your franchisees can provide you with
an additional source of income. Some examples of add-on services
that you can off er, according to  Master Franchise
Wealth.com  are: accounting, bookkeeping, people handling and
consultation services. All these in exchange for additional fees.
True, the majority of your revenue will still be from your
franchising fee and royalty fee percentage, but you also stand to
generate profi ts from training and certifi cation. Additional income
on top of your cut from the franchise and royalty fees is surely
worth it.
5. Exclusivity of territory
Most master franchise agreements grant the master franchisee
territory exclusivity. When you become the master franchisee of
your specifi c area, that area is only for you and the franchisees
that you recruit. You will not have to experience the hassle of
competing with the same franchise as yours. This will give you
limitless possibilities in terms of growth and expansion.
6. Complete control

Complete control
img src: unsplash
Having complete control in running your own business empire is
another benefi t. You are empowered to supervise  the franchisees
in your territory. You are the middle man between the
franchisees and the franchisor. Yes, you have the responsibility of
expanding the business and supporting your franchisees. But
unlike working as a manager or an executive in a company, as a
master franchisee, essentially, you will be your own boss.

7. Hiring skilled employees

As a master franchisee, you have the advantage of being able to
hire skilled employees to assist you in managing your business.
This could  free up a lot of your time so you can concentrate in
other aspects of your business, or operate another business .
8. Equity and value
According to Kensington Franchise Sales,  one benefi t  of being a
master franchisee is building equity and value. This happens as
you continue to expand the business.  The master franchisee will  
continuously sell franchises and build your own sites. The value of
your business will be positively aff ected as you do this.
9. Minimum customers
Being a master franchisee, you have very few customers.  Your
only customers are the franchisees in your territory. How can this
be a benefi t? Your main job then is to guide and support
them. With the support of the franchise company, you can focus
on this main task and be eff ective at it in the long run.

10. Very few employees

As a master franchisee, you will have to operate the master
franchise by yourself with an administrative assistant, a trainer,
support staff , and maybe a sales person to help you sell your
franchise. You may need to add more staff as your master
franchise expands. Your role as the master franchisee is to
expand and develop your territory. You do these things
simultaneously as you support your franchisees. Until your
franchise has fully grown, very few employees are needed. As a
matter of fact, plenty of master franchisees just have an
administrative assistant and a trainer or a consultant.

Conclusion
Being a master franchisee is not a walk in the park. You will serve
as the sub-franchisor, or mini-franchisor, in a specifi c area and
you will have to recruit franchisees in your area. As the master
franchisee, you will have to give all the support your franchisees
will need. Examples are training, marketing, and quality control.
You will also take on a supervisory role among your franchisees to
ensure that they comply with the terms of the contract.  You
need strong management and organizational skills, marketing,
and operational skills. If you have what it takes, being a master
franchisee is the perfect opportunity for you to build up your skills
some more.
Stable business brands allow the growth of  a master franchisee in
their wings

b)

10. TRAINING.

10.1 Initial Training.

If you (or the Controlling Person if you are an Approved Entity) are opening your (or his or her) first
Domino’s Pizza Store, you (or the Controlling Person) must enroll in and complete all training
programs and classes which we require for the operation of a Domino’s Pizza Store. These training
programs and classes will be furnished at such times and places as we designate. We have the right
to charge a reasonable training fee for these training programs or classes. All training programs and
classes must be completed to our satisfaction. You will be responsible for the travel, living expenses
and any other costs incurred during these training programs and classes.
10.2 Training of Employees.

You agree to implement a training program for employees of the Store and to be solely responsible
for training the employees to legally, safely and properly perform his or her duties while inside the
Store and while outside the Store for business purposes, including training your employees to follow
appropriate procedures for their safety and well-being as well as the safety and well-being of the
public. You agree not to employ any person who fails or refuses to complete your training programs
or is unqualified to perform his or her duties in accordance with the requirements established for
the operation of a Domino’s Pizza Store. You acknowledge and understand that implementing a
training program for employees of the Store and training your employees to follow safe and proper
procedures for the operation of the Store will remain your sole responsibility even if, from time to
time, you obtain advice, certifications or suggestions from us or our affiliates about these topics.
You further acknowledge and understand that it is not our responsibility or duty to implement a
training program for your employees, nor do we have the responsibility or duty to instruct your
employees about matters of safety and security in theor around the Store or delivery service area or
on the way to or from the Store. By providing advice, certifications or suggestions, we do not
assume any of your responsibilities or duties.

10.3 Additional Training.

We may also, at our option, require you (or the Controlling Person if you are an Approved Entity) to
attend supplemental or additional training programs which may be offered

August 2008April 2012 SFA 11

from time to time by us or our affiliates during the term of the franchise. The fee for such training
shall range from between One Hundred Dollars ($100.00) and Five Hundred Dollars ($500.00) per
training class. You will be responsible for the reasonable costs of such programs and for the travel
and living expenses and any other costs incurred during these programs. You must complete this
supplemental or additional training within one (1) year of the time in which it is originally offered by
us or our affiliates.

11. OPERATING ASSISTANCE.

11.1 Advice and Guidance.

We will furnish you with such reasonable operating assistance as we determine from time to time to
be necessary for the operation of the Store. Operating assistance will include advice and guidance
regarding:

(a) methods of pizza, other authorized food and beverage preparation, packaging and sale; and

(b) the establishment of administrative, bookkeeping, accounting, inventory control and general
operating procedures.
You acknowledge and understand that it is not our responsibility or duty to operate the Store and
we do not have the legal right to direct your employees in the operation of the Store. Those
functions remain your sole responsibility and duty. Further, you understand that the assistance
provided to you under this Section 11 does not obligate us to provide the accounting, bookkeeping,
administrative, inventory control or marketing services required for the operation of the Store or to
otherwise operate the Store. By providing advice or suggestions, we do not assume any of your
responsibilities or duties.

11.2 Operating Problems.

We will advise you from time to time of operating problems of the Store disclosed by reports
submitted to or inspections made by us or our designee. We will make no separate charge for
operating or marketing assistance except that we may make reasonable charges for forms and other
materials supplied to you and for operating assistance made necessary in our judgment as a result of
your failure to comply with any provision of this Agreement or for operating assistance requested by
you in excess of that normally provided by us. By providing advice, certifications or suggestions, we
do not assume any of your responsibilities or duties.

1. With more than 8,000 locations in more than 54 countries, Dominos needs a
cost-effectiveway to reach out to a broad audience to support leadership
development. Offering a variety ofprograms through its homegrown learning
portal, DPZ University (which houses e-learningcontent from a variety of vendors),
accomplishes this strategic objective."The nice thing about this is, from home, at
night, I can access it; I dont have to be at work,"said Patti Wilmot, executive vice
president of PeopleFirst, Dominos Pizzas trainingprogram. "With the business that
we run, a lot of our team members work odd hours,particularly our leaders that
run our stores. This gives them the opportunity to do it in themorning or whenever
they want to do it.""This allows us to put tools in the hands of each and every one
of our leaders in an instant,and now weve got a very broad reach out into the
marketplace, across this building, into ourdistribution centers and out into the
stores," Kissinger said. "Otherwise, we were challengedin having large
infrastructures and training departments."Wilmot said the bottom is where its
most useful."Its primarily for an early-career leader. Maybe its their first time
managing people, and heor she is having an issue with someone around
attendance or has lack of results-orientedperformance management skills," she
said. "They can go in and get some quick tips on howto sit down with this team
member and have a good one-on-one discussion to address thoseskill
deficiencies."
2. 16. PIZZA MAKING TRAININGDomino’s Pizza India has remained focused on
deliveringgreat tasting Pizzas and sides, superior quality, exceptionalcustomer
service and value for money offerings. Dominoshave endeavoured to establish a
reputation for being a homedelivery specialist capable of delivering pizzas within
30 minutes or else FREE to acommunity of loyal consumers from all our stores
 around the country.Target timeResource neededKey learning pointsRead &
practiceSkill checkRead & observe: 1. Grab the correct portion from the make line
bin 2. Evenly spread the topping over the pizza 3. Use both hand so you can go
more quickly 4. Check quality of the item 5. Place items on the belt outside the
oven 6. Try to take the correct portion of cheese from the bin in one or two grab
7. Put items to one side of the belt so that two items can be baked side by side.
3. 17. PIZZA DELIVERY TRAININGWhen you drive down the road: 1. Delivery
troubleshooting 2. Payment at the door 3. Driver check in and drop 4. Driver
check out 5. At the door Count out full change, starting from the smallest coins to
the largest notes don’t assume the tips. Take the credit card slip and a pen on the
delivery Swipe the card or imprint it on the slip and get the customers signature.
Treat credit card slips like cash, depositing them in the drop box. To ensure great
customer service as well as your safety at all times, you must be ready to handle
all type of situations on delivery
4. 18. BOX FOLDING AND STORAGE 1. Fold the lid so that the flaps go behind
and over the bottom flaps 2. Ask your manager how to apply box tops 3. Store
boxes by size with groups stacked on top of each other, when the manger takes
inventory he or she can quickly count the groups to figure out how many boxes
are in stock 4. A box is a food contact surface like a dinner plate or pizza cuter so
must be store on clean rack or shelf 5. During the shift, keep the front of the cut
table stocked with pizza and side boxes. ORDERING
5. 19. 1. Answering the phone is 1 priority2. Telephone etiquette3. Phone
script4. Telephone hold procedure5. Suggestive selling6. Takeaway customer
priority and ordering7. Takeaway payment transaction
6. 20. OTHER TRAININGPersonal hygienePersonal safetyHand washingChemical
safetyTotal satisfaction guaranteedDrive defensivelyBox labellingTelephone
procedureSink setupMaps and delivery areasUsing hot bags
7. 21. Primary training: 1. Suggestive selling 2. Cleaning and sanitizing 3.
Sweeping and mopping 4. Cleaning the bathroom 5. Prepping, dating and self life
6. Prepping chicken products 7. Using a scale 8. Cleaning the oven 9. Pizza
saucing 10.Cleaning beverage cooler HR DEVELOPMENT PROGRAMDomino’s fast-
paced global business requires support from strong HR professionals with abroad
range of experiences. The HRD Program was designed to develop and prepare
futureDomino’s human resource leaders.
8. 22. During the program you will work in a series of rotational assignments.
We’ll work togetherto specifically select these roles to help you achieve your long-
term career goals andstrengthen your credibility as a strategicbusiness
partner.These positions are held during the first 3-4years of your Domino’s Pizza
career andrequire company sponsored relocation(s).Then what?Anything! After
learning our business model from the ground up, you will be uniquelyprepared to
move into any number of other roles in our People First Team. We’ll worktogether
 to specifically select these roles to help you achieve your long-term career
goals.While participants can move into any area of our business, some of the most
popularopportunities are with the employee relations, recruiting, and
compensation and benefitsteams.

1. LEADERSHIP DEVELOPMENT PROGRAMAnything! After learning our business

model from theground up, you will be uniquely prepared to move intoany number
of other roles in the company.We’ll work together to specifically select these roles
tohelp you achieve your long-term career goals.While participants can move into
any area of ourbusiness, some of the most popular opportunities are in our
International, FranchiseDevelopment and Operations, Marketing and Supply Chain
Services departments.“The goal of the Leadership Development Program is clear
for us…we’re using it to developthe future leaders of this company. We find
bright, highly motivated students and then givethem the training and
development opportunities they need to become extraordinarilysuccessful at
Domino’s. It’s clear to me that many of the Pipeliners will reach the highestlevels
in management at Domino’s.”
2. 26. IN STORE TRAINING IN DOMINO’SAt the heart of our learning and
development is store skill training. Our store team membersreceive extensive
training that prepares them for "making, baking and taking" pizzas.Advancement
from Drivers and Customer Service Representatives to Assistant Managersand
General Managers is achieved by completing our Crew Training Program on
leadershipand running the business.Crew and AssistantThese workbooks cover
every topic you need operational training for: Product quality, safedelivery,
customer service, cost controls and sales building
Domino’s Pulse Training, at the World Resource CenterThis new three-and-a-
half-day class covers everything from preparing for your first shift toteam
member check out to menu and labor management.

Q4 A)

Project Management:
Project management is the discipline of initiating, planning, executing,
controlling, and closing the work of a team to achieve specific goals and
meet specific success criteria. (Source: Wikipedia)
Traditional (or waterfall) project management, majority of the times,
follows a fixed sequence:
 
When one process is complete, only then can the next one begin.
Typically this method is more suited for projects that anticipate very few
changes from the start to finish. Like manufacturing a billion dollar
helicarrier. Here requirements are fixed, only cost and time vary. Since
there are minimal changes, chances of the budget or time estimation
going haywire are comparatively less.
However, not every project can be planned in the same manner. For
software development projects, frequent iterations are required, a
flexibility which Agile methodology provides. Instead of planning the
entire project  beforehand, teams focus on quicker iterations and increase
efficiency. Although most of the steps involved remain same, it is not
necessary that they are carried out in a sequential manner. These steps
are broken down into smaller segments known as sprints.

On August 14, 2008, Menlo Innovations LLC (Menlo), a Michigan-based software design and
development company, received the Alfred P. Sloan Awards for Business Excellence in Workplace
Flexibility.5

The award recognized Menlo for nurturing a culture characterized by a high level of teamwork and
flexible workplace practices that promoted work-life balance. Menlo had also received several awards
earlier for its innovative work practices and creativity at the workplace.

The establishment of Menlo dated back to

2001 when the information technology (IT)
industry was coping with the turbulent times
as a result of the dotcom bubble burst.

Richard Sheridan (Sheridan), co-founder,

president, and CEO, Menlo, established the
company in association with his colleagues
based on Thomas Alva Edison's6 (Edison)
Invention Factory of 1876.

Sheridan used extreme programming7 for

software project management and also
adopted an open, flexible, and collaborative
working environment inspired by Edison's
Invention Factory.

Analysts felt that this approach was path-breaking since it not only enabled Menlo to provide
innovative solutions to its clients but also gave new meaning to workplace flexibility and work-life
balance.

Sheridan placed a lot of importance on project management.

"At Menlo Innovations, we've learned that project management is critical to successful innovation.

It's a concept that stands in stark contrast to the commonly held misconception that project
management stifles innovation.

Innovative projects naturally thrive on an "out of the box" attitude that easily can lead to a "no
deliverables" result if formal professional project management is absent," 8 he said...

Richard Sheridan & His Early Career

Sheridan started working on software

programming in his school days. At the age of
13, he worked as a programmer at Chippewa
Valley High School. By the late 1970s, he had
earned his bachelor's degree in computer
science from the University of Michigan. He
then did his master's in computer engineering
from the University of Michigan...

Menlo Innovations

In June 2001, Sheridan and his colleagues set

up The Menlo Software Factory and The
Menlo Institute. The Menlo Software Factory
was inspired by Edison's approach to flexible
practices at the workplace...
High-Tech Anthropology
Despite Menlo developing several successful products, there were a few products that did not appeal
to customers because of reasons such as difficulty in implementing the software application, etc...
Menlo's Approach to Project Management

Sheridan advocated the use of project management

since software development was an incremental and
iterative process that required careful planning and
implementation. According to Sheridan, "Project
management is a key element of our ability to scale
our organization to handle more projects
simultaneously without having to create inordinately
complicated and expensive management hierarchy."
Around 15 percent of the budget set for the
implementation of a particular software project was
spent on project management practices at Menlo

Adopting a 'Flexible' Approach

Inspired by Edison's Invention Factory,

Sheridan adopted a similar approach at Menlo
and there were no cubicles, walls, or doors in
the office.

It was an open style brick and beam office

which resembled a workshop rather than a
corporate office. The employees were not
even assigned personal computers to work
on.

Neither did they work in isolation. They

worked in pairs for a particular project and
were then reorganized into different teams the
next week. This ensured that all the
employees worked on a project at one time or
another...

Results

As of 2007, Menlo had achieved revenues of US$ 2.7 million. In 2008, it made it to the Inc 5000 list
with a three year growth (2005-2007) of 72.3 percent. It was also a finalist in the Top Small
Workplaces.

Analysts felt that though Menlo did not do too well on the growth front, it had excelled in other areas
such as putting together a vibrant and cohesive organizational culture and engaging employees
through effective team building initiatives. It had also demonstrated its ability to retain talent...
Difference between Traditional and
Agile Project Management
Flexibility:
Traditional project management provides little to no scope for making
changes to the product. It’s a rigid process that only follows a top-down
approach. Once the plan is finalised, managers communicate it to their
teams and make sure that everyone sticks to it in the best possible
manner. There is a lot of resistance to any change that is proposed as it
can disrupt the project schedule.
Agile methodology is more adaptable and offers a lot of flexibility in terms
of making changes to the product. It allows  team members to experiment
and find out some of the best alternatives. They are free to communicate
any idea they believe will help to enhance the product further. Being a
feature-based approach, Agile focuses more on getting the right product
than follow rigid structures.

Ownership and Transparency:

In traditional management, ownership belongs to the Project Manager. It
is the manager’s responsibility to plan and document the entire journey of
the product. Apart from managers, only customers are involved in the
planning stage but once implementation begins their involvement is zero.
Since managers hold all the reins of the project, team members usually do
not have a say in the result of their efforts or how the project is
progressing.
Whereas in Agile methodology, the team members share ownership of the
project. Everyone puts their heads together to come up with a plan
designed to finish the work within the estimated time and cost. They are
able to view the progress of the product right from the start to its end.
Such transparency plays an important role in maintaining a productive
and highly engaged work environment.

Problem solving:
In case of unexpected obstacles, individuals need to escalate the issue to
their managers. However approaching your manager every single time is
not a feasible option. It can cause undue delays and exceed the estimated
time limit, apart from increasing the overall cost as well.
Agile teams have the authority to take decisions on their own. They try to
internally solve all issues to avoid wasting time. Being closely involved in
the process, their knowledge helps them to tackle most of the problems
that hinder their progress. Unless there is a need to take extreme
decisions, team members rarely need to escalate trivial matters to their
manager.
Checkpoints and Monitoring progress:
Traditional method advocates heavy planning at the analysis and design
stage of the project. Their focus is more on streamlining the processes
than on the product itself. Once the process is finalised, it is expected that
the team will follow it step by step with minimal guidance. Progress is
determined after the project is completed. There are no frequent check-
ins unless the manager receives any escalations.
Since there are shorter and quicker iterations, Agile methodology
encourages team members to have checkpoints at regular intervals. It is
easy to determine the progress as well as helps individuals maintain
accountability in their work. In Scrum – one of the most popular agile
methodologies, teams hold daily stand-ups to catch up on what was the
work done yesterday, agenda for the day and if there are any obstacles.
In the dynamic environment that we now live in, there are very few
situations where change doesn’t occur. In such times, sticking to Agile
methodology will serve companies much better. 

Traditional project management specifically emphasizes on conducting a long and detailed upfront
planning for all projects irrespective of whether the requirements are known or not. The long upfront
planning is emphasised to ensure fixing the variable like time, cost, scope etc. Lot of time is spent on
upfront planning these parameters. In today’s fast changing environment, requirements keep changing, and
all this upfront planning is wasted if there is a major change in the specification at a later point of time.

While Agile is a general approach used for software development, agile emphasizes on teamwork, frequent
deliveries of working software, customer collaboration, and time boxing events and allowing the ability to
respond to change quickly.

Scrum is one of most common used form of Agile. Scrum encourages iterative decision making and
reduces time spent on unknown variables which are prone to change. Scrum embraces change like no
other. Scrum is based on the concept to deliver the greatest amount of value to the customer in the shorted
period of time, ensuring a potentially shippable product at the end of each sprint otherwise called iteration.

Traditional project management emphasis on linear processes, comprehensive documentation, spends high
time on upfront planning; all requirements prioritization is fixed for the lifetime of the project, and works
in managed organization. Traditional project management is adverse to changes and follows a formal
change management system. The Return on Investment is after the project is closed and the customer
inputs or the involvement in the project may vary depending on the project lifecycle.

While Agile follows an iterative processes and are divided into sprints of shorter span, as agile is more
open to changes in the specification, there is less amount of time spent on upfront planning, prioritization
of requirements is based on business value and the product backlog is frequently groomed by the product
owner. Agile follows self-organized style as individuals are not managed and the organization is de-
centralized. Since Agile is split in iterations they pick up small amount of work and rest can be changed
and updated to the prioritized. In Agile the Return of Investment is achieved early as release happens in
phased and received throughout the project life. The customer involvement in the project is very high as
the development work on the concept of customer collaboration.
Difference:

In this fast-moving world, project management has become one of the most

important pillars that are helping businesses run without any glitch in their

processes. Both small and large scale organizations around the world are exploiting

technology and depending on project management systems to deliver the software

development project successfully. Whether it is team workflow management or

timing, these tools help to ensure that everything is going well without any

obstacles.

While there are tens of different project management approaches, Agile is

considered one of the most practical and flexible software development mechanism

that exist today. It is capable of executing a variety of tasks, but what sets it apart

from others? Let’s find it out.

Here’s a brief comparison of Agile management and traditional project management

software:
                                                                                                                   Traditional

vs Agile Project Management

Overview of Agile and Traditional Project Management

What is Traditional Project Management?

The traditional Project Management (waterfall) approach is linear where all the

phases of a process occur in sequence. Its concept depends on predictable tools and

predictable experience. Each and every project follows the same life cycle which

includes the stages such as feasibility, plan, design, build, test, production, support,

as shown in the figure above.

The entire project is planned upfront without any scope for changing requirements.

This approach assumes that time and cost are variables and requirements are fixed.

This is the reason why traditional project management faces budget and timeline
issues.

What is Agile Project Management?

When a traditional system focuses on upfront planning where factors like cost,

scope, and time are given importance, Agile management gives prominence to

teamwork, customer collaboration, and flexibility. It is an iterative approach that

focuses more on incorporating customer feedback and continuous releases with

every iteration of software development project.

The basic concept behind Agile software development is that it delves into evolving

changes and collaborative effort to bring out results rather than a predefined

process. Adaptive planning is perhaps the biggest feature of Agile and one that

makes it a crowd favorite among project managers.

Scrum and Kanban are two of the most widely used Agile frameworks. They are very

well known for encouraging decision-making and preventing time consumption on

variables that are bound to change. It stresses customer satisfaction and uses

available teams to fast-track software development at every stage.

The table below shows the major differences between Agile project management and

traditional project management.

                                                                               Table: Agile project

management vs traditional project management

Why is Agile Preferred and why not the traditional project management?

Agile is preferred by most developers and managers because of a variety of reasons.

Let’s have a look at the most common ones:

 Project complexity
Traditional:

This method is the best fit for small or less complex projects as it follows linear

approach. Sudden changes in the project or any other complexities can block the

entire process and make the team go back to step one and start all over again.

Agile:

This is the best methodology to follow in case of complex projects. A complex project

may have various interconnected phases and each stage may be dependent on

many others rather than a single one as in simple projects. So, Agile methods are

preferred for large complex projects, as they can respond better to such structures.
 Adaptability

Traditional:

This approach works with a belief that once a phase is done, it will not be reviewed

again. So, it is not adaptable to rapid changes in the work plan. In case if any sudden

situation arises or any change in the requirements from the client’s side, traditional

approach fails to adapt to the new change. The only choice is to start from the very

beginning once again. This wastes a lot of effort and time in the process.

Agile:

The adaptability factor is very high in this methodology since it is not linear. Complex

projects consist of several interconnected stages, where a change in one stage can

cause an effect on another. And the project managers can take calculated risks in

such scenario, as there is a chance of high adaptability. 

 Scope for feedback and changes

Traditional

Each and every process is clearly detailed and defined at the start of the project in

the traditional approach. It cannot deal with any big change or feedback that might

require a change in the process. Mostly, the project delivery time and budget are

fixed, allows change very rarely.

Agile

There is a high acceptance for feedback and change in this method. The process is

very flexible and allows constant feedback that can help to provide better output
within the fixed project delivery time.

The main reason that managers or developers choose agile direction is for the

flexibility it offers. Developers working with Agile management are able to respond

to customer requests quickly as they are only addressing small parts of the project

at a time and the customer validates each iteration or sprint before finalizing.

Some of the important characteristics of Agile development

Breaks project into parts

Agile divides a project into parts (called iterations) where the release is sent to the

customer after every single iteration. Additionally, the success of the project can be

easily foreseen through the success of these iterations. This removes the need for

upfront planning completely.

Self-organized

As mentioned above, Agile uses a parallel mode of management. Employees of a

company are not managed by a central line of control, but by groups. For example,

in Agile, there may be eight teams working on a single project. Each team is

managed by itself without external guidance. The teams only interact with each

other for project discussion and process linking as they are otherwise not self-

sufficient.

Generally speaking, an Agile project consists of three parts:

 The product owner – the expert on the project (for which the product is
being developed) and is the main person who oversees the projects
 The scrum master – this person manages the process involved in Agile.
He/she looks after the iterations and its completion
 The team – individuals who play significant and minor roles in the software
development process

Customer Engagement

In Agile, customer engagement is at the very top. The customer is regarded highly in

its frameworks as after every iteration, feedback is generated and acted upon.

Overall, Agile is clearly the winner among project management systems. When

compared with other traditional approaches, Agile’s features come to the fore and

reiterate why it is one of the top software used by companies globally.

Can Agile Coexist with Other Approaches?

This is a question asked by many project managers, and opinions of experts seem to

be divided. While some say it is possible for Agile to coexist with traditional project

management systems, they suggest being cautious and using them for different

terms. For example, using two different approaches on the same project can be

counter-productive and highly explosive. As Agile and most other frameworks are

totally contrasting to each other, the projects may go for a toss.

On the other hand, some experts believe that it is not possible for Agile and other

tools to co-exist because of their contrast. Using them together can cause disorder in

the entire company system, making the productivity to go for a toss.

Agile vs Traditional- Adoption Growth According to a recent online survey of 601

IT and development professionals, it is proved that Agile is the new typical formula

for project success. The majority of projects and development teams are now

adopting this methodology, while the traditional waterfall approaches have many

flaws. 

Agile was first introduced about 15 years ago as a substitute for traditional software

development approaches. Many people considered it as challenging to implement

traditional approach practices and Agile adopters stated that this new style of

software development improves team collaboration and is more customer-centric. 

Though Agile method was present more than a decade ago, the vast majority of

organizations have adopted the practice in the last 5 years. Moreover, the survey

reported that agile adoption saw an inflection point between the year 2009-2010. As

shown in the above figure, agile adoption seems to have slow incremental growth till

2008 and then its growth was accelerated after gaining traction in the market.

Reasons for the transition to Agile

Most of the organizations who transitioned from traditional to agile project

management have listed the following reasons:

 Improves collaboration between teams- 54%

 Enhances the quality level of software in organizations- 52%
 Results in enhanced customer satisfaction- 49%
 Speeds time to market- 43%
 Reduces development cost- 42%

The Verdict
In the traditional software development, the customer involves only before the start

of the development process. So, there might be a number of mistakes and a large

amount of money needs to be spent to rework on them.

Since in the Agile software development, the customer involves at each stage, the

corrections can be made once the defects are detected. This helps us in saving cost.

As we can see, Agile project management is really in-demand for teams. It helps the

team to work on the top priority ones at the right time and allows them to walk

through the risks much faster than they would with traditional project management

tools.

Q4 B)

Expectations from Agile: This is the most common and often the biggest

challenge while implementing Agile. It is very important to know what are the

expectations from Agile or why has your organization decided to implement Agile.

Agile is a project management methodology, and more importantly, it is a philosophy

that prioritizes delivery over paperwork. However, one thing that Agile is not, is a

cure-all remedy for all maladies. If there are deep-rooted problems in the

organization which cannot be helped by Agile then implementing Agile might lead to

more frustration. For example, if your organization is struggling to recruit or retain

quality developers, or if your sales team is used to making excessive promises to

close the deals, then Agile might not be the answer you are looking for. And it may

be better to put the house in order before inviting Agile in.

Resistance to change: As with anything new, the inertia of established routine is

the biggest hurdle. People develop certain habits and practices around their way of

work. This is a natural phenomenon which makes work easier and customized to

people’s pace and ability. For example, a program manager may be used to conduct

an hour-long meeting every day with team members from all teams present. This

gives him a confidence of being in control of the projects and peace of mind that

there are no unpleasant surprises around the corner. If this manager is told that he

has to do away with this practice and rely on the daily standups or Kanban boards

for overview, it may not be the most welcome suggestion. Here it is important that

the employees are not just given a training in Agile methodologies but also an

understanding of the Agile philosophy. Employees need to be explained why the

organization has chosen to implement Agile and their fears and anxieties addressed.

Residue from old methodologies: Similar to resistance to change but not quite

the same. They say old habits die hard. And sometimes people may truly understand

the importance of adopting Agile and genuinely try to implement it. But the spirit of

old processes stays with them. So the retrospective is used to track the status of the

tasks, instead of looking for challenges and learnings. Sometimes, teams may take

ages to create product backlog and move into construction iterations because they

are waiting for the requirements to finalize (remember, Agile is geared to handle

changing customer requirements). Or sometimes, design documents are added as

deliverables instead of treating them as artifacts and sprints are planned around

design documents due to poor understanding of Agile.

Too much focus on ceremonies and artifacts: When organizations implement

Agile, the first thing they do is train some of their employees in Agile, that is one of

the many methodologies in Agile. Most often it could be Scrum, Kanban or Lean. But
it is important to understand that Scrum, Kanban, Lean or any other methodology

are just a part of Agile. A way to implement Agile. And while ceremonies and

artifacts are important in each of the methodologies, they do not define Agile. Just

like knowing the rules of tennis won’t make you a better tennis player or knowing

how to operate a vehicle, does not make you a better driver, knowing the

ceremonies and artifacts of a certain methodologies does not make you a better

Agilist. The real danger is of the core philosophy of Agile, of giving more value to

delivery over processes and documentation, can be easily forgotten in the

enthusiasm of implementing Agile. And a new methodology just replaces the old

methodology without any gain in efficiency.

Evaluating Agile implementation: Another challenge faced by organizations

implementing Agile for the first time is evaluating the success of their Agile

implementation. It is required to define parameters of success for Agile

implementation and most often, very erroneously, companies choose form over

content in this matter. Thus companies measure how many teams have moved to

Agile, or how many projects are following the new methodology. They evaluate

whether all ceremonies are being followed correctly and measure the number of

stand-ups or retrospectives held. However, it would be ideal if companies rather

evaluated how the implementation of Agile has helped them achieve the original

goals of Agile implementation. For example, maybe reduction in the number of

delayed deliveries or reduced customer escalations.

Customers’ understanding of Agile: It is, without doubt, a necessary step in the

implementation of Agile to let the customers know about the organizational changes

taking place. And while the seamless transition is every organization’s dream, there

are bound to be some hassles and slip-ups, as the teams adjust not just to a new

routine but to a new mindset altogether. But more important than forewarning

customers about the possible teething problems, is knowing whether customers

understand what the implementation of Agile means to them. Do they still expect

you to provide work plans and Gantt charts? Do they think Agile means a free pass

to change the requirements as many times and as often as they wish? While Agile is

geared towards adapting to changing customer requirements, financial and

contractual constraints should be kept in mind and Agile has a very specific way of
handling fixed cost contracts with a prioritization or elimination of story points. It is

important to not just train the employees but also the customers in this process.

While implementing Agile may be a step forward, it involves a lot of work and

emotions and passions run high as people and processes collide. Hiring an Agile

coach may help you maneuver these challenges but not without an effort from the

entire organization, from the executives and senior management to the rookie

programmers. As with any good harvest, the yield from Agile depends on the efforts

that go into implementation.

Challenges of Agile Project management

The last edition of State of Agile Development survey (2014) reveals the fact that around 94% of
IT organizations surveyed implements processes based on agile methodology. Though this is an
impressive percentage, agile processes are still not considered as the magic potion for all software
development projects. There are multiple challenges faced while putting this theory into practice.
Listed below are some of the major challenges:
Communication in Distributed Environments: With globalization being the buzzword, a good
portion of the projects today work in distributed and outsources modes. Agile is designed to
thrive on cases where the stakeholders and production/development happens at the same location.
This raises a challenge for a geographically distributed team to run their daily Scrum calls. The
difference in time zone and other factors like language or culture just adds on to the complexity.
Developer’s Skill and Motivation Levels: Agile emphasize on daily or periodic reporting which
is crucial to create the feedback loop and track the progress of the project. Sometimes the
developers feel uncomfortable as this can turn to a type of micromanagement. Their deficiency in
technical or communication skills can be exposed in such a scrum meeting where things work in
a judgmental way.
Stress on Social Skills of the Team: Most of us have come across excellent developers, who lag
a bit in their communication. Agile might not be the dream environment for similar people, as the
process requires them to interact within the team and also to the customers on a regular basis.
AGILE PROJECT MANAGEMENT –BENEFITS AND CHALLENGES 16
If they are not really able to express their thoughts accurately and efficiently, this will cause a
major challenge to the system.
Lack of business knowledge in the team: When the size of agile team or the complexity of the
software increase, there is challenge of keeping each developer updated on the business
knowledge which is mainly acquired from the business team or client directly on a usual day.
This impact is more for agile, as each team member is considered as a complete expert in his
domain area.
Hybrid of Waterfall and Agile process: Since higher management usually likes to see a plan in
hand, most companies today attempt to create a hybrid of Agile and Waterfall models. In this
method, they usually create a plan based on classic waterfall model, but let the development team
work in an agile model. Most of the cases adopting this form have seen conflicts between the
development team and management on the true essence of the process and on reporting.

Inefficient Customer Feedback Process: Agile methodology thrives on a feedback process to

see the output of what was made and suggesting the modifications on what is further needed. This
basic process requires the team to know who the real customer is. (In some cases it is the Product
manager, sometime Business/User groups). Any confusion on this role and duty definition can
create scope creep, conflicts, ignored inputs, wishful programming and many more issues.

Scenarios where Agile Project Management can fail

Listed below are some scenarios where Agile project Management has a very high probability to
fail.
 The trust factor – Not trusting the team or the agile process. This is mostly a management side
issue and can lead to other repercussions like micromanagement tendencies.

 Lack of leadership and blame on the process – While agile teams are designed to be self-
managing, they still need good leadership to drive them. This is usually expected in the form of a
visionary product manager who gives ample freedom to the team within the limit.

 Ignorance of Agile Practises – The procedure is built upon a set of practices. If the team and
management lose faith in the same, the practices might go for a toss which can lead to the
downfall of the project.

 Delivery Failure during Sprints or Iterations – If the team continually fails to deliver what was
committed for iterations, then the very foundation of agile will collapse.

 Lack of Cross-functional Teams – Agile process recommends splitting and managing teams in
a cross functional way, so that they are self-sufficient within the team and can work
independently without reporting or task related issues. An example where this can fail is when a
management puts all developers in one team, and testers in another.
AGILE PROJECT MANAGEMENT –BENEFITS AND CHALLENGES 18
 Large Teams – For large projects or programs, this is a main challenge. It is kind of practically
not efficient to have everyone work and report daily in the scrum meetings for example. Larger
teams need more overhead communication efforts as well.

 Customizing Agile Practices – Customizing agile practices is fine to a limit. But it can be
catastrophic if the customization is done without fully understanding the underlying agile
principles.

 Lack of efforts for improvisation and adaptation – Companies are expected to improvise and
adapt to modern technological practices despite whatever process they are following. If the team
is not doing this, agile can face challenges of delivering on time with quality.
Scenarios where Agile Methodology is recommended
In today’s business world, agile project management can be adapted to technically all kinds of
projects. Nevertheless, listed below are some of the features where agile method is more
favourable than other strategies:
 Dynamic Requirements - With the brisk competition which companies face today, it is more
than likely that the requirements might not be clear cut, though the project might be. Agile
becomes the silver bullet here, as the process is defined to show a working model to the customer
so as to perceive and confirm.

 Iterative Nature - The initiatives which are iterative in nature also fall into the best fit
category, as Agile itself is iterative in nature. Most of the product development efforts fall into
this category. The delivery is done in the form of small increments eventually.

 Interactive Philosophy and Active User Involvement - For projects with these factors, agile is
certainly recommended. User and product owners play a major role in deriving the final outcome
of the project.

 Skilled, Same Team -As agile methodology focuses on delivering the required changes in a
fast and efficient manner, it is imperative to have a skilled team. And if that team remains
unchanged for the entire project duration, it’s an environment where agile can thrive on.

 Acceptable cost of failure – This factor is almost a pre requisite to agile project management.
Working on an iterative model, there should be some space planned to accommodate failures.

Q.5 A)
Six Sigma is a methodology that helps improve business processes
by using statistical analysis. It is a data-driven and highly disciplined
methodology and approach that ensures elimination of defects in
any type of business or organizational process.
In order to achieve Six Sigma, organizational processes need to
keep their defects to a maximum of 3.4 per million (99.99966%)
opportunities. A Six Sigma defect can be defined as anything that is
outside of client specifications. Its objective is to minimize the
variability in business and manufacturing processes. One of the
salient highlights is the ability to create focus on achieving
quantifiable and measurable financial returns from any six sigma
project.
Developed by Motorola in 1986, Six Sigma is basically a set of tools
and techniques that enable process improvement.
Six Sigma is a disciplined, data-driven approach and methodology for eliminating
defects (driving toward six standard deviations between the mean and the nearest
specification limit) in any process – from manufacturing to transactional and from
product to service.
Lean Six Sigma is an overall management strategy for measuring and
improving performance across different processes in the organization. It
helps us to identify and reduce variation in all processes of the
organization by applying statistical tools in a disciplined manner and
controlling processes to get the desired results.
Over the years it has been realized that Lean and Six Sigma
methodologies complement each other. The integration of Lean and Six
Sigma provides a rapid process improvement strategy for attaining
organizational goals.
When separated, Lean Manufacturing cannot bring a process under
statistical control, and Six Sigma cannot dramatically improve cycle time
or reduce invested capital. Together, synergistic qualities are created
to maximize the potential for process improvement.
Mean is the arithmetic average of a process data set.
Central tendency is the tendency of data to be around this mean.
Standard Deviation (also known as Sigma or σ) determines the
spread around this mean/central tendency.
The more number of standard deviations between process average and
acceptable process limits fits, the less likely that the process performs
beyond the acceptable process limits, and it causes a defect. This is the
reason why a 6σ (Six Sigma) process performs better than 1σ, 2σ, 3σ, 4σ,
5σ processes.

Obviously 7 or more σ processes are even better than a 6σ (Six Sigma)

process, and yet throughout the evaluation and history of Six Sigma
process, the practitioners gained the belief that a 6σ process is good
enough to be reliable in almost all major situations except some systems
whose defects can cause repairable consequences.

Six Sigma stands for 6 standard deviations (6σ) between avarage

and acceptable limits

LSL and USL stand for “Lower Specification Limit” and “Upper
Specification Limit” respectively. Specification Limits are derived from
the customer requirements, and they specify the minimum and maximum
acceptable limits of a process.

For instance in a car manufacturing system the desired average length

(Mean length) of car door can be 1.37185 meter. In order to smoothly
assemble the door into the car, LSL can be 1.37179 meter, and USL can
be 1.37191 meter. To reach a 6σ quality level in such a process, the
standard deviation of car door length must be at most 0.00001 meter
around the mean length.

Sigma is also the capability of the process to produce defect free

work. Higher the capability, lower the defects.

Processes in various Sigma Levels

In the above figure, the red curve indicates a 2σ level of performance

where we observe that its peak is very low (fewer outputs are around the
desired average) and the variation is from extreme left to extreme right of
the figure. If the process improves from 2σ to 3σ (green curve), you will
observe that the process variation reduces and the process has a larger
peak (more outputs are around the desired average, but a different
average than red curve). As the process performance increases from 3σ to
6σ (blue curve), the process becomes centered between the upper and
lower specification limits and does not have much variation. Here with
blue curve the majority of process outputs are around the desired
average. This is why it is good and it causes less defects beyond the lower
and upper specification limits.
Sigma Level vs DPMO Defects per Million Opportunities

In the above table, you will observe that as the Sigma level increase the
Defects decrease. For example, for a 2σ process the Defects are as high
as 308,537 in one million opportunities. Similarly, for a 6σ process the
Defects is as low as 3.4 in one million opportunities. The 2σ performance
level will have more defects than a system in 6σ performance level as the
standard deviation for a 2σ process is much larger than the standard
deviation for a 6σ process.

Can we have any process which has 6σ level of performance?

The answer is yes. Pharmaceutical Companies, Airline Manufacturing
Organizations, Automobile Manufacturers, among others are bound to
work at a sigma level which is either 6σ or more than that. If they are not
able to perform at this efficiency, the organization cannot exist. Think
about it, you are in the air, 5000 feet above the ground, flying in a Boeing
777 Aircraft and suddenly a nut-bolt in the wing of the plane loosens
(probably due to manufacturing defect) making it difficult for the pilot to
steer the flight! This is the only reason why defects are not welcome and
organizations try to achieve higher Sigma levels.

Six Sigma vs DPMO Examples

In the above examples,

 Sigma indicates the Sigma level.

 Spelling indicates the total spelling errors.
 Money indicates the amount of fine/indebtedness that can occur due
to the misspellings.
 Time indicates the total time it takes to correct those misspellings.
 DPMO indicates the total Defects in One Million Opportunities.
We can clearly observe that as the Sigma Level increase, the defects
(misspellings) decrease, the indebtedness reduce and the time for rework
also reduces, thus it reduces the DPMO-Defects per Million Opportunities.
Six Sigma is a rigorous, focused and highly effective implementation of
proven quality principles and techniques. Incorporating elements from the
work of many quality pioneers, Six Sigma aims for virtually error-free
business performance. Sigma, σ, is a letter in the Greek alphabet used by
statisticians to measure the variability in any process. A company’s
performance is measured by the sigma level of their business processes.
Traditionally companies accepted three or four sigma performance levels
as the norm, despite the fact that these processes created between 6,200
and 67,000 problems per million opportunities! The Six Sigma standard of
3.4 problems per million opportunities* is a response to the increasing
expectations of customers and the increased complexity of modern
products and processes.

Six Sigma is the application of the scientific method to the design and
operation of management systems and business processes, which enable
employees to deliver the greatest value to customers and owners. The
scientific method works as follows:

1. Observe some important aspect of the marketplace or your business.

2. Develop a tentative explanation, or hypothesis, consistent with your

observations.

3. Based on your hypothesis, make predictions.

4. Test your predictions by conducting experiments or making further

careful observations. Record your observations. Modify your hypothesis
based on the new facts. If variation exists, use statistical tools to help you
separate signal from noise.

5. Repeat steps 3 and 4 until there are no discrepancies between the

hypothesis and the results from experiments or observations.

At this point, you have a viable theory explaining an important

relationship in your market or business. The theory is your crystal ball,
which you can use to predict the future. As you can imagine, a crystal ball
is a very useful thing to have around. Furthermore, it often happens that
your theory will explain things other than the thing you initially studied.
Isaac Newton’s theory of gravity may have begun with the observation
that apples fell towards the earth, but

Newton’s laws of motion explained a great deal about the way planets
moved about the sun. By applying the scientific method over a period of
years, you will develop a deep understanding of what makes your
customer and your business tick.

Lean Six Sigma has made significant impacts in:

Ø Manufacturing

Ø Automotive
Ø Cellular Phones

Ø Business

Ø Management,

Ø Office Processes,

Ø Software and Hardware

Ø Cellular Switching

Ø Medical Equipment.

Ø Government

Ø Logistics

Ø Facilities

Ø Operations

Ø Hospitals and Healthcare Patient Care

Ø Supply Chain Management

Importance of Six Sigma

· It maps the process

· Eliminate variation and waste

· Reduce defect

· Continuous improvement

· Reduced cycle time

· Strategy planning

· Customer satisfaction

What is Six Sigma and Why is

it Important?
Six Sigma refers to a set of techniques and tools that help organizations improve business
processes. Organizations maximize performance and reduce product defects, which ultimately
leads to higher profits. Introduced in its modern form in 1986, the approach improves quality of
output by identifying and eliminating causes of defects. Additionally, it contributes to the reduction
of variability in business and manufacturing processes. As such, it remains a firm part of most
business degrees, including the business administration program.

The methodology revolves around disciplined and data-driven practices. It achieves the objectives
by employing a variety of statistical and empirical techniques. Every project adheres to a series of
well-defined steps aimed at reaching specific value targets. Some of the intended targets include
improving customer satisfaction, minimizing operating costs, reducing pollution, boosting profits,
and reducing cycle time.

Six Sigma can provide a quantitative description of how a business or manufacturing process is
performing. The description comes in the form of a statistical representation. To attain Six Sigma,
a process must produce less than 3.4 defects per one million opportunities. Defects are defined as
any standard outside of customer specifications.

The implementation of a measurement-based strategy is accomplished using two sub-

methodologies: DMADV and DMAIC. The Six Sigma DMAIC stands for define, measure, analyze,
improve, control. This sub-methodology is used to rectify under-performing processes. DMADV, on
the other hand, stands for define, measure, analyze, design, verify. It provides a practical way to
develop new products or processes at Six Sigma quality levels.

Six Sigma Principles

Six Sigma principles are:

 All business and manufacturing processes come with a set of characteristics

that can be analyzed, controlled, defined, and improved
 Consistency plays an integral role when it comes to reducing process
variation, which contributes to the viability of businesses
 Commitment at all levels of an organization is vital for sustained quality
improvement
Six Sigma has a clear focus on quantifiable financial returns than any previous quality
improvement initiative. Decisions are guided by statistical methods and verifiable data.

Implementation Roles
The approach takes quality management from production floors to various levels in an
organization. It identifies six principal roles that help ensure successful implementation.

 Executive Leadership – incorporates top-level management. This role entails

formulating an effective strategy for implementing the methodology. The Chief
Executive Officer (CEO) and board members define roles for personnel at
various levels. The directives are aimed at empowering the staff to explore
innovative ideas. Staff members are expected to propose breakthrough
improvements. The approach breaks down departmental barriers and
overcomes resistance to change.
 Champions – consists of innovators drawn from upper management.
Champions mentor personnel at lower levels, including the Black Belts. The
role is designed to ensure an integrated approach to implementation.
 Master Black Belts – role players at this level are appointed by the Champions
to act as in-house coaches. Daily duties for members is focused entirely on the
implementation of Six Sigma. They guide personnel on lower levels with the
assistance of the Champions. Some of the key roles for Master Black Belts
 include ensuring consistency across the entire organization and handling
statistical tasks.
 Black Belts – responsible for implementing Six Sigma methodology on priority
projects. They provide special leadership on project-specific tasks to ensure
successful execution. The projects are assigned by Champions and Master
Black Belts.
 Green Belts – consists of personnel that handle Six Sigma implementation as
part of their daily duties.
Organizations often provide specialized training to personnel assigned to Six Sigma roles. This is
aimed at ensuring that implementation is done correctly. The total number of belt levels varies by
organizations. Some entities add belt colors, such as yellow, to suit specific requirements.

Benefits of Six Sigma for Managers

The approach provides a viable way to create an organizational culture of continuous
improvement, which makes the manager's job easier. Increased quality output is associated with
improved productivity levels. In turn, the organization achieves its financial targets ensuring
overall success. Six Sigma thrives on promoting change by eliminating barriers and inherent
resistance.

Managers leverage the creativity of personnel at various levels. This enables the organization to
introduce breakthrough changes to business or manufacturing processes. In addition, it becomes
simpler to educate staffers in new ways of solving problems and improve production processes.

Six Sigma is set of techniques or set of management techniques carried

out to improve business processes by reducing the probability that an
error and defect will occur.
Six Sigma is a disciplined, using statistical based data driven approach
and also a continuous improvement methodology for eliminating defects
in a product, process or service.
Six Sigma methodology firstly developed by Motorola and company then it
became popular when General Electric achieve the excellence in business
by applying Six Sigma Methodology in the early 1990s. Now there are
thousands of company in the world who are adopted Six Sigma as a way
of doing of business.

Principles of Six Sigma:

Success of Six Sigma implementation is based upon five main principles:

 Concentrating on customer requirements

 Using accurate measurements to do error-less statistical analysis to

understand improvement opportunities for building a solution for
identification of root cause of problems (variations)
 Being efficient and capable to eliminate variation to continually improve
the process.
 Involving manpower in Six Sigma cross-functional teams.
 Being thorough and being flexible

What are the main concepts in Six

Sigma?
1. DPMO (Defects Per Million Opportunities)

2. Critical to Quality:
Critical to quality is one of the major concept in Six Sigma methodologies
because the quality can affect the whole business objective or Goal.

Critical to quality means the measurable characteristics of a product or

service which must be matches the customer requirement of product or
service.

3. Defect:
The defect is defined as a product or service characteristics which are not
the customer want.
4. Process Capability:
Process capability can be defined as a ability of your business process to
deliver or produce a service or product which are meeting the customer
demands.

5. Variation:
Variation term is a bit different in Six Sigma methodology, here variation
means after delivering service and product the control person can
measure the difference between the what customer sees and what they
actual feels after acceptance of product or service.

6. Stable Operations:
Stable operations means not only the stabilizing the process but
businesses have to ensure that the process of business in consistent to
reduce the gap between what customer sees and feels.

Customer & Product driven Features of

Six Sigma Methodology:
1. Six Sigma is aim to avoid waste and in effeminacy, so increasing
customer satisfaction by delivering what the customer is really expecting.

2. Six Sigma is strictly structured and disciplined structure methodology,

which has very specific for the particular participants.

3. Six Sigma is statistical data driven methodology which requires

accurate or error-less data to perfectly analyze the process.

4. Six Sigma is not just about the improving quality and increase the sale
its about changing results in the financial statements also.

5. By applying Six Sigma in your business you are successfully achieve the
below milestones what we called the business success facts:

 Improving Process
 Lowering Defects
 Increased Profit
 Increased Customer Satisfaction
 Reducing Costs
 Reducing Process Variability

Six Sigma Methodologies totally revolves around one main cycle called
DMAIC

DMAIC
DMAIC is a data driven quality strategy used to identify opportunities in
the process to make improvements and reduce the errors and defects

D - Define-(Defining the problem, opportunities, business

objectives, customer demands)
Here you define what opportunity are you looking for or we can say what
problem you are trying to fix or simply what new business objective or
customer demand you are trying to complete.
M - Measure performance
This is the crucial step for professional who are seeking out any
opportunity to improve the service, process or product. Measurement is
critical in the step and it must be accurate because you are trying to build
solution on the basis of that measurement. In this process the
measurement team has to focus on the process and what customer
actually cares about.

A - Analyze opportunities
In this step the team has to analyze what is causing the problem and
where there will be the opportunity to improve the process or service
quality or cost or product. In this step team spend their time on finding
root causes of problem and building the solution depending upon the
results.

In this step mostly experienced and Six Sigma Green belt certified person
analyze. The teams have to develop hypothesis according to finding and
results and then define then work to prove or disprove the hypothesis.

I – Improve Performance
After implementing solution into process the teams have to concentrating
on the factors which are crucial for improving the process or service or
product. In this step the team have to collects data to check if there is
measurable improvement or not if yes then the team will follow these
process as a core process than pilot process and then finally improve the
baseline ultimately it leads to improve the service quality or product
quality which finally meets the customer satisfaction.

C - Control performance

This is the step in which team have to control the process and sustain the
changes and improvement they made in the process or service. This is
one of the most important activity required by the business because
sustaining the improved process is very important to hold the service
quality or product quality ultimately to hold the customer.

Benefits of Six Sigma to Businesses:

1. Lowering Defects:
Six Sigma completely revolves around only one principle reducing defects
and ultimately increase the quality of product or service. So when a
organization have Six Sigma implemented in their process then the
business will totally focus on that one principle based statistical data
driven approach.
2. Reducing Cost:
This is one of the final and long term benefits businesses get when they
have implemented Six Sigma in their process because Six Sigma
implementing ultimately leads to reducing the defects which means
saving of time, resources, power, manpower efforts and ultimately money.

3. Increased Customer Satisfaction:

Six Sigma and DMAIC implementation starts with measuring the variation
means measuring the gap between what the customer actually sees and
feels. So the successfully implementation completed and if it is
sustainable for business then it will ultimately reduces the variation their
services or product that means increased customer satisfaction and
increased customer loyalty.

Benefits of Six Sigma Certification

1. Help to protect your organization to Avoid Errors:
If you are working in organization which needs improvement then your
certification and skills gained during certification will help your
organization to make better product or serve better service with minimum
errors.

With Six Sigma certification and skills you will be able to improvise the
process and increase the profit of your organization it will ultimately lead
you to become a important asset for the company.

2. Higher Salary :
As per the survey on Payscale.com you can see that Six Sigma certified
persons are getting highest salary and working in the top multinational
companies.
3. Increase your managerial and leadership ability:
When you are working as a Six Sigma professional in an organization then
you have to undertake all the factors like finance, manpower, resources
before taking any decision or before implementing any changes in any
process or service or product.

Those who are achieved with Six Sigma Black Belt Certification are work
as a Change Agent in their organization they have better understanding
and knowledge about process and how to make it make it better.

To work as a leader in Six Sigma field you must have knowledge and
understanding of financial management and risk assessment to perform a
job without a error.

4. Large scope for Six Sigma across all the Industries:

Many individuals thinks that Six Sigma is only beneficial to manufacturing
industry but actually six sigma is applicable to all types of industry.
Service industry like IT, healthcare, hospitality needs to improve their
service to provide 100% satisfaction to customers with completing their
business objectives so all the service sector needs six sigma professionals
to improve their overall business process and to complete business
objectives.

5. Increase your productivity and capability:

After completing six sigma certification you are completing responsibility
by doing less effort so the ultimate result will be increased productivity
and capacity to handle large projects easily with sustainability.

6 Benefits of 6 Sigma

Six Sigma:

Six Sigma is a methodology used by organizations to eliminate

defects in any process. To achieve a six sigma for a process it
should not contain any defect that is outside of customer
specification.

Six Sigma works with the use of two sub methodologies. DMAIC
used for existing processes and DMADV which is used for new
processes. DMAIC stands for Define, Measure, Analyze,
Improve and Control. DMADV stands for Define, Measure,
Analyze, Define and Verify.

There are number of benefits in implementing six sigma within a

business. There are six key advantages that this methodology
offer any company.

1. Time Management:

Implementing Six Sigma in a business helps employees to

manage their time effectively. This results in a efficient business
and productive employees. They are asked to set smart goals and
then principles of six sigma to them. The key areas involved are
Learning, Performance and Fulfillment.

In the area of learning a practitioner of six sigma asks how

often the interruptions deviate him from the task and how many
interruptions require his attention.

In Performance, the user knows how the practices he is using are

helping them to reach their professional goals so that the users
can create an action plan. The result of this will be the employees
will be 30% efficient and are happier in themselves, having a
better work-life balance.

2. Improved Customer Loyalty:

Any business wants to retain its customers. It is a significant

factor to measure the success of business. Customer loyalty and
retention will show the the levels of Customer Satisfaction.
Most of the surveys says that the reason of customers for not
returning to a business are dissatisfaction and employee attitude.
The company may or may not know that they have a dissatisfied
customer.

By implementing six sigma in a business reduces the risk of

having dissatisfied customers. To achieve this you should
consider a running voice through customers to understand the
products which are critical to customer perception of satisfaction.

3. Employee Motivation:

In every business the employees need to act in a right way, if it is

destined to success. For this they must have a sufficient
motivation. The organizations which are fully engaged with the
employees, had 25-50 % increases in the productivity.

By sharing Six Sigma Problem solving tools and techniques will

help in employee development.

4. Reduced Cycle time:

We do observe that most of the firms extend their deadlines often

because of changes in project scope or shift in management
policy.

By using Six Sigma, a business can develop a team of

experienced employees from all levels of the organization and
from every functional department. These teams work on
identifying the factors that leads the project to long cycles.
The team is tasked to find solutions to these problems. This
method allows the business to create shorter cycle times fo
projects and fix to that schedule, with many businesses reporting
reductions in cycle times up-to 35%.

5. Strategic Planning:

Six Sigma plays a key role in any strategic vision. Once the
business has used a created mission statement and carried out a
SWOT analysis,then six sigma helps you to focus on the areas of
improvement.

For example, if the strategy of your business is based on being a

cost leader in the market, then six sigma helps you to improve
internal processes, eliminate unnecessary complexity, increase
yields and maintain lower cost supplier agreements. In fact,
Whatever your business strategy happens to be, six sigma helps
your company the best at what it does.

6. Supply chain management:

The aim of six sigma is having a defect rate less than 3.4 per
million and your suppliers have influence on whether the target is
met or not. One of the best way to reduce the defect rate is to
implement six sigma to decrease the number of suppliers your
business has.

It is also very important to know whether the supplier is planning

for a change. For example, the change in machinery can have an
effect like ripples from a pond when a rock is thrown.
Importance of Six Sigma
Six Sigma has come a long way since its implementation as a
business strategy by Jack Welch at General Electric in 1995. Since
then it has been widely implemented in several industrial sectors.
Implementing Six Sigma is important as it will help organizations in
several ways like:
Mapping or flowcharting of processes
Process mapping is utilized by Six Sigma, which can be defined as
a process of flowcharting to enable documentation of a specific
business process. Documentation includes various aspects of
business processes like employee roles and decision points in
overall work performance required for meeting specific client needs.
These flowcharts are often used towards making improvement
suggestion.
Elimination of variation and waste
After identification of improvement ideas, Six Sigma techniques can
be used for elimination of waste and variation in business
processes. Waste is defined as anything that doesn’t help in
producing the service or product that is required to be delivered to a
customer.
Reduced Defects
One of the reasons why implementation of Six Sigma is important is
that it helps in reducing defects. Using Six Sigma techniques,
employees are able to identify problem areas as well as recurring
issues that affect the overall quality expectation of a service or
product from a customer’s viewpoint.
Room for continuous improvement
Last but not the least, employees trained in Six Sigma processes
have the necessary tools and skills to identify problem or bottleneck
areas that camps down production or performance. This process
helps employees to identify areas of improvement and work
towards it continuously. At the end, it helps in improving existing
services or products and assists with development of new high
quality products

Importance Of Six Sigma In The Business World

Six Sigma is important because it scores much higher over other quality
improvement techniques such as TQM. Business organizations employing TQM just
focus on achieving predetermined quality levels, which certainly improves
efficiencies but does not allow the organization to realize the full potential. Six Sigma
is different as the focus here is to make consistent quality improvements until
business processes are fully optimized. As soon a certain quality level is achieved, the
organization shifts gears and starts concentrating on achieving other levels of quality.
The whole process continues until all the business processes are fully optimized.

DataDrivenApproach                                                                          
                   
Six Sigma concepts and methodologies stress the use of statistical tools and
techniques for improving quality and reducing defects. The dependence on hard facts
and figures automatically ensures that whatever decisions are taken will have the
desired affect on the quality of goods or services and the efficiency of business
processes.
An experienced production manager may be the right person to make quality-
improvement decisions but if the decisions are based solely on gut feelings and
preconceived notions, the decisions may not have the desired effect, especially if the
task is to make adjustments in a complex business process. The inherent ability of
Six Sigma to produce the desired results has thus increased its importance in today’s
business world.

Helps Increase Customer Satisfaction And Build Loyalties

Another reason for the ever-increasing popularity and importance of Six Sigma is
that it really helps when it comes to handling competition, which has increased
considerably in today’s business world. Business organizations worldwide have
realized that in order to beat the competition, they will have to offer better quality
products or services to their customers and that too at competitive rates.
Six Sigma helps because it enables business organizations to achieve the above stated
objective, which ultimately results in greater customer satisfaction and helps in
building customer loyalty. Having a loyal group of customers is always important for
any business because it ensures a constant flow of revenues even when there is a
cyclical downturn in the industry.
The importance of Six Sigma has increased manifold in the last two decades and is
set to increase even more in the coming years as more and more businesses realize its
benefits. Six Sigma is anticipated to maintain its dominance over all other existing
quality improvement techniques because it is flexible and can be altered to suit the
requirements of new businesses that might come up in the near future. We can never
be too sure about the future but as far as the present is concerned, Six Sigma is
certainly calling the shots across all types of industries worldwide.

5 B)

In all finance industries there are defects which slow down business. Six Sigma
develops satisfied customers and efficient operation for sustained success within
banking centers and asset management. Lean and Six Sigma solutions from
Anexas have helped many banks and financial services to improve their processes.
Bank of America has been the most successful among banks to benefit from Six
Sigma Program with nearly $3Bn & 30% increase in Customer Satisfaction.

Benefits:

Higher Shareholder Return

Financial Benefits

Improvement in Customer Satisfaction

ProcessOrientation

Change in Culture!

Tactical Problem Solving Approach

• Run as many projects across LOBs • Less strategic interventions • Limited

Leadership participation • Narrow focus on tactical benefits • No cultural impact •
Inexpensive • Becomes a fad with time

Enterprise Change Management Program:

Strong Linkage to business strategy • Takes long time to show results • Initial
Investment is big • Higher Risk • If enterprise gets it right, has strong positive cultural
impact

Successful banks started with tactical and moved to strategic approach.

Introduction

Six Sigma is world-wide renowned quality improvement methodology that mainly

works on removing defects from the products, services and the processes across the
sectors.
It was invented in 1980’s at Motorola company. In its initial application, Six Sigma
was limited to Manufacturing & Production industries however with its increasing
popularity, it spread to all other sectors.

Today, Six Sigma is considered one of the prominent methods for Quality
Management and being used by over 90% of Fortune 500 companies. Almost all
National and Multi-National companies use Six Sigma in some or the other way.

Six Sigma has 4 key levels of expertise identified as-

Six Sigma Yellow Belt Six Sigma Green Belt Six Sigma Black Belt Six Sigma Master
Black Belt

Every level of expertise has its own roles & responsibilities in Six Sigma Project
Implementation and generally lead by a Master Black Belt.

When integrated with Lean, which is, in simple words, a waste removal method, Six
Sigma becomes Lean Six Sigma.

Banks – Banks providing a broad range of financial services, including retail banking,

loans and money transmissions.

Suntrust Bank, Citigroup and JPMorgan Chase & Co. are few examples of initial Six

Sigma success in banks. JPMorgan Chase & Co is the second largest bank in the US.

With Six Sigma, it has generated wonderful results through expense reduction,

revenue increase and enhanced customer satisfaction. 

American Express began with Six Sigma in 1998. It has benefited with billions of

dollars of benefits since then. Bank of America started with Six Sigma in 2001 and

has announced huge savings through increased savings, increased revenue and

enhanced customer satisfaction. 

Among Indian companies, Benchmark Six Sigma has had participation from good
number of financial sector participants in recent six sigma training programs. Few of

them are ABN AMRO, IDBI, HDFC Bank and ICICI Bank. Some example Six Sigma

project titles are mentioned below.

Applicaiton of Lean Six Sigma in Banking 

Loan Department

1. Reducing the cycle time to Process a Loan Application (both Mortgage & Personal

loans).

2. Improving the Customer Information gathering processes.

3. Improving the Credit Evaluation Process

4. Improving Productivity of loan processing agents

Account Opening

1. Reducing the time to open an account

2. Reducing errors in account opening process.

3. Reducing rework in processing customer applications

Other Projects in Retail Banking

1.  Reducing the Credit Card Delivery time.

2.  Reducing Bank Statements Processing & Delivery time.

3. Reducing the errors in money transfer

4. Improving accuracy, timeliness and completeness of customer communication.

5. Developing new products (timeliness, business potential)

6. Improving Market Share of existing banking products.

7. Improving the Branch Banking Processes

5 Amazing Ways for Banks to use Lean 6 Sigma

hile handling financial matters, it becomes essential to be 100 percent accurate. Leaving a small room for error
can be financially devastating. This is certainly true in case of banks and financial institutions. Unlike
manufacturing companies, banks can not make their customers happy with returns and exchanges of products. A
banking sector needs to be fully committed to offer complete customer satisfaction, and operate efficiently to
ensure 100 percent perfect results. This is where lean 6 sigma (lean six sigma) can add value. Following are top
5 applications of lean six sigma for banks to get better results.

1. Increase Customer Satisfaction

Due to the existence of several banks, customers have various options to choose banking facilities. By using lean
6 sigma applications, a bank can enhance customer satisfaction, reduce waiting time for services and provide
better and faster services. Lean performance assures that customer problems are addressed timely and possible
solutions are sought to resolve their issues and grievances. Proper use of lean six sigma applications assists
banks in providing superior services and products that result in higher customer satisfaction.

2. Increase Profitability and Decrease Costs

Since the needs and requirements of customers vary greatly, it becomes essential to identify and measure the
requirements of customers. By applying lean six sigma approach, banks are able to identify specific needs of
each customer eliminating process inefficiencies, and errors and enhance customer satisfaction while offering
quality services at the same time. Better services and facilities increase customer retention rate which pays in the
long run in terms of increased profitability and reduced cost.

3. Monitor performance

The data pertaining to performance of the bank is collected to track how processes within a bank are initiated.
The customer waiting time, the services offered, the satisfaction level of customers are measured. The cost
associated with customer services and facilities are measured to find out the amount spent on each customer. If
the performance level dips down considerably, the root cause of the processproblem is identified and solved with
possible steps using lean  sigma approach.

4.Eliminate processing delays 

Whenever a bank faces any problem, they are improved and implemented. Problems such as delays in providing
any facility such as loan or mortgages have a great impact on the level of customer satisfaction and rate of
retention of customers. In order to avoid all these problems, banks employ lean 6 sigma applications to offer
better customer services to enjoy better retention rate and increase inflow of regular customers, new as well as
existing ones.

5. Analyze performance and avoid banking errors

In order to ascertain that improvements are generating efficiencies at all levels within a bank, it becomes
important to measure and conduct an assessment of the processes before and after implementation of key
measures. In such a case, customer satisfaction level can be measured before implementing lean sigma
approach and after taking corrective measures. Besides this, lean performance is employed to eliminate
mistakes in calculations, errors in order to provide efficient and up to date banking services to customers.

Many banks have applied lean 6 sigma applications and have achieved big success. Bank of America, bank of
Montreal, DSB bank etc are some of the major banks that have attained huge success through lean six sigma
applications.

in example of an organization using Lean Six Sigma to evaluate and improve its data warehouse
management processes occurred back in 2009 when Bank of America (BOA) used the
methodology to track data warehouse load tasks on a time value map. BOA identified that more
than 90 percent of its process involved non-value-added processing.
In the Analyze Phase, BOA used another Six Sigma tool, the Cause and Effect/Fishbone diagram,
to dig deeper into the problem. This tool allowed the BOA team to identify, explore and
graphically display in detail all of the possible causes related to the problem of a high-percentage
of non-value added processing time in the data warehousing process.

In conjunction with the Fishbone diagram, BOA applied the Six Sigma technique of the 5 Whys.
The 5 Whys Process doesn’t require advanced statistical tools, it only requires stating the
problem and then asking “why.” When you have an answer to the first why, ask why again, and
keep evaluating the answers by repeatedly asking why up to five times.

The 5 Whys tool helped BOA remove layers of symptoms and discover the root cause of their
inefficient data warehousing problem. As a result of using Six Sigma methodology, BOA identified
a significant flaw in its relational database management system and targeted a data warehouse
appliance solution with the potential to increase data availability by 96 days per year.

As demonstrated by Bank of America, the rigorous, data-driven Six Sigma methodology is ideal
to apply to the highly quantitative and process-oriented nature of data warehousing. When Six
Sigma tools are used to examine and enhance data warehousing processes, organizations can
clearly recognize defects, bring root causes of problems to the surface, identify opportunities for
improvement and implement changes that will reduce defects and increase efficiency and
productivity.

Banking On Six Sigma Bank

Of America Improves
Meetings Mgmt., Compliance
And Savings
By Mary Ann Mcnulty / December 21, 2008

Four years after implementing the "Cinderella story of strategic meetings"

management programs, Bank of America in 2005 detected a flaw: Instead of
following the established sourcing path, a 30-person event team in a New York office
continued to source meeting venues and even negotiate contracts, and then ask the
meetings and events procurement team responsible for contracting to put the
contract on "our paper."
While the "very experienced, very qualified, very good event managers" negotiated
good deals and contracts, they routinely bypassed the documented request for
proposals process, Shannon Bucey, Bank of America vice president of sourcing
responsible for corporate travel and food service, told National Business Travel
Association conference attendees this summer. The bank's audit process for
meetings begins with the RFP and is meant "to establish the baseline of savings,"
she noted.
The problematic sourcing and selection of nonpreferred properties "didn't support the
spirit of the program because [the meetings and events management purchasing
team] wasn't in a position to influence and leverage the spend, "Bucey said.
[PROFILE_1]"At the bank, if it's not auditable, it's not reportable," Bucey said of the
process to validate savings. The fix, she said, was a Six Sigma Green Belt study to
give those involved the "comfort that this was an objective project" and "take the
emotions out of it."
The Six Sigma project studied 2005 meeting and event contracts requested by the
New York event team that exceeded $10,000. "Their compliance rate was under 6
percent," Bucey said of the events. "So, 94 percent of the time they were working out
their deal before they sent it to the meetings [procurement] team to put it on paper."
The Six Sigma project team relied on a bevy of standard tools as they mapped
processes, created a cause-and-effect matrix, measured the cost of failures and
eventually devised a new process. The goal was to "improve compliance to 70
percent, which we thought was a lofty goal," Bucey said.
As part of the process, the team used the cause-and-effect matrix to study the
potential impact of adjustments to four key areas: the workload of purchasing
managers, quality of information provided to the meeting purchasing managers, data
capture and audit requirements, and the skill set of the purchasing manager.
The team also identified the failure models: the lost savings due to no RFP, poor
client satisfaction, slow turnaround times due to unreasonable workload of meeting
purchasing managers and inaccurate data coded by those managers.
The project highlighted the importance of using preferred hotels, Bucey said, as "we
get 18 percent to 20 percent savings using preferred suppliers, but only 10 percent
to 12 percent savings using nonpreferred suppliers. That represents a significant
difference in savings for us."
[PULL_1]But the failures could be overcome, the study determined, with new
standard operating procedures, communication, training and additional support staff.
In 2006, "we implemented a number of changes, a lot of messaging" for event
planners, suppliers and executives, Bucey said.
By year-end 2006, compliance to the purchasing policy had improved to 83 percent,
and negotiated savings increased by $455,467. By 2007, compliance rose to 95
percent and negotiated savings increased $1.76 million, to more than $3.4 million,
Bucey said.
To verify the success of its new process, a Six Sigma team later evaluated 145
events in 2006 and found only 43 defective items. By 2007, a study of 144 events
found only 12 defects. While the 2007 Sigma level was dramatically improved, it was
still below Six Sigma perfection, Bucey noted.
"Applying Six Sigma logic to a very simple process helped us make some great
gains in compliance to our strategic meetings program," Bucey said. However, "in
many cases, the cost benefit to get to Six Sigma is not worth it."

Two years ago, when Barbara J. Desoer was named global

technology, service and fulfillment executive at Bank of America
Corp., she immediately began applying to its IT and fulfillment
practices the Six Sigma quality management expertise she had
developed as chief of the bank’s consumer products group.

The investment is already paying off in more efficient processes,

better alignment with business and even increased sales

Bank of America is the nation’s third-largest bank in terms of

assets, and its IT organization had been applying multiple
software development processes across its numerous
businesses. Not only was this inefficient, but the divergent
approaches also made it difficult for IT staffers to rotate
among business units, says Desoer, a 29-year company
veteran who has also had stints as the bank’s top marketing
executive and as president of its Northern California banking
group.
Better Development

Desoer assigned a team leader to use Six Sigma techniques

to create a single application development methodology.
That standard has been introduced to the consumer and
small-business banking units and is being rolled out to Bank
of America’s capital markets and wholesale banking
businesses, with its wealth management and investment
management groups to follow.

Desoer is optimistic that the standardized methodology will

reduce development time and help make developers and
project team members more transferable across business
units in coming years. That could be crucial if an exodus of
retiring baby boomer technologists and a widely anticipated
shortage of entry-level IT workers make it tougher for the
bank to find and recruit people with the skills it needs,
Desoer says. “We are going to be increasingly challenged to
find highly qualified technology associates five to 10 years
out,” she adds.

ADD COMMENT

Bank of America is one of the most prominent financial services company

with a corporate-wide Six Sigma initiative, and they’re not afraid to talk
about it. Their unique blend of Hoshin planning, Kanri management and
Six Sigma separates them from the pack.
Bank of America began their Six Sigma journey in 2001 as a corporate
initiative supported by CEO Ken Lewis. Their deployment model was a
blend of external hiring and internal training.
“When the program was first introduced, some employees were skeptical.
But resistance subsided, officials said, when Lewis and his top lieutenants
earned green belts. Now Bank of America has certified about 3,000 green
and black belts and has tallied $2 billion in either cost savings or added
revenues

Benefits derived by Bank of America from the Six Sigma initiative and its contribution to the
company’s sustained superior financial performance and competitive advantage.

Improving quality has become an important business strategy for many organizations
including manufacturers, distributors, transportation companies, financial services
organizations, health care providers, and governmental agencies. Quality is a competitive
tool that can result in considerable advantages to organizations that effectively employ its
basic principles. A business that can delight customers by improving and controlling quality
has the potential to dominate its competitors. Developing an effective quality strategy is a
factor in long-term business success.

Six Sigma is a disciplined, project-oriented, statistically based approach for reducing

variability, removing defects, and eliminating waste from products, processes, and
transactions. The Six Sigma initiative is a major force in today’s business world for quality
and business improvement. Statistical methods and statisticians have a fundamentally
critical role to play in this process. As a Methodology, Six Sigma leads to business process
improvement by focusing on understanding and managing customer expectations and
requirements (Brewer & Eighme, 2005; Rudisill & Clary, 2004) . As a Management System,
Six Sigma is used to ensure that critical improvement opportunity efforts developed through
the Metrics and Methodology levels are aligned with the firm’s business strategy (Ansari,
Lockwood, Nino, Thies, & Modarress, 2011).

In the case of Bank of America, after the application of Six Sigma and other tools in
2001, benefits and gains started to show great promises. It was estimated that Bank of
America had gained more than $2 billion through significant cost savings and revenue
generated from 2001 to 2003. The initial Green Belt project in 2001 and 2002 was reduced
by 70% of errors and missing items in customer statements. It reduced errors in encoding
and the number of delays in posting customer transactions. Most of the initial Six Sigma
projects Bank of America was caused by ATM system failures and defects in telephone
banking and online banking, which was drastically reduced by 88% in 2002. The Green Belt
project became a huge success in 2002 when a strong focus on customer issues and
performance gaps were attended to.

In 2003, Bank of America achieved an increase in delighted customers of 50% and

more than 2.5 million new customers, a big leap from 2001 where it was only at 41%.
Account losses were reduced by 28% and more than a million number of account was
increased in 2003. The company attained a 36% increase in the same-day payments
processing and 47% improvement in deposit processing in comparison in 2002. Time was
reduced to 100 days for Bank of America to open a new banking center and the online
banking enrollment processes improved tremendously too. Bank of America certified 5,000
Green Belts and 300 Black Belts in 2004. And when 2005 rolled in, 80% of its executives
were certified as Green Belts or Black Belts.

The merger process between Bank of America and Fleet Bank of Boston, which was
announced on October 27th, 2003, was sped up while using Six Sigma. The deal was closed
on April 1st, 2004. Bank of America made sales and service improvements at Fleet Bank
and eventually gained customers satisfaction and loyalty. The new checking accounts at
Fleet increased from 35,000 in 2003 to 1,74,000 in 2004 within the first three quarters after
closing the deal. Post-merger, Bank of America became the largest consumer bank in the
United States (U.S), post-merger, and it also enabled the bank to have a larger demeanor in
the Northeastern parts of US. It also became the chief lender to small and medium sized
companies. In 2005, the bank ran 5,800 banking centers and 16,700 ATMs in the US.

In 2004, Bank of America had revenues of $48,894 million compared to 2001 with
only $34,638 million. The company‘s profits stood at $14,143 million in 2004, compared with
$6,792 million in 2001. In June 2005, Bank of America entered into a merger agreement with
Maryland Bank National Association (MBNA). It was the world‘s largest independent credit
card issuer and MBNA earned $9.56 billion in revenues in 2004. An acquisition was
announced by Bank of America of the company on June 30, 2005 for a price of $35 billion.
MBNA would be renamed as Bank of America Card Services. After the acquisition, Bank of
America become the world’s biggest credit card provider after solidifying a partnership
agreement with China Construction Bank. It was the company‘s aim to become one of the
world‘s most admired companies. Bank of America was set to achieve higher standards by
increasing efficiency and productivity and it believed that Six Sigma could help achieve its
objective (Hills, 2006).

The biggest achievement for Bank of America that can be seen, which matters the
most to the organization was the fact that they are able to delight their customers with their
services. It was proven in the Six Sigma initiative, which has attracted 2.5 million new
customers in 2003. Customer delight is the long-lasting answer to success. Customer cannot
be delighted until satisfaction is achieved with the presented services. Pinpointing promoters
or eliminators of delight is the next step after consumer satisfaction. Delighted customer is
more valuable for the company as it will help the organization to compete with its
competitors in best fashion (Hasan, Raheem, & Subhani, 2011).

Speaking to financial analysts and Bank of America associates, then-new Bank of

America chairman and CEO, Kenneth D. Lewis said, he was “more proud of our
improvement in customer metrics” than he was of Bank of America’s record breaking
financial results. These tremendous financial and customer satisfaction results have
convinced leaders throughout Bank of America, that Six Sigma works and quality efforts are
critical to achieve their desire to become the world’s most admired company (Jones Jr.,
2004). The age of customer delight has now started where a customer’s satisfaction is no
longer considered to guarantee bank success for the services provided.

Competitive edge is no longer applicable as almost every bank is providing the same
services in terms of both quality and quantity. The difference which makes the bank
distinctive is successful fulfillment of its customer requirements at the time when they are
desired most. According to Sinatrya and Iskandar (2016), customer delight creates the
everlasting edge for the banking sector. In this condition, the traditional goal of “satisfying
customers” does not seem to be enough to ensure loyalty. Instead, service firms must
skillfully and clearly differentiate themselves from their competitors in order to obtain a
competitive advantage. In short, customers must receive the highest noteworthy level of
satisfaction: they must be “delighted.”
 Customer satisfaction “is the feeling of a person of pleasure or disappointment which
is resulting by comparing the perceived performance of a product in relation to the
expectations of the person." But now the concept of Customer delight has taken place which
involves “the moving of business above and beyond the customer relations in order to
administer an experience which is resulting from generally having the expectations of one
person exceeded to a surprising degree. For the success of the banking sector it is
imperative to fulfill the requirement of the customers at the time when they are desired most
(Rani, 2016).

In a study by Coetzee (2014) he recommends that banks intensify their efforts of

creating satisfied customers, and aim to achieve heightened levels of customer satisfaction
known as customer delight. Rather than meeting customer expectations, banks should
consider implementing official measures that aim at exceeding customer expectations.
Exceeding customers’ expectations speaks to their emotions and has longer-lasting positive
effects than when customers’ basic expectations are met.

In a nutshell, having a Six Sigma Certification in an organization benefits not just the
organization or employers but also the employees (individuals).

For Employers

 Eliminate organizations errors and impacting company’s revenue

 Improve organization business process
 Cost reduction
 Waste optimization
 Improving customer relationships.

For Employees (Individuals)

 Nature managerial and leadership skills

 Prioritize efforts based on impact of action
 Preparing proper planning and strategy
 Better chances of getting promoted
 Helps to finding job in any industry.
5. Conclusion

By implementing the Six Sigma concept, banks give the priority to increase their
clients’ satisfaction, which, in turn, results in the reduction of time cycle needed for the
perfect service to be produced and delivered to the client. Also, they enhance the processes
related to the bank’s risk management at all levels, resulting in increased profit and reduced
costs. Stoiljkovic, Milosavljevic, and Randjelovic (2010) mentioned that Six Sigma is a
powerful system. Basically, it is measuring of quality that longs for perfection (6 Sigma = 3.4
defects/million = 99.999997% accurate).

The main factors of successful Six Sigma implementation are: commitment to

leadership, full engagement of Six Sigma team leaders, integration with the top management
strategy, business process frameworks, intelligent network of clients and markets, real cost
reductions, revenue and profit, motivation and incentives to all employees, program
infrastructure, corporate culture, etc.

The success of Six Sigma concept implementation depends on the readiness of the
employees themselves to participate in it. Therefore, they should: learn about the objectives
of Six Sigma (be able to see ‘the big picture’), be prepared for the chaos, start viewing their
work within the context of the entire service delivery process, seize the opportunity to learn
about the new possibilities, avoid paranoia, expect changes and challenges, accept
responsibility for their education, be patient, never give up, and be ready to embark on an
endless journey.

The role of marketing today is as much about delighting existing customers as it is

attracting new ones. Organizations want to make sure customers have a great experience
using their product or services so they not only buy again, but ideally, spread the word
through referrals or social media. Customer loyalty should also be an organizations ultimate
goal. Customer loyalty is when customers are willing to turn down a better product or price
because they would want to continue doing business with the same organization. The only
way to achieve that if the organizations are in good standing with them.
 Bank of America, emphasizing on their customers and Six Sigma, have proven to be
successful over the past three years by enhancing their abilities to put the right customer in
the right products at the right price. They are committed to continue to improve in service
excellence, continuing to invest in the future and to innovate respond to customer needs.

ntroduction

In 2004, with revenues of $49.6 billion and

profit of $14.1 billion, the California-based
Bank of America Corporation (BoA) was the
fifth most profitable company in the world and
the second most profitable banking institution
(Refer Exhibit I for facts about BoA)2.

BoA provided full-service banking in 29 states

and in Washington, D.C. in the US and had
operations in 30 countries worldwide.

The company performed its banking activities

under three subsidiaries - Bank of America
National Association (Bank of America, N.A.),
Bank of America, N.A. (USA), and Fleet
National Bank3 (Fleet).

BoA had four major business segments - Global Consumer and Small Business Banking, Global
Business and Financial Services, Global Capital Markets and Investment Banking, and Global Wealth
and Investment Management (Refer Exhibit II for more information on Business Segments).

BoA was formed in 1998 as a result of a series of mergers and acquisitions (Refer Exhibit III for
Background of BoA). This inorganic growth strategy helped the company in enlarging its customer
base but it failed to generate customer satisfaction and retention. As a result, the bank had been
recording low customer delight scores4 which reflected the low quality of service being provided. On
January 24, 2001, Kenneth D. Lewis (Lewis) was appointed as the Chairman and CEO of BoA. Under
Lewis, BoA adopted an organic growth strategy. He focused on providing high-quality service to
customers and enhancing their satisfaction and retention. Lewis adopted the Six Sigma quality
initiative in the year 2001 (Refer Exhibit IV for a conceptual note on Six Sigma).
hrough Six Sigma, BoA focused on reducing
the errors in the transactions involving
customers, thereby increasing customer
delight scores. Initially, BoA faced resistance
from some employees during the
implementation of Six Sigma.

However, in course of time, the resistance

subsided as BoA encouraged fair competition
between the teams, which led in turn to much
greater involvement of employees in
implementing Six Sigma. In all, Six Sigma
enhanced the customer delight ratings of BoA
and also improved its revenues, while creating
long-term customer relationships and a quality
culture within the organization.

Six Sigma in a Service Industry

The concept of Six Sigma was initially developed for manufacturing companies.

Later it was realized that the concept could be

applied to any process which encountered
flaws and resulted in the production of
defective products or services. So, it was
extended to service companies as well.

The major difficulty in applying Six Sigma to a

service company was that measuring the
quality and quantity of a service was much
more difficult than measuring the quality or
quantity of a product. The second problem
was deciding whether the defect that had
occurred was a quantitative or a qualitative
one. Another matter of concern was that a
service-based company relied on its
employees for the quality and quantity of
service rendered.
nalysts suggested four major points to be considered to ensure a sensible Six Sigma measurement in
Service Processes5. These were:

• Right level of measurement

• Accounting for variability
• Right emphasis on quantitative vs. qualitative measures
• Interpretation and management support for change...

Six Sigma Journey at Bank of America

Ever since its formation, BoA had given
greater importance to increasing its size and
securing larger numbers of customers than
providing customer satisfaction and retaining
customers. In due course, the company
realized that the quality of service it was
providing was getting poorer due to its
inefficient processes. Therefore, the company
decided to make process improvements
throughout the company. However, the plans
did not materialize due to a lack of systematic
implementation. When Lewis took over as the
Chairman and CEO in 2001, he adopted an
organic growth strategy, which emphasized
building strong customer relationships. The
strategy succeeded in creating a strong
customer base for the bank in the US...

The Gains

After the application of Six Sigma and other tools in 2001, it was estimated that BoA gained more than
$2 billion through significant cost savings and revenue generation from 2001 to 2003. The initial GB
project in 2001-02 reduced 70% of errors and missing items in customer statements. It reduced errors
in encoding and the number of delays in posting customer transactions. Most of the initial Six Sigma
projects in BoA concentrated on the ATM system failures and defects in telephone banking and online
banking, which were reduced by 88% by 2002. By 2002, with a strong focus on customer issues and
performance gaps, the GB project became a huge success which proved the applicability of Six
Sigma to financial services.

BOA achieved an increase in delighted customers from 41% of 2001 to 50% in 2003 with an increase
of more than 2.5 million customers. In 2003, the account losses were reduced by 28%. Also, the
number of accounts was increased by more than a million in 2003.
 

AGILE PROJECT
MANAGEMENT
 –
BENEFITS AND
CHALLENGES 18


 
Large Teams
 – 
 For large projects
or programs, this
is a main
challenge. It is
kind of practically
not efficient to
have everyone
work and report
daily in the scrum
meetings for
example. Larger
teams need more
overhead
communication
efforts as well.


 
Customizing
Agile Practices
 – 
 Customizing
agile practices is
fine to a limit. But
it can be
catastrophic if the
customization is
done without fully
understanding the
underlying agile
principles.


 
Lack of efforts for
improvisation and
adaptation
 – 
 Companies are
expected to
improvise and
adapt to modern
technological
practices despite
whatever process
they are
following. If the
team is not doing
this, agile can
face challenges of
delivering on time
with quality.