Pareto Analysis

Prepared by: Yiannis Giannopoulos

Individual assignment

Operations management

NYU - Skopje

Table of contents

Executive summary 2

Introduction of the company 3

Description of current situation 3

Possible solutions 5

Description of the proposed technique or planned change 6

Description of the new situation in the company 8

Justification of proposed solutions with cost based analyses 10

Implementation plan 12

Conclusion and recommendations 13

References 14

Pareto analysis for improving ISDN service

1. Executive Summary

The national telecom provider, MakTel, faces poor sales of ISDN service for several years. Although the service was introduced e years ago, utilization is less than 50%. Poor sales of the ISDN arise from quality of the service delivery.

Applying Pareto analysis about failures in the service delivery shows that the main problem is poor quality of network terminals and unqualified technicians (uneducated) for provisioning of the ISDN service.

By reducing the number of suppliers, replacement of all terminals from two vendors that count for 80% of all faults and establishing a commitment of long-term partnership with the best vendors the quality of the service will increase. The other improvement relies on the employees. Well educated, empowered and rewarded employees will deliver excellent quality.

Justification of proposed solution shows that in the period of one year the company will have benefit, which will be increased in the next years. An implementation plan is given. An education for technicians for provisioning and customer orientation will be organized in a period of a month. Meanwhile, the procurement department should conclude partnership programs with two vendors only, and operation teams should replace terminals from two vendors that count for 80% of total faults in terminals at the end of September.

Continuous measuring, reviewing and improvement of customer service, based on the customers' perception of how well the service is, not on how the company thinks it is, is a crucial factor for improving business growth.

2. Introduction of the company

"Makedonski Telekomunikacii AD" (MakTel) is a dominant provider of telecommunication services in the Republic of Macedonia (RM).

In 1999, the company was separated from its predecessor "PTT Makedonija" as a telecom provider. In 1998, the Company has been registered as a Shareholding Company owned by the Government of RM, in order to prepare for the future privatization. In 2001, the Consortium led by the Hungarian telecommunication operator MATAV, Soros and the Greek company CosmoTelco bought 51% of the shares of MakTel, thus becoming a dominant owner of the Company.

The Company's portfolio consists of a variety of products and services, starting with telephony services in national, long-distance, and international traffic, including ISDN services, value-added services, public payphones, up to Internet services and complex business solutions. At the end of 2005, the number of subscribers was 580,000, out of which only 6,200 are ISDN customers, which represent only 1,2% of total customers.

The Company will have a "monopolistic" position on the market for offering voice services until the end of 2006. Internet business competition exists from the very beginning of the Internet era in the country. The ISDN service is also under the monopolistic position and the Company is a sole provider of it.

3. Description of the current situation

In many households, there is a demand for several phone lines: one for business, one for normal family use, one for Internet, a different one for teenage children etc.

In most cases, ISDN is the solution because it offers multiple subscribers numbering, making it possible for as many as 10 numbers to be allocated per line.

ISDN (Integrated Services Digital Network) is a service offered by telecom providers. ISDN offers affordable high-speed last mile connectivity. The biggest ISDN applications are voice, Internet access, and videoconference and according to Heather (1995), "... few people had an obvious need for the depth of communications service that these lines provide."(p.53)

The Company introduced the ISDN service in 1999. From the 13.000 ports installed in the digital switches, only 6.200 have been sold until end of 2005. Six years after the implementation of the service in the network, and being in the company's product portfolio, the number of customers using ISDN service is less than 1.2% from the total number of customers. Although the company introduced the service almost at the same time as other telecom operators in Europe, the number of users in others countries is significantly higher (28% in Slovenia, 10% in Hungary, 32% in Germany). The disproportion is evident. The sales of ISDN in the Company are a problem.

Ron (2000) stated: "Since ISDN is digital service and capable of high rates of speed over the same pair of copper wires that service the POTS infrastructure, combining voice and data over a common medium, results in improved service capacity and higher quality"(p.70).

Although ISDN is a digital service and should result in higher quality, the perception of MakTel customers of ISDN as a poor service quality is one of the biggest problems for increasing the sales.

According to the faults statistics for 2005, on existing 6200 ISDN subscribers were reported more than 2400 faults. In the previous years, the ratio between the number of subscribers and the