Telecommunications Optimization Project Saves $3.3 Million

Challenge

• Control escalating telecommunications costs
  
  
• Incentivize cost-effective behavior
  
  
• Adapt to changing business model (internal and external)

Solution

Apply Raytheon Six Sigma™ principles to:

• Resolve conflicts between business-level and company-wide representatives
  
  
• Eliminate budget risks
  
  
• Develop an equitable and cost-effective distribution scheme
  
  
• Realign responsibilities and rearchitect underlying processes to ensure budget overruns wouldn’t recur

Results

• Eliminated $2.5 million in waste through process improvements
  
  
• Saved $800,000 through improved practices
  
  
• Reduced telecommunications budget by 8 percent

Reducing Cost Pressures: A Three-Phased Approach

After surveying the issue of Raytheon’s mounting telecommunications costs – associated with wide-area networks, Internet service providers, remote access services and voice long distance – Vice President and Chief Information Officer Rebecca Rhoads was faced with an array of competing cost pressures:

• Increasing demand within the company to support growth
  
  
• Telecommunications market consolidation and reduction in price competition
  
  
• Inefficient processes in place in the wake of reorganizations and outsourcing

In light of these pressures, Rhoads sponsored a Raytheon Six Sigma™ project to attack the problem of a $4.6 million budget overrun.

The team assembled consisted of both business-level and company-wide representatives. Part of the challenge lay in the fact that business-level representatives tended to view telecommunications costs as fixed-budget operations whereas the company saw them as a demand service. To solve this and other problems, the project was broken into three phases.

Phase 1: Increasing Cost Visibility and Eliminating Waste

The first phase, which brought together key telecommunications experts, had the twin goals of establishing the baseline for the following phases and eliminating the projected budget overrun. The telecommunications team developed a value-mapping tool that showed there was an average delay of 31 weeks before business managers saw the cost impact of telecommunications decisions.

A finance team reviewed budget issues and brainstormed cost reduction strategies. That team created an agenda for a company-wide blitz to reduce waste and a plan for a new telecommunications financial management system.

Phase 2: “Reverse Role Playing”

The goal of the second phase was to redefine the process of cost distribution to drive better use of telecommunications resources and to provide increased visibility into the budget. Because of the different ways in which company and business-level representatives viewed telecommunications costs, this goal proved to be a nearly-insurmountable hurdle.

The team applied a unique adaptation of Raytheon Six Sigma to overcome this obstacle. In this approach, company-wide and business-level team members were asked not to bring forward their individual biases at the start. Instead, they took on the roles of their counterparts. First they defined the ground rules for making the decisions. Next the teams listed the criteria they would use to evaluate the alternatives. Then they went through a hypothetical year of budget and service planning. Only at this point were the participants allowed to revert to their native roles. The result was mutual understanding and a new ability to manage disagreements using a broad company perspective that eliminated parochial concerns.

Phase 3: Optimizing Processes and Cutting Costs

Ensuring that budgeting problems wouldn’t happen again was the goal of the final phase. Consisting of four “mini-blitzes,” this last phase, completed in 2002, reexamined the baselines of the processes in more detail using the new cost model and realigned management teams.

In 2003, three new teams were formed to combat specific problems. The teams:

• Shortened average cycle time for service provisioning from 130 to 70 days
  
  
• Reduced the time it takes for service costs to be visible from 31 weeks to 2 weeks or less
  
  
• Lowered costs by identifying unneeded inventory

Results

The results of the project far exceeded expectations. Implementation of Raytheon Six Sigma processes eliminated $2.5 million of pure waste. Real year-over-year costs have been reduced by approximately $800,000. This accomplishment is impressive given the increase in teleconferencing and video conferencing use post-9/11.

Service-provider relationships changed—suppliers evolved into active participants. In addition to providing service-rate reductions, they acted as partners: improving processes, sharing practices and exploring new technologies. Additionally, this Six Sigma project enabled the team to learn a new way to explore problem solving with the role-reversal strategy.