DMAIC at American Express

Please see below: "Hey, Is Anybody There?" An Example of DMAIC at American Express case on p. 344 of Operations Management for Competitive Advantage. Answer the questions at the end of the case study.

C A S E : "H E Y, I S A N Y B O DY T H E R E ?" A N E X A M P L E O F D M A I C
A T A M E R I C A N E X P R E S S
In this case the customer is using Six Sigma to
reduce defects in a service.
THE GENERAL SITUATION
A number of merchants that accept American Express cards fail to
place point-of-purchase materials (e.g., decals) that notify customers
that they can use these cards at these establishments while
displaying competing (e.g., Visa, Mastercard, etc.) point-ofpurchase
materials. American Express defines these merchants as
â??passive suppressors.â? In an effort to increase visibility, an external
vendor that placed point-of-purchase material in the marketplace,
identified passive suppressors, and measured placement and passive
suppression rates was hired by American Express. However, the
vendor had a significant rate of failure to contact or meet with the
merchants. The leading reason for not meeting with the merchant
was that the store was closed when the vendor stopped by.
DEFINE AND MEASURE
The objective was to reduce closed store uncallables (failures to
contact), which represented 27.4 percent of total uncallables and 8.0
percent of the annualized attempted visits. The process represented
a 2.9 sigma level and 80,000 defects per million opportunities.
ANALYZE
A Pareto chart pointed to the â??closed storeâ? category as the number
one reason for uncallables. By shadowing the vendor on merchant
visits, American Express learned that the visits took place between
8:00 A.M. and 6:00 P.M. Of the closed stores, 45 percent were retail
establishments and 16 percent were restaurants. Typically, these two
types of establishments are not open before 10:00 A.M. Therefore,
American Express hypothesized that the hours the vendor was calling
on the merchant contributed to the high uncallable rate. It also
was determined that if an establishment was closed, the inspection
process was terminated with the merchant being reported as
uncallable without first checking to see if any point-of-purchase
materials were visible from the outside. This resulted in merchants
who displayed point-of-purchase material being visited multiple
times--leading to rework.
IMPROVE
American Express then tested and validated their hypotheses. The
call hours for all visits were changed to begin after 10:00 A.M. The
vendor was required to continue the inspection process with respect
to external placement of point-of-purchase material. The first
change, revised call hours, resulted in a decrease to 4.5 percent from
8.0 percent in the defect rate. The second change, continued inspection,
indicated that 35.4 percent of the remaining 4.5 percent closed
stores actually had external point-of-purchase material displayed.
Combined, these two changes had the following effects: the defect
rate decreased to 2.8 percent, the number of defects per million
decreased to 28,000, and the sigma level increased to 3.2.
CONTROL
In order to achieve control, American Express uses a p control chart
to track the proportion of closed stores over time and the vendor call
report was revised to reflect the uncallable rate by reason.
Q U E S T I O N S
1 In terms of "design quality" and "conformance quality,"
explain how using the Six-Sigma approach helped American
Express.
2 In the case, American Express uncovered the two primary
causes of the uncallable rate by â??shadowingâ? the vendor.
What Six-Sigma/continuous improvement tools might the
vendor have used to uncover the same information and
revise the process?
3 What are some of the limitations of the Six-Sigma approach
when there is subjectivity in the metrics used?