assignment on economics
TRANSCRIPT
CONTENTS
List of abbreviations………………………………………………………………..……2
List of tables and figures………………………………..…………………………….…3
Introduction.......................................................................................................................4
1. The philosophy and basic content of the Six Sigma ………………………….…..…..6
1.1. Really focus on customer…………………………………………………………….6
1.2. Improving management cycle DMAIC………………………………………………8
2 .The process of applying Six Sigma at OJB in period of 2004-2006………………….16
2.1. Business situation of OJB…………………………………………………………..16
2.2. Implementation of Six Sigma ……………………….………..……………………18
2.3. The results obtained when applying Six Sigma at OJB……………………………22
3. Some measures to raise the credit quality at OJB (Conclusion)….... ………………..23
3.1. Building business strategies…………………………………………………...……26
3.2. Diversification of credit activities……………………………………………………27
3.3. Efficient implementation of credit activity processes………………………………29
3.4. Enhancing inspection activities of credit loans………………………………………29
List of References…………………………………………………………………….…30
List of abbreviations
SMEs – Small and medium sized enterpirses
OJB – Ocean joint stock commercial bank
TQM – Total Quality Management
SBV – The State Bank of Vietnam
APO– Asian Productivity Organization
VPC – Vietnam Productivity Centre
APQC – The American Productivity and Quality Center
HR – Human Resource
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List of tables and figures
Figure 1. DMAIC management cycle……………………….………………………..…….8
Figure 2. OJB’s lending process ………………. …………………………………………20
Figure 3. OJB’s documentation rotating process……………………………….. …………21
Table 1. Levels of Sigma…………… ………………………..……………………………7
Table 2. Define phase descriptions…………………………………….……..……………10
Table 3. Measure phase descriptions…………………………………….……..…………..11
Table 4. Analysis phase descriptions…………………………………….……..……….….13
Table 5. Improve phase descriptions…………………………………….……..…………..14
Table 6. Control phase descriptions…………………………………….……..…………....15
Table 7. OJB capital mobilization situation…………………………….……..……………17
Table 8. Summarized result of Six Sigma projects…………………….……..…………….22
Table 9. Analyzed quotients of credit quality over 3 years…………….……..…………….24
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Introduction
It is true that banking sector has been facing with more and more competition as well as other
in Vietnam. Especially, as a new official member of WTO, joining in an equally ground,
Vietnam will have many opportunities as well as risks at the same time that should be well
prepared for. It is very popular to hear about enhancement for competitive competence in
doing business or manufacturing as a guideline toward world trading orientation. Banking and
Finance activities receive most attention from the government due to its importance and
impacts on the structure of nation economy. If these activities, most importantly the Credit
Operation, are under rational management, it obviously makes positive contribution in
ameliorating and stabilizing macroeconomics, eliminating inflation factor, keeping up the
promising growth rate of the economy. In addition, the indispensable change-over in Banking
is being attended by a large number of citizens who had sat down under multiform crisis in
credit operation from pre-transaction period. The obsession made from domino effect falling
down of “Credit found for people” series or imperious manner, overbearing attitude of bank
clerk in 1980’s still be the faith barrier, though less and less in progress economy transaction.
Currently in Vietnam quality management is along with growing business enterprises in
Vietnam. The integration of quality into all elements of management activities to be
operational is common and indispensable for any organization to survive and grow. But
quality is not naturally born nor whether it is an accident that results as a result of the
impact of a series of all factors that are closely related, is the result of a process that processes
synchronization is also the factor of all: people, management systems, methods, tools that
support the manufacturing process to produce a quality product. Quality and opportunity
are as well as challenge. With increasing customer demand for products, businesses need
to continuously improve product quality. Quality improvement is to enhance performance to
create more benefits for the company and customers. There is one method to enhance product
quality called Six – Sigma. Six Sigma is a methodology for process improvement to reduce to
the lowest defect rate of products. The application of Six Sigma program will help reduce
production costs, management costs, increase customer satisfaction, reduce excess time in the
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process, ensure delivery, expand production, and help enterprises (banks) be more confident
to achieve higher goals.
Within 2 years of application of Six Sigma, OJB have obtained good results in the goal of
improving the quality of services, especially credit operation. This essay describes Six Sigma
approaches that OJB has applied to improving service quality projects. The results are
encouraging, and Six Sigma has proven the effectiveness of the application of scientific
methods in the management process. Based on data in annual credit reports from 2004-2006
of OJB, this context focuses the analysis on a typical result through OJB's credit quality to be
improved by applying Six Sigma process.
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1. The philosophy and basic content of the Six Sigma
1.1. Really focus on customer
In the 80’s and 90’s of the 20th century, when the total quality management (TQM) was
developed, a series of companies proposed the policy and quality objectives to “best
meet the requirements and expectations of customers ". Unfortunately, some enterprises
have a real effort to run short-term requirements of customers in a short period that
ignores the construction of business-oriented system, not customer-oriented as it should
be, to serve the needs of human.
In Six Sigma method, customer orientation is a top priority. For example, performance
measures of Six Sigma start with the identification of customer requirements.
The Six Sigma improvement is determined by the impact of customer satisfaction. We
will examine why and how to identify customer requirements, measure performance and
become a leading development company and meet customer needs.
Six Sigma is not a quality management system such as ISO-9001, or a quality certification
system. Instead, this is a methodology for reducing defects based on process
improvement. For the majority of enterprises in Vietnam, this means that instead of focusing
on quality initiatives which prioritize the error checking on the product, it moves the focus
onto improving production processes so that defects do not occur.
Six Sigma is a methodology based on process improvements to reduce statistical error rate or
disability to a rate of 3.4 defects per million defect opportunities by identifying and
eliminating the source provides the knife dynamic (unstable) in the business process. In
defining disability, Six Sigma focuses on establishing a thorough understanding of
customer requirements and is, therefore, highly customer oriented.
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The goal of Six Sigma is only 3.4 defects (or errors) per one million defect opportunities. In
other words, it is 99.99966% perfection.
It should also be noted that Sigma measures defect rather than product defects. A more
complex product will be more likely to be error free. For example, to the unit of
product defect, there are more in a car more than in a paperclip.
Sigma Level Million defect Hundred defect
One Sigma 690000 69%
Two Sigma 308000 30.8%
Three Sigma 66800 6.68%
Four Sigma 6210 0.621%
Five Sigma 230 0.023%
Six Sigma 3.4 0.00034%
Table 1. Level of Sigma (*)
While the majority of private manufacturing enterprises in Vietnam have about Three Sigma
level or even lower in some cases, a process improvement project to apply Six Sigma
principles can be targeted first Four or Five Sigma to the capital has also resulted significantly
reduce defects.
Customer emphasis is a top priority of business applications of Six Sigma. Enterprises must
understand the customer requirements and expectations . "The voice of the customer" needs
to be heard, recorded, stored and analyzed continuously. Six Sigma introduces the concept
of "management based on real data" which brings about a lot of effective management
activities. In recent years, the focus has been placed on the measure, improved information
systems, knowledge management ... Six Sigma system also aims to build a
system for organizing "a decision based on data. " The implementation of Six Sigma
principles begins with the measurement to assess the current status of the organization to
operate the company based on which to build a management system effectively.
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In fact, Six Sigma helps managers answer two questions needed to support decision
making and to provide practical solutions on realization:
1. Which kind of information and data does your organization really need ?
2. How does your company use materials and information to maximize profits?
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(*) "Sigma" means the standard deviation (standard deviation) in statistics, so Six Sigma means six standard
deviation units.
1.2. Improving management cycle DMAIC
In Six Sigma, "process" is where the activity occurs. In any case of the design of products -
services, measuring performance, improving efficiency and customer satisfaction or even the
management of the Six Sigma business improvements are all directed at the
regulation workflow.
Many organizations fall into a loss of control and are unsure in selecting management priority.
Managers tend to want to achieve all the results in sales, growth rate, the quality criteria,
indicators of human resources, the socio-political goals, ... Placing too many items
organizational objectives makes distributed resources, do not focus on the key stages.
Eventually lead to wastes of time, money and manpower
Six Sigma-oriented methodologies for managers to focus on the key objectives, aimed at
finding and addressing the root causes of problems causing waste, failure, does not meet
the customer requirements. Six Sigma system indicated for the management
principle is "prioritize targets is the way to go up" .
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Figure 1 . DMAIC management cycle
Firstly, the Six-Sigma projects focus on the key issues associated with strategic nature and
they have significantly affected the level of customer satisfaction, and essential for business
results in the form of bringing quick financial performance and large (high income, lower
costs, etc ...).
DMAIC process is the focus of the project Six Sigma process improvement. The following
steps introduce problem-solving process in which the specialized tools are employed to
turn a real problem into a statistical formula, a solution built on statistical models and then
move change it to a real solution.
DEFINE PHASE:
Determination phase aims to clarify issues to be addressed as well as requirements and
objectives of the project. The objectives of a project should focus on the key issues associated
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with the business strategy of the company and the customer's requirements. The Define phase
includes:
• Identification of customer requirements related to improvement projects. The
clarification request from the client side is called the Essential Quality characteristics
(Critical-to-Quality);
• Construction of the definition of disability as accurately as possible;
• Conduct a baseline study (through a general measure of the level of performance before
starting improvement projects);
• Organizing the project team with a sponsor (Champion);
• Estimate the financial impact of the problem; and
• Approval of senior management to proceed with the project.
DEFINE PHASE
Questions need to be
answered
Most commonly used tools
• What is important
for customers?
• What’re types of
errors / disability we are
working to reduce?
• So how much we can do?
• When will we complete
• The Project Summary (Project Charter)-A document
describing the issues clearly, defines a
disability, information about members of the project
team, the goal of the project will conduct and
record the commitment to support the
implementation of those involved.
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the improvements?
• How much does defect cost
presently?
• Who will be involved in the
project?
• Who will sponsor, or
do support this project?
• Trend chart (Trend Chart) - Indicates the trend
of visual defect appear after some time.
• Pareto Chart (80/20) - Indicates the level
of visual impact and negative between the input
factors to output or level of disability.
• Process flow chart (Process Flow Chart) - to
understand how it works and the sequence of steps of
the current processes.
Table 2 . Define phase descriptions
MEASURE PHASE
Objectives of the Measure phase are to fully understand the level of performance in the
present by identifying the best way to assess current capabilities and begin measuring.
The measurement system should be useful and relevant to the identification and measurement
of sources of variation. This phase includes:
• Identify the specific performance requirements related to the Essential Quality
Characteristics ;
• Establish the process diagrams (process map) associated with the inputs (Input / X)and
output (Output / Y) were identified in which, at each step of the process, to express alignment
of the input factors can affect output factors;
• A list of potential measurement system;
• Analysis of the measurement system and establish a baseline capability of the process;
• Identify areas where errors in the measurement system may occur;
• Take measurements and data collection of input factors, processes and outputs;
• Verifying the existence of the problem based on the measurement system;
• Clarify issues or objectives of the project.
MEASURE PHASE
Questions need to be answered Most commonly used tools
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• What is current process we are in?
• How to compare the levels of
performance ?
• How output characteristics are likely
to affect the
most essential quality (CTQ)?
• Are input factors likely to
affect output (affecting CTQ) by the
most?
• Ability
to measure / detect vibrations of the
system was sufficient, was not?
• How’s the capacity of the
current process?
• How’s current active process?
• How well the current process can be
if everything is running smoothly?
• The current process may be perfect
that which’s according to the design?
• Fishbone diagram - to
show the relationship between inputs and outp
uts.
• Process Mapping - to understand the current
processes and facilitate the project team
can identify potential waste.
• Matrix of cause effect - to quantify the impact
of each factor input to the variation of the
outputs.
• analyze the status of errors and Impact
- use this tool in the measurement step will
help us identify and implement remedial
measures to reduce temporary disability
and save money charges as soon as possible.
• Assessment Reliability of Measurement
System- is used to analyze the variation of the
components of the measurement
system which will reduce the mistrust of
the measurement system.
Table 3 . Measure phase descriptions
ANALYSIS PHASE
In the Analyze phase, the parameters collected in the Measure phase are analyzed for
the author
theories about the root causes of variations in the parameters can be generated and
then proceed to verify.
Is at this stage, the real business issues to be switched on statistical issues, including:
• Generate hypotheses about the root causes underlying causes of variation and
essential inputs (X);
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• Identify a few factors and inputs the most significant impact, and
• Validate these hypotheses by multivariate analysis (Multivariate).
ANALYSE PHASE
Questions need to be
answered
Most commonly used tools
• Is inputs that have the
greatest
impact to the quality
of the basic output
characteristics (based
on actual data)?
• How much the extent
should be?
• Is the combination
of the
variables affecting the o
utcome?
• With changing
inputs, is outputs
corresponding changes a
s expected?
• How many
observations can
be conclusions?
• How much the
reliability of the
conclusions is?
• 5 Why (Five Why's) - use this tool to understand the root
causes of defects in a process or product, and to be able to
break the default wrong before about the causes.
• Assess the distribution characteristics (Descriptive
Statistics, Histograms) - This tool is used to determine the
characteristics of the collected data are normal or abnormal to
help us choosing the tools of statistical analysis appropriate
later.
• Analysis of correlation / regression (Correlation /
Regression Analysis) - To determine the relationship between
the inputs of the process and the outputs or the relationship
between the two groups of data variability.
• Dynamics of the main actors (Main Effect Plot) - Displays
the main agents of the studied ones.
• Analysis of variance (ANOVA) - this is inferred statistical
tool is designed to test for significant differences between the
mean value (mean) between two or more samples.
• Complete the table FMEA (Failure Mode and Effect
Analysis) - application tools on current processes helps us to
determine the appropriate action to improve the disability
prevent recurrence.
• Methods to verify the hypothesis (Hypothesis testing
methods) - this is the set of tests aimed at determining the
source of variation using the data in the past or present to
provide objective answers to questions that were previously
often a subjective answer.
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Table 4 . Analysis phase descriptions
This step allows us to analyze the methods used and the specific statistical tools to separate
the main factors that are critical to a comprehensive understanding of the causes of defects.
IMPROVE PHASE
Improve phase focuses on developing solutions to eliminate the root causes of variation,
proven and standardized solutions. This step includes:
• Identify ways to eliminate causes of variation;
• Validation of the input factors;
• Explore the relationship between the variables;
• Establishing tolerances for the process, also known as upper and lower limits of the
specifications or customer requirements for a process to evaluate the response of a specific
characteristic, and if stable process operation within these limits will help create the product
or service quality expected;
• Optimizing the input factors or reconfigure the parameters of the processes involved.
IMPROVE PHASE
Questions need to be answered Most commonly used tools
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• When will we know
the inputs that have the greatest
impact to the outputs?
• How do we have to control them?
• Is that we need to try many times to
find out and determine the operating
mode / regulation,
optimal inputs for this major?
• The old process should be
improved and what is the new
process will be like ?
• How much has reduced Defects
Per Million Capacity (DPMO)?
• Flowchart (Process Mapping) - This
tool helps to represent the new process was
implemented after the improvement.
• Process Capability Analysis - to test
the capacity of the process after
implementation of improvement actions to
ensure that we achieve a real improvement in
the prevention of disability
• Experimental Design - the set of tests
were planned to determine the mode /operating
parameters to achieve optimum output as
expected and confirm the improved progress
Table 5 . Improve phase descriptions
CONTROL PHASE
The objective of the Control phase set the standard measures to maintain performance and
fix problems as needed, including issues of measurement systems. This step includes:
• Improve the measurement system;
• Proven long-term capacity of the process;
• Implementation of process control by control plans to ensure problems do not reoccur by
continually monitoring the processes involved.
CONTROL PHASE
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Questions need to be answered Most commonly used tools
• When the defects have been
reduced, how can
we ensure that improvements are
sustained?
• What systems should be
applied to test the implementation
of improved procedures?
• What’re measures to
maintain the results even when
things change that we need to
establish?
• What’s the lesson can
be improved for everyone to
share in the company any way?
• Planning and control (Control Plans) - This is
a document or set of specified actions,
including schedules and responsibilities necessary to
control the variable input factor
essential to the optimal mode of operation.
• Process Mapping with Control Points -
Includes a single diagram or set of visual
diagram shows the new process.
• The control charts in statistical process- A set
of charts to help track the process by displaying the
data over time between the upper
standard limit (USL) and limited standards under
a center line
• The inspection
slip (Check Sheets) - This tool allows us to store and
collect a systematic way from the source data in the
past, or past events arise. Accordingly, the
form repeated patterns and trends can be identified
and clearly presented.
Table 6 . Control phase descriptions
In short, the selection of Six Sigma projects at an early stage is very important and therefore it
plays a key role for the success of the Six Sigma project organization should consider
carefully the implications can affect the success of the project as well as considering the
possibility of solving the problem without implementing Six Sigma project
2. The process of applying Six Sigma at OJB in period of 2004-2006
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2.1. Business situation of OJB
a. The main business line
OJB obtains permission to do the operation as followings:
- Capital mobilization: deposit-taking, bond financing to build up the funds from both of
inbound, outbound organizations or customers.
- Financing to respective organization or customers with various types of loans, discount of
claims, finance leasing…that are under permission of the State Bank of Vietnam.
- Performance the guarantee of funding, payment, contract implementation, performance bond
and others banking guarantee forms for financier or personals that definite in relevance
documentary provided by the State Bank of Vietnam.
- Investing in contribution or buying stock of inward or outward companies as well as
financiers from sources of charter capital and provident fund.
- Inward currency exchanging and trading on foreign currencies and gold (the outwards
intended to joint as soon as receiving SBV’s acceptance)
- Assigning and operating commission, represent in the respective banking factors.
- Providing all kinds of domestic payment, safekeeping treasure, valuable document, pledge
services, storehouse, and warehouse lassoers.
b. Capital mobilization status
First of all, capital mobilization is an indispensable operation to banks hence it makes the
main resource what to be used for others such as: financing, payment services…
Prior to changing to Urban Commercial Joint stock bank, OJB had been operating within the
limits of Haiduong civil thus, its capital mobilization was sparing with quality and quantity.
Otherwise, this tragic situation also became from competence of the other big bank. So, when
finish this Six Sigma changing, expanding the network along with the new friendly interest
policy, it’s consequently to OJB raise up rapidly its capital mobilization.
As a result, building up the fund of OJB is described by the Table 7
Unit : Millions VND
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ASchedule
figure2004 2005 2006
Margin
2005/2004
Margin 2006/2005
Amount % Amount %
2 Capital Mobilization 63.255 139.184 800.071 +79.929 +120 +660.887 +475
3 Non-personal deposit 36 81 450.179 +45 +125 +450.098 +562
4 Saving deposit 63.219 139.103 186.975 +75.884 +120 +47.872 +34
5 Other deposit - - 56.817 - - +56.817 -
6 Borrowing - - 106.100 - - +106.100 -
Gross resource 78.350 161.700 1.001.335 +83.350 +106 +839.635 +519
Table 7. OJB capital mobilization situation
(Source: OJB annual reports 2004-2006)
The changing situation of capital is realizable through above data sheet in the period 2004-
2006. In the details, OJB capital has been promptly raising up in running, especially in 2006.
In 2005, gross resource made 161.700 millions VND, an increase of 83.350 millions VND
compared to 2004, respective raising rate is 106%. In 2006, gross resource (including VND
and foreign currency) made 1.001.335 millions, increasing 389.635 millions VND in
comparison with the year of 2005 via growth speed 519%, In more details, the non-personnel
depositary had been overshooting with speed of 562% beside 2005. Inside the table, we also
know that in the years of 2004, 2005, OJB primarily had build up the fund through saving
depositary but in 2006 the mist mode of financing is non-personnel one.
That is to say 2006 was a year in which the gross resource of OJB had been made a highest
degree of thriving as much as rapidest speed compared with the same period last years. It’s
logically to get this encouraged progress when the speed of Haiduong urbanization in 2006
has been swiftly booming (Haiduong tends to be class 2 Urban in 2008). Thus, there are many
plan of capital construction, industrial zones in the stream of establishing companies has been
attracting much of outward investing monetary flow. Moreover, OJB itself has rationalized
financing assignment, essential customer care policy, good-mannered, applying flexible rate,
and spreading marketing operations, keep up the precise public relation for making name OJB
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as a strong trademark. Through all theses activates, applying Six Sigma helps OJB manage its
process effectively, especially suitable with the new high requirements from customer. From
hence, OJB is more and more available to catch the dormant capital from enterprises and
citizen. Besides, OJB has carried out modernizations in information technology for banking
process, establish the PCs network connected to the whole system to improve capacity.
Customer orientation is to serve customer promptly and effectively. As a result, the opening
transaction account number to be increased more and more.
Particularly, one more competence development comes from a Six Sigma project for the big
client of OJB is in progress. In the case of clients who have very big dormant capital, OJB has
been providing various priority methods over usual to harmoniously ensure the valuable
benefit for both sides of consigning and purchasing parties. OJB upholds to appoint credit
clerks to the every big client for updating related vouchers, set up the particular mobilized
workgroup that stand by client’s office. In addition, OJB has essentially applied the interest
rate within permission of SBV to build up a stable and solid situation in banking performance.
2.2. Implementation of Six Sigma at OJB
In 2004, Asian Productivity Organization (APO) to approve the project Six Sigma in OJB to
promote the effectiveness of Six Sigma in improving yield and quality of the organization /
enterprise. The project started out in OJB from 1/2004, and was successfully
concluded on 12/2006.
The purpose of the APO project is selected as the concept model for OJB application of
Six Sigma in Vietnam, through which the effect of promoting the application of Six Sigma in
Vietnam and other countries in the APO zone, simultaneous transfer of knowledge and
experience in Six Sigma for IT professionals by Vietnam Productivity Centre (VPC) .
Six Sigma is a very effective tool in reducing waste, improving productivity, reducing product
defects, improves customer satisfaction.
The project launched with the participation of three partners: APO +VPC + OJB. At that time,
OJB was about Three Sigma level, according to studied survey that carried out before. The
bank is striving to improve operational efficiency and quality customer service to become the
first class bank in Vietnam. During the recent challenges of the global economy,
OJB increasingly need to accelerate process improvement systems and processes to adapt to.
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The pilot projects were selected to apply the Six Sigma process improvement are:
• Project 1: Improving the management and operation of ATM
• Project 2: Improving the lending process
• Project 3: Improving the process of document rotation
• Project 4: Reducing the processing time to the customer portfolio
Six Sigma experts from APO undertook to guide the project team of OJB by below methods:
TRAINING – PRACTICING – CHECKING.
• Phase identification (Define): The group identified the problem, given the context of the
project, analyzing the benefits the project may bringing, pointing out the roadmap, project
scope and project team list.
• Phase measurement (Measure): The problem is identified, the focus group analysis
found the factors affecting the objectives of the project and start measuring, collecting
data to clarify issues .
• Phase analysis (Analyze): The purpose is to use statistical tools, analysis tools to find
the root cause of the problem.
• Improve phase (Improve): This phase groups offer solutions to the root cause of the
problem to eliminate or minimize the causes.
• Phase control (Control): The group implemented the solution on a pilot scale, measure
and provide procedures to maintain the achievements of the project a long-term and stable.
In this essay, only improvement related to credit factors would be collected and described as
an example result of Six Sigma enhancement. In each operation process of OJB, project team
work in group try to find the root cause that may perspective takes improvement with
suggested changes. The cycle PLAN – DO – CHECK – ACT has been used to adjust every
activity until they agree with a fully work-out proposal. However, every improvement should
be enhanced by the times, applying Six Sigma process at OJB also abide by this rule as well.
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Figure 2. OJB’s lending process
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Receiving
document
Leader
approving
Inform to
customer
Verification
Ratifying
Loan making
decision
Disbursement
procedure
Post-release fund
control
Re-
screening Inform to
customer
20
Figure 3. OJB’s documentation rotating process
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Customers
Credit document
Credit Clerk
Manager
Director
General director
Credit board
Re-screening
21
2.3. The result obtained when applying Six Sigma at OJB
With many difficulties to overcome both the objective and subjective, but after 48 months of
pilot projects ended with many positive results.
IMPROVEMENT
Project 1- Reduce the 3 steps in the process of ATM funds and
increase machine uptime from 95% -> 97%,
- Savings VND 111,286,666 / year.
Project 2- The average time steps of process were reduced from 120 minutes to
80 minutes (~ 25%) of Disbursement procedure to Post-release fund
control.
- Down 47% on-time error detection of Receiving document.
- Down from 18 days to 5 days to minimize the risk of Ratifying
steps.
Project 3- Reduce the 7 sub-steps and 4 signatures of approval procedures
- Increase the Sigma level from 1.6 to 2.5,
- 20% saving transaction time for customers (from 198minutes
to 162 minutes);
- Improve customer satisfaction (from 48.2% to 68.7% customer said
Satisfy in service feedback form).
Table 8. Summarized results of Six Sigma projects
(Sources: Quoted from OJB reports)
Over the Six Sigma methodology can draw the lessons learned are:
Commitment of the leadership-management key to success Six Sigma started from the top
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down and top management department will have to commit sufficient resources.
Six Sigma will not be successful without the support from top management department
The participation of all employees:
Six Sigma requires a change in culture, it changes the way we work. All member
companies must participate and we are committed to make them change. The active
participation of all employees at all levels will ensure the success of the project
Start from small things.
We should focus on small projects to be able to achieve success quickly. If a project
seems massive, break it into smaller projects to be sure to use resources efficiently.
Continuous Training
All employees must be continuously updated techniques solve this problem continuously. It’s
important to create equal educational opportunities for all members of the company.
Make decisions based on facts
Six Sigma goals of working with data. All decisions should be based on reliable data.
3. Some measure to raise the credit quality at OJB
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Even though the government has provided guidelines for commercial bank to have certain
autonomy in their lending decision and responsibility for those decisions, but in reality, banks
do not always have such autonomy. Often times, banks suffer influence from multiple sources
(from local authority or person of influence) the banks lend to businesses that in all fairness
should not be able to procure loans. Heightened risks are due to situation such as these.
A reality that we have come to terms is that presently in Vietnam, an independent credit
ranking bureau has not established. This is an important factor that one must not over clock.
Banks lack unbiased information in the process of examining, understanding and valuing
potential customers in order to accept or refuse a loan application. This limits the ability to
expand credit because banks are not willing to take risks with businesses that they are
uninformed about.
Two components that go hand in hand with credit are risk and profit. If the bank is only
interested in pursuing profit but lack necessary caution in risk management, then the
probability of the risk is high, but instead, if there is not too much spotlight on risk and very
cautions in terms of lending, then the bank may face the possibility of loosing valuable
customers and much profit. This is an issue of balance that not only OJB but all national
banks are facing. Undue stress is placed on safety of fund that the trend is that most banks
limit lending to independent business.
Admittedly, lending to private business in the recent past is risky, nevertheless, not all
international entrepreneurs are created equal, they are aware of their roles in economics. This
is what banks, including OJB, need to focus on in the near future.
No Quotients 2004 2005 2006
1 Mobilized capital/Outstanding 0.98/1 1.26/1 1.21/1
2 Lending revenue/Outstanding 0.84/1 0.87/1 0.83/1
3 Receiving interest from creditivities/Outstanding 6.4% 14% 6.4%
4 Receiving interest from creditivities/Total returns 92% 96% 89.7%
Table 9 . Analyzed quotients of credit quality over 3 years
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The bank’s marketing activities have not really been studied. This kind of work has only been
done cosmetically, a kind of public relation and propaganda that does not come from vigorous
research, therefore unable to grasp fully the need of market in order to satisfy that need.
Previously, the bank’s marketing activities has been considered duties of marketing agents,
but in fact, it is the duties of all banking staff. This weak point is not only seen at OJB but
almost all banks in Vietnam. OJB’s debt over proportion still be ideal but its customer relation
is not really, as they always put forward “My role is your partner”. The mainly supports to
companies of OJB operations just has been debt adjustment, debt extent, added lending
capital, so not yet performed consulting orient role to help companies solving their difficulties
in business.
First and foremost, thoroughly OJB’s lending followed economic sector structure; lending
proportion of public sector still is at high volume. The state-own is very high-risk potential
customers because of small capital owned, lacking of mortgage and much more problems
belong to its essence. The private sector has been not oriented as proper as it should be.
In other sides, a professional skill in appraising has been not qualified in fact, especially in big
size projects such as: construction, heavy industry, trading….Therefore, quality of credit
appraising has still lowed, namely determining practicability of projects, lending projects,
specifying accruement source, borrowings aim using, disbursement time, puzzle in defining
and applying lending modality…Each of these problems all together made an adverse effect
into OJB operations and miss the business opportunities of its customers.
Human resources – this is concentrated matter among others. In credit sector, if creditors
have no possibilities to analyze project/plans, to evaluate the market…then they can not
access the practicability these projects/plans as a mistaken appraising that may lose investing
opportunities of their customers. Additionally, in information collecting, if creditors lack of
necessary skills, they will not fulfill needed information for projects/invested plans. Even
completing information phase, they could not use or analyze sensibly without level of ability.
It’s certainly that Six Sigma not to be the magic key for all problems that OJB have. So it may
help to reliably reduce the defects in every operation process. In the last part of this essay, we
attempt to look inside some processes that Six Sigma appliance could get the positive result as
it done before.
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One of the main and fundamental types of risks in banking activities are the irrecoverableness
of debts that have negative impacts on the business efficiency, reducing profit, limiting the
growth speed of debt balance and capital rotating speed; depriving the bank of payment
capability of the bank at the higher level. Therefore, restriction and minimization in business
risks are always the top priorities and the highest goals of bank’s administrators, requiring
banks in particular and banking system in general to implement the effective professional
measures in business activities with a view to improving bank’s credit quality.
3.1. Building business strategies
Business strategies are always the expressions of the long term basic goals of a bank; selection
of operating directions and allocation of necessary resources to achieve these goals. Thus,
business strategies are first and foremost very essential and of decisive meaning to the
existence and development of any banks. Business strategies have significant influences on
the quality of banks’ operations especially the quality of credit. So, if a strategy is not built in
compliance with the real ability of the bank and the market demands, then that bank shall have
the wrong steps that affect the efficiency of its operations. But if there are not business
strategies, the bank can not foresee the possible changes. Thus, it does not have overcoming
measures.
Additionally, competitiveness between banks have become increasingly fierce in the economy
market nowadays. And that is the reason why it is a must to have a business strategy suitable
with the market practice and the bank’s capability.
To follow this goal, the bank should simultaneously carry out measures as follows:
-First, enhancing and developing regular customers. Ocean Joint Stock Commercial Bank
needs to simplify its loan procedures for enterprises that are its regular customers based on
assurance of safety, satisfying the enterprises’ demands in a timely and quickly manner within
its ability, creating comfortable, trustful and secure psychology and feeling for the customers.
For customers of long-lasting good relations, it is essential for the bank to shorten the
appraisal time as well as other loan-guarantee stipulations.
-Second, for customers of non-state owned enterprises such as joint stock companies, private
companies…, Ocean Joint Stock Commercial Bank needs to have specific policies aimed at
promoting the potential of this customer group. In practice, the number of customers of non-
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state owned enterprises accounts for a high percentage of its customer base. Although these
enterprises enjoy high possibility of risks objectively and subjectively, not all non-state owned
enterprises have the same way of doing business. Many enterprises do business efficiently,
make profits and repay the full loans for the bank. In the transitional period of the economy,
the number of non-state owned enterprises being established has gone up significantly. If the
current situation still remains unchanged, the bank shall miss such a huge source of benefits
and the competitiveness in the area is certain to be reduced.
-Third, selective expansion is done for the new groups of customers. The bank must be
dynamic to take all necessary measures to attract customers in the state owned area to make
closed loans compatible with production process. At the mean time, setting and improving the
efficiency of credit information processing based on the fact that the bank must select
customers through various and essential measures to heighten its market share of the
customers being the general corporations.
Through building customer strategies, the bank can manage its customers more practically.
Owning to this, the bank can participate into new projects of enterprises actively and directly
at the very initial stages, not having to wait until these enterprises ask for loans. Obviously,
through this, the bank can have deeper understanding of the projects.
3.2. Diversification of credit activities
Diversification is one of the operating guidelines of the bank with a view to decreasing risks,
assuring safety both for the bank itself and the depositors. Diversification of credit activities
consists of the diversification of loan methods and loan for trading fields.
-Diversification of loan methods: it is necessary for the bank to supply loans under
commercial paper discount. It is a specialist skill of low risk because discount allows banks to
have the right of recourse when it fails to collect debts from the issuer. Moreover, discount
does not make the banks’ capital frozen due to short duration. Because it is possible to
rediscount, capital of banks can be rapidly cleared, the liquidity of banks’ assets is improved.
Furthermore, the bank can use other different lending measures such as: lending through the
issuance and usage of credits, rotation lending…The bank can combined different lending
methods at the same time. For the new lending methods, the bank should make clear and
thorough explanations to the customers in terms of methods, advantages and disadvantages of
each type so that the customers can carry out their borrowings conveniently the next times.
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After each time of new method application, it is very pivotal for the bank to gather and
summarize opinions from the customers to bring into full play the strengths and minimize
weaknesses of each method.
-Diversification of loan for trading fields: In economic industries, Ocean Joint Stock
Commercial Bank lends in various trading fields such as tourism commerce, capital
construction…This is quite suitable with the banks’ role. However, the bank should also
attach importance to lending in the traditional trading fields of customers, concentrating on
loans for trading fields that are not considerably influenced by globalization process and
schedule of Vietnam’s accession to the WTO… By this way, the bank can disperse and divide
risks and raise profits. To perform this well, Ocean Joint Stock Commercial Bank must focus
more on seeking and exploitation of customers in this fields; improving appraisal activities of
the projects; enhancing the professional knowledge of credit staff about this field.
3.3. Efficient implementation of credit activity processes
Process of credit activities includes the basic professional contents, implementation steps from
the beginning to the end of a loan which main points are appraisal stages regarding financial
efficiency of the loan; inspection of the borrowed capital usage of the customers, reminding
them of the loan and loan interest payment duration so that they have payment plans… This is
necessary work for credit staff when carrying out their lending aimed at restriction of capital
loss and minimization of risks.
To lend effectively, it is a must to follow and execute fully and strictly the lending process
especially perform well the appraisal activities on the project finance, seizure of information
about the customers, business and production situation of the customers, capital using
purposes, perform well the appraisal activities for each phase of lending process in order to
the lending quality, decrease the risks for the bank, accelerating the production because if the
project’s borrowing method is feasible, the customers use their capital efficiently, then their
credit-worthiness is very solid and reliable. The more effective the appraisal and inspection
stages are, the higher the capital recovery possibility of the bank is and this assures the credit
quality of the bank. Therefore, improvements of professional knowledge during credit process
are extremely essential.
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3.4. Enhancing inspection activities of credit loans
Banking activities are the ones of closed relation with business production activities of fields
in the national economy. Economic fields want to develop and expand their sizes, capital
sources needs to be added by borrowing from the bank. If business production activities of
enterprises are inefficient, it leads to credit risks. Therefore, commercial banks in general,
Ocean Joint Stock Commercial Bank in particular lending enterprises should inspect
stringently and closely the capital using process of enterprises.
Inspection before lending: inspection of the validity, legality of loans and the related people’s
signatures; the match of date and figures of papers and relevant documents, whether involved
credit staff and leaders implementing the lending process in accordance with the stipulations
or not.
Inspection during lending: Inspection during delivery of loans, if transfer of payment to the
counterparts of the borrowing customers is done correctly and suitable with the borrowing
purpose or not, having adequate legal and valid evidences or not. When loans are signed and
approved for disbursement, the credit staff must keep capital borrowing dossiers and other
supplemented documents during observation duration of debt collection until the debt is fully
repaid and transfer of documents archived as stipulated.
Inspection after lending and debt recovery: After granting loans for customers, the tight
inspection and observation on the customers of the bank shall reduce their needs and
intentions of misusing the loans.
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