Six Sigma Case Studies : Enhancing Revenue versus Cost of Goods Sold

Industry: Consumer electronics and high tech

Background

The client has been an industry pioneer and innovator in the GPS industry for over 20 years and is one of the top five GPS providers worldwide. As GPS applications have propagated across the consumer and commercial markets, the company has experienced dramatic growth. The client selected TELUS International to provide technical and customer care support.

A Six Sigma project was initiated when the client did not meet its revenue over cost of goods (REV/COGS) ratio target of 50%. Its average REV/COGs ratio was 35%, which resulted in client dissatisfaction and loss of revenues. The ratio is the key metric used by the client to measures how much revenue they are getting back from the cost of replacing a GPS unit (both free of charge and upgrades). On average, the weekly dollar value for losses amounted to $10,000 or more.

The challenge

Based on a Voice-of-the-Customer (VOC) analysis, it was determined that the top drivers of below target REV/COGs were due to replacements of GPS units. Further investigation identified these contributors:

• Processes for proof of purchase, a key identifier for returns and warranty verification, could be improved
• Methods for tracking retail sales including legacy units were lacking
• A portion of shipped units were reported as being lost in transit and not received by customers

Solution

Action plan matrix: recommended solutions with subject matter experts from both TELUS International and the client were aligned to the top reason for replacements. Process maps were then devised to deal with specific return issues.

Benchmarking with other companies: best practices and comparative industry models were identified that could be applied by the client.

Sustainability: action plans with intended goals, as well as new opportunities, were reviewed on a weekly basis to get costs under control.

Results

At the end of the project, the REV/COGS ratio reached client targets. Importantly, this business enabling project positioned TELUS International as a true partner and trusted advisor beyond contact center operations. This fostered a continuous awareness to look for strategic process improvements in both TELUS International and client operations to reduce cost and identify revenue generation opportunities.