Collections Accountability Leases that Terminate into Term Code TMDCR Tom Merry October 23, 2003 Week 4 Presentation

Week 3 Presentation n Project Outline  Problem Statement  n Analyze Phase  Pareto  Cause & Effect Diagram (C&E) and Matrix  Failure Mode & Effects Analysis (FMEA) n Measure Phase  Data Collection Plan  MSA  DPMO and Z score  Project Benefits n Define Phase  Big Y  Process Maps n Next Steps n Questions n Appendix

3 Project Outline n Problem Statement: This project focuses on improving & establishing appropriate billing processes to maximize collections for IOS Capital lease agreements that have met their obligation and have then been terminated. n Goal: To increase collections revenue while minimizing any associated incremental collections costs. n Defect: Failure to collect any dollars owed and/or failure to have less than 50% of A/R balance over 90 days.

4 Define Phase Project Metric “Big Y”:  Y = Dollar Opportunity to be Collected  Data shows $16,000,000 in TMDCR “Now Due” bucket  Greater than 80% is “not owed” by customer due to delays in our process that lead to continued billings – determining this is the main challenge of the project  Y1 = What customer owes (buyout/payoff quote sent to customer by IOSC)  C1 = Collection $ from Y1

5 Define Phase Delays Cause Monthly Billing To Continue Sales attempt to save customer Collection time (some Marketplaces) Time between Pick Up and Term

6 Define Phase Termination Occurs And Billing Discontinues Pick Up & Term then Collect Collect & Pick Up then Term

7 Measure Phase n Data Collection Plan  Challenges on “Big Y”  Y1 = IOSC mailed quote (Report capability 8/1/03 – current) Previously - quotes captured in comments (unreliable)  C1 = $ collected on Y1 to provide a “run rate” (C1/Y1) to be measured weekly (Since no collection activity C1 expected to be very low)  Both reports due 10/20/03 (may have some conclusions that weren’t in time for this presentation  Estimation of Big Y = (average $ / Y1) x total # TMDCRs and / or Estimation of Big Y = ( Y1 / Now Due Y1) x $16 m

8 Measure Phase n Measurement System Analysis  Term Code Accuracy 30 samples tested for accuracy by a process expert and resulted in a 10% error rate Learned that if Marketplace sends a TMDUP or TMDPU then there is no way to distinguish between TMDCR 160 more samples ( 5.6% error rate) “New contract” report within 60 days of term being run on these customers to indicate a possible mistake on term code. Further research with the marketplace then required to validate. Initial data shows that 7.1% are coded incorrectly. (new data – 30.6% in question)

9 Measure Phase n Measurement System Analysis  Buyout / Payoff Quote Accuracy 30 past scenarios to be quoted by an expert. Then 3 current process employees to quote the samples two times. To be measured against the expert, against each other, and against themselves To be completed week of 10/27/03

10 Measure Phase n Defects per Million Opportunities (DPMO)  Customer expectation is to have less than 50% AR balance > 90 days. Our current process doesn’t come close so DPMO is 1,000,000.  Run Rate = C1 / Y1 (t)t = weekly measurement  DPMO = (1 – C1 / Y1 (t)) x 1,000,000  Current data and process knowledge indicates DPMO will be very high n Z Score  To be determined after data collection is complete

11 Measure Phase n Project Benefits  No “real” dollars available until Y1 is collected. However……..  Project benefit of $250,000 or more to continue is required: So…… If we’re conservative and 18,000 TMDCRs coded annually and 70% actual TMDCRs = 12,600 and $100 per TMDCR = $1,260,000 and 75% aren’t currently collected = $945,000 Collect 50% = $472,500 potential benefit

12 Analyze Phase 5E 5A 5B 5D ½ of Terms Are from Team 5

13 Analyze Phase Inability to Collect “Now Due” after TMDCR

14 Analyze Phase C&E Matrix Results

15 Analyze Phase Failure Mode & Effects Analysis (FMEA)

16 Analyze Phase Failure Mode & Effects Analysis (FMEA)  Possible Corrective Actions Online termination request Initiate pick up immediately Customer lists updated and accurate Train sales to educate the customer before purchase Terms to be more clear Logistics enters pick up into system, it sends flag to OC Training flowchart / cheat sheet for CITs HR/IT - change voic when employee terminates “Stop-gap" - IOSC absolutely needs fax before creating PRS Monthly update on bill with buyout quote (after lease end) RAP sessions (ensure reps are organized) Get "right fax"

17 Next Steps n Data Collection “Big Y” & DPMO  Collection to be completed week of 10/20/03 n Measurement System Analysis  To be completed week of 10/27/03 n Analyze Phase  Data collection on X’s  Conduct Hypothesis Testing  Graphical Analysis n Improve Phase  Pick Up Fee  Variable Relationships  Alternative Solutions  Determine “Best Fit” Solution  Control Phase

18 Summary  Questions?

19 Appendix n Focusing only on Term Code TMDCR – “Contract has reached end of term (or gone into auto-renewal) or has less than 2 months left to be paid. Machine is being returned.”

20 Appendix

21 Appendix n CT Diagram

22 Appendix n SIPOC Diagram

23 Appendix n Original Project Benefits:  Current data shows that IOS Capital does not pursue approximately $14M of charges (including equipment lease charges, late payment charges, overage volume charges, and related taxes).  Using a conservative collections rate of 3%*, and assuming no material incremental fixed collection costs, the project benefits are estimated at $420,000. * 3% was used based on Financial Analysts understanding that most of the dollars are unable to be pursued (as much as 90%) and the rest would flow thru at approximately 50% (current IOSC run rate on similar collections).