Integrating Lean and Six Sigma

1. Integrating Lean and Six Sigma WCBF Summit, 4/29/2008 Pete Abilla Email: pabilla@ebay.com Blog: www.shmula.com 801-400-3895 Alex Bellabarba Email: abellabarba@ebay.de

2. Agenda Lean Six Sigma eBay Lessons Learned Conclusion • Opening Remarks • On the Surface • Beneath the Surface • What does “Lean” really mean? • Six Sigma • Lean + Six Sigma • Lessons Learned • Conclusion

3. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion on the surface beneath the surface

4. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion on the surface beneath the surface

5. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion What does Lean really mean? Philosophy Technical Development & Managerial Summary • The term “lean” does not find its origins in Toyota. The word was coined by Jon Krafcik, part of MIT’s International Motor Vehicle Program, which was led by Jim Womack. Krafcik came up with the term “lean” to describe Toyota’s system that managed to get by with “half of everything”: physical space, labor effort, capital investment, inventory, and with far fewer defects and safety incidents. • Toyota describes its system as a triangle of Technical, Managerial, & Philosophy – with human development in the middle. All of this together combine to form a Lean Culture. what we do how we manage what we do what we believe

6. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion What does Lean really mean? Philosophy Technical Development & Managerial Summary • It is important to define Lean in the context of the organization’s goals and objectives. • For eBay, this means: We are pioneering new communities around the world built on commerce, sustained by trust, and inspired by opportunity. • We believe people are basically good. • We recognize and respect everyone as a unique individual. • We believe everyone has something to contribute. • We encourage people to treat others the way they want to be treated themselves. • We believe that an honest, open environment can bring out the best in people.

7. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion What does Lean really mean? Philosophy Technical Development & Managerial Summary • The technical side of Lean can be described as the tools and methods that we implement and use. This aspect of Lean is what we see most often in popular culture – the Cult of Lean, as it were – but is only one aspect. For example,

8. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion What does Lean really mean? Philosophy Technical Development & Managerial Summary • Toyota leaders use the phrase “building people before building cars”, meaning that developing its employees is the key to improving its products and services. • In true Lean fashion -- respect for people – is at the center of most activities. • In addition to Philosophy and Technical aspects of Lean, there is also an emphasis on how we manage and train leaders throughout the company. • The infrastructure – systems, processes, and people – are required to sustain improvements.

9. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion What does Lean really mean? Philosophy Technical Development & Managerial Summary • In summary, we can reduce Lean into two parts: • Total Elimination of Waste • Respect for People • We claim that a successful implementation of Lean – in any environment, transactional or manufacturing – requires a balanced approach on: Total Elimination of Waste* & Respect for People * Waste, or Muda, refers to the 7 waste: transportation, motion, defects, inventory, overproduction, waiting, over-processing.

10. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion what is it? belt? what Belt? • Father of Six Sigma was Bill Smith, an engineer and scientist at Motorola. • The characterization, measurement, analysis, and control of variation is the chief aim of Six Sigma. • Customer experience is largely a function of “consistent” experience, of which the mathematical measurement is σ or “sigma”. • “Consistent” doesn’t mean delightful. It can be consistently bad, but at least it’s consistent. Once variation is controlled, then it can be appropriately reduced. • The methodology that is typically followed is Define, Measure, Analyze, Improve, and Control (DMAIC).

11. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion what is it? belt? what belt? In the beginning, there were no colored belts and we focused only on the end customer, reducing warranty costs and getting it right the first time. It was named six sigma and it was good. Over time, we added black belts and increased the use of advanced statistical tools. This was called the six sigma way and it was better. Soon we saw the need for more definition and including others to help the black belts in their quality quest so we added green belts. This made the black belts happy. Eventually, the black belts grew numerous by order of the King. These black belts expanded their search for variation reduction to all corners of the kingdom including even processes in the Human Resources Department but still lacked direction. So we added Master Black Belts to lead them. As we look across the kingdom today, we can now see yellow belts, gold belts, white belts, master black belts and even Grand Master Black Belts added to the royal order of belts. Everyone must have a colored belt to save the kingdom money regardless if it actually helps the end customer. And the only way to fix a problem is through a black belt project, green belt project or even a lime green project (in between a green belt level project and a yellow belt level project). I guess calling it a lime green project is better then calling it a pea green project. But is this good? Maybe we should go back to the basics and focus on the customer, reduce warranty cost and getting it right the first time. ~ Mike Wroblewski

12. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary • Our balanced strategy is simple: Improve the Member Experience and Reduce the cost-to-serve • Our Scope: • Within-CS: We believe that participatory management leads to long-term organizational learning. Our aim is to empower each customer service agent with the principles and tools of Process Improvement & to improve their work everyday. In sum, we believe that everyday, normal, down-to-earth CS Agents can do really big things. • Outside-CS: Our worldview is that Customer Service is a reflection of the customer pain and, that some or most, of the root causes are potentially – and usually – upstream in the value chain; upstream from the Customer Service function. Most projects of this type, will usually follow DMAIC, but always with our Lean hats on, just for good measure.

13. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary unpaid items Item not received list-to-sell paid-to-ship seller outside-CS focus: Why do we receive CS contacts at all? significantly not as described find-to-bid bid-to-win win-to-pay buyer ship-to-receive etc… Customer Service cs abandonment rate within-CS focus: Why do we deviate from perfect customer service? handle time policy issues wait time 1st contact resolution etc…

14. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary within-cs drive out fear beyond-cs Expected Outcomes & Key Deliverables Guiding Principles • We want our CS Agents to: • Focus on the customer • Be involved, participate, & not be afraid; feel heard • Be empowered to enhance their work in a systematic way and know how to apply improvement tools appropriately. • Deliver and sustain results • Share best-practice across other areas of the business and with global partners.

15. question solve reflect experiment Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary within-cs drive out fear beyond-cs ICVS • Investigate, Change, Verify, and Share is a modification of Deming’s PDCA Model. • The beauty of ICVS is that this approach can be applied by anybody to almost any situation. • The wheel below is another representation of ICVS.

16. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary within-cs drive out fear beyond-cs The Andon of Fear • An Andon Cord is a cord that sits on both sides of a production line. • It is designed to be pulled by the operator if a problem is observed. • When pulled, the production line stops, the team gathers in the area, and quickly drive to root causes, brainstorm and implement countermeasures, and start the line again. • But, in some places, workers are afraid to pull the Andon Cord. • What are the consequences of fear in the workplace? What is the impact on the Customer?

17. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary within-cs drive out fear beyond-cs • Most outside-CS work is done primarily following DMAIC. • From a global perspective, we view contact volume as symptoms and we aim to follow the volume to its potential root causes upstream. • The critical success metric for us is to reduce contact volume through fundamental improvements in product, policy, and process.

18. Process Improvement Core Teams consists of people from Toyota, GE, Amazon, Porsche; backgrounds in both manufacturing and service. Style Improve the Member Experience & Reduce the Cost-to-Serve. Strategy Skills Shared values Staff Systems Process Improvement Teams in EU & NA. Structure Teams are based in Customer Service, with close allies in other parts of the company. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary

19. Fence Sitters Saboteurs Fully Committed ACT Leadership Opportunity: • Set a Direction • Cope with Change • Cope with Complexity • Aligning People • Motivating and Inspiring • Act is: • Long-term, in-depth testing, trial and application of the change. • An examination of the extended implications of the change • The notion that the change is the status quo, not the deviation from it. • Where the belief is the implementation of the change is past the point of no return • Demonstrated Behaviors: • Shows commitment/ ownership of the change • Works on creating ongoing commitment for the change among co-workers • change is treated as the norm • Takes responsibility for own actions related to the change • Shows enthusiasm high-energy involvement • Initiates continuous improvements BELIEVE UNDERSTAND • Believe is: • Shows signs of buy-in for the change • Demonstrates a willingness to embrace the change in some fashion and continue the change process • “Try-out” of the new system or concepts • Demonstrated Behaviors: • Displays optimism / sees positive implications • Shows Signs of sponsorship • Commits time and energy • Shows signs of support for the change • Makes a formal decision to initiate the change • Displays true committed action • Exit Criteria: • Attempts to implement the change AWARE • Understand is: • The comprehension of the nature and intent of the change as well as where you “fit in” • Demonstrated Behaviors: • Displays anger • Playing the game • Shows resistance • Bargaining • Shows signs of Optimism • Actively seeking information • Shows denial • Actively judging how the change will affect the organization and employees • Exit Criteria: • Speaks positively of the change, at least conceptually • Participates actively in meetings to discuss the change • Aware is: • Knowledge of the emerging change, but unclear of the scope, depth, full impact, or even rationale for the change • The realization that you will be affected, but not sure how • Demonstrated Behaviors: • Shows resistance • Displays uninformed optimism and pessimism • Exit Criteria: • Describes change and the business rationale after active questioning UNAWARE • Lack of knowledge of the change project and the first encounter or interaction with the change effort • Demonstrated Behaviors: • Initial reaction • Displays confusion • Exit Criteria: • The realization that the change will affect the status quo without understanding the full impact Build Awareness Foster Understanding Obtain Buy-in Facilitate Ease-of-Adoption Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary

20. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary participation results • Our Visual Management RotoCube contains cards for metrics recording, suggestion forms, and a celebrate section for completed suggestion forms. • Goal: Increase the Problem-Finding & Problem-Solving capability of our CS Agents.

21. feedback shipping Seller files retaliatory UPI Claim against Buyer in order to descore negative feedback eBay does not require Seller to state shipping information in the shipping fields of the listing Hypothesis 1 Hypothesis 3 suspension Sellers that are active & then suspended & then reinstated, have a higher rate of UPI Claims than other sellers. Hypothesis 2 6.25% 14.6% Wrongful Why UPI Claims? Justified 1.46% Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary participation results Unpaid Item Claims • UPI Claims leads to less or no buying activity on eBay. • Verified 3 Root Causes of Wrongful Unpaid Item Claims. • Eliminating these 3 root causes will bring eBay an estimated ~24MM lift in Gross Merchandise Bought (GMB).

22. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary participation results Chris’s improvements to the contract subscriptions process resulted in year-to-year revenue gains of $114,000! What were the Changes? • Round Robin contract to DC • Creation of eFax number • Placing an 800# on the contract Look at the Results! Before After $114,000RevenueGains

23. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary participation results • Before: • Redundancy: calls stored in 2 areas (spreadsheet and email box) • Scheduling of calls not defined • After: • Elimination of kana email box storage • Phone calls now assigned • Service level attached to calls • 18 days • 2 days

24. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary participation results What were the Changes? Adam Lund’s project addressed several problems in the Error, Addition, and Muze Portal work processes at Half.com that resulted in $72,000 growth of catalog GMV. • Created Kana workflows • Created process to evaluate catalog entries • Tasked CSR’s and trained Look at the Results! Before • KANA • 7,500 abandon cases • Oldest case 10,802 hours • MUZE • 50% Roll Through • Average Response Time : 9 Days • All Responses out of service level Service Level Range After • MUZE • 95.6% Roll Through • Average Response Time: 54 hours • 70 % of responses in Service Level • KANA • Casesworkedwithin72hours

25. Identified bad proofs (36%) • Defined IP related proofs and appropriate actions • Developed/delivered IP focused training for ATO reps Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary participation results What were the Changes? • IP related proofs did not accurately identify ATO and were causing WATO to occur. • Accurate proofs and education led to reduction of WATO by 839/month • This equates to $2.1M in revenue gains annually Look at the Results! Before After $2.1M RevenueGains

26. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary participation results The goal: reduce the misroutes by 50% or approx. 1800 emails. Implemented solution January 29th.

27. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary participation results Problem: Significant amount of redundancy User ID 2x Email address 2x Contact information Required waiting for information Solution: Information Pushed: Name Address Telephone # User ID - 45 seconds

28. General Support, Proof-of-Identity – Eliminate Steps & Reduced Cycle Time Richard Wong and Scott Taylor Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary participation results POI “Before” Process POI “After” Process Member Contacts CS Rep Verifies Member Verification/ POI Approval Contact from member Fax sent in Account Review Account Restored The new cycle time for restoring an account is now measured in minutes; impossible under the previous email and fax system. Complex process: 32 POI approvals sent out by helpline over a 4-week period, only 2 members faxed their details and regained access to their accounts. Rep changes the Password for the member Account is Restored

29. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion strategy and scope supply chain gemba infrastructure change management stories summary • At eBay, our focus is on Improving the Member Experience and in Reducing the cost-to-serve. • Our scope is within-CS and outside-CS. • Within-CS, our approach is for broad participation and to teach CS Agents primarily Lean Thinking. • Outside-CS, we always keep our Lean hats on, but do much more DMAIC work.

30. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion • The Continuous Improvement team at eBay is only 10 months old. • We’ve hit the ground running and are very focused. • While true change happens from the ground-up, it sure helps to have key influential people throughout the company as allies. • A focus on principles is key – that resonates with people. The Tools and Methodology will make much more sense once people understand the principles. Next Steps: • Keep on building people; keep on improving the member experience; keep on fundamentally reducing the cost-to-serve.

31. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion • We started with Lean, then a little about Six Sigma. • We explained our strategy, focused on Improving the Member Experience & Reducing the cost-to-serve. • Our scope is within-CS and outside-CS. The former emphasizes participative management, lean thinking, and focused on within-CS metrics. The latter deals with why CS contacts are created and uses primarily the DMAIC methodology, but always with our Lean hats on for good measure. • Next Steps – continue to do good, delight the member, build our people, and reduce the cost-to-serve.

32. Agenda Lean Six Sigma eBay Lessons Learned Conclusion Agenda Lean Six Sigma Lessons Learned Conclusion Thank You