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Beefing Up Business Processes

Businesses of all kinds are finding hidden millions to add to their bottom lines by using statistical measures and quality improvement techniques to boost performance and availability across the board. If statistical measures of quality improvement are Greek to you, it may be time to learn a language that could save your company millions - or even billions of dollars.

Beefing Up Business Processes
By Jacquelyn Brown

Businesses of all kinds are finding hidden millions to add to their bottom lines by using statistical measures and quality improvement techniques to boost performance and availability across the board. If statistical measures of quality improvement are Greek to you, it may be time to learn a language that could save your company millions - or even billions of dollars.

Six Sigma: A New Name for Process Improvement
What's in a name? Process improvement by any other name will get the job done, say Six Sigma detractors. But proponents of the statistical measurement tool known as Six Sigma say that reaching the Six Sigma level of quality is comparable to winning a gold medal in the Olympics. Defects (specific occurrences of conditions that do not conform to expectations) virtually disappear, and companies can save millions.

Sigma is the Greek letter used by statisticians to mark a bell curve of data showing the normal distribution from the lower control limit to the upper control limit, to show the likelihood of deviations from the norm. It is defined as 3.4 defects per million occurrences, or 99.9997 per cent perfect. To achieve Six Sigma, a company must progress through levels Three, Four and Five Sigma. Companies consistently operating at Three through Four Sigma experience, on average, 67,000 defects.

The Six Sigma method requires the use of data to measure, analyze, improve and control a company's performance. While based on many of the older quality tools, Six Sigma also integrates customer requirements early in the collection, measurement and testing of data. The result is improved productivity, waste reduction or elimination, and greater efficiency, all of which can result in a healthier bottom line.

Championed by the likes of former GE Chairman and CEO, Jack F. Welch, Jr., and Allied Signal CEO, Larry Bossidy, both of whom credit Six Sigma with saving billions of dollars for their companies, Six Sigma measurements and tests can show a company exactly where its problems lay and identify ways to eliminate them.

Hannah Feldman, a consultant with Rath & Strong Management Consultants in Lexington, Mass., said that while her company has been advising clients on the merits of continuous process improvement for many years, the firm joined the Six Sigma bandwagon some seven years ago, incorporating the name and methodology of Six Sigma in work with its clients, which include Johnson & Johnson, Seimens, Merck and Owens-Corning. Feldman said Six Sigma had its genesis at Motorola, but it really took off when Allied Signal's Bossidy turned his friend Jack Welch on to the Six Sigma method.

"GE experienced incredible results," she noted.
But Six Sigma is not for the fainthearted. It requires a considerable investment in manpower and resources for implementation. Leadership buy-in and commitment are imperative, and availability is maximized when there is cross-functional input. It is not uncommon for a company to invest millions in implementation of the process. In fact, when GE embraced Six Sigma in 1996, the company spent $200 million on implementation, realizing savings of $170 million. Then the following year, GE spent $380 million and saved $700 million.

Process Improvement by Any Other Name
Ken Holland, manager of support for Qualpro, Inc., believes his company's program is actually preferable to the much-touted Six Sigma approach. "I think Six Sigma is just the latest fad in the process improvement arena. Looking back, you can see the evolution from TQM to re-engineering to Six Sigma,"he said

"We feel that what we do is superior to Six Sigma,"he said. "That system looks at improving your internal operations, focusing primarily on cost reductions. They only analyze what is going on currently in your processes. We feel you have to not only cut costs, but also grow your revenue,"Holland said.

He adds that this growth strategy has paid off handsomely for Qualpro's clients, which include Toys R Us, SBC Communications (Pacific Bell, Southwestern Bell, Ameritech and 60 percent of Cingular), DuPont, (EI duPont De Nemours) and Boise Cascade.

Holland points to one major retailer that used QualPro's Multi-Variable Testing (MVTs) to improve sales operations. "We focused on testing new ideas for improvement, using 20 or more variables at one time. After we sorted out the data statistically and the company implemented changes, it experienced a tremendous surge in both sales and stock position," he said.

Neil Ismert, of SBC Communications, noted that his company used the QualPro process to "touch all areas of the business -literally hundreds of MVT's. The bottom-line impact for the first 10 years is approximately $1 billion," he said.

And, using the Qualpro approach, Progressive Insurance, a major auto insurance company based in Ohio, was able to identify two actions the company needed to add to its sales process. The new actions generated a significant increase in new customers, which in turn brought in a quarter of a billion dollars each in incremental revenue, according to Holland.

Process Improvement in the Fourth Estate
Debi Brown, continuous improvement manager for The Knoxville News-Sentinel, in Knoxville, Tenn., joined the company to help implement a process improvement program called Partners 2000, as part of a pilot program to bring continuous process improvement to the Fourth Estate.

A project of the Newspaper Association of America, the Partners Program took off three years ago to meet the needs of advertising customers. The News-Sentinel was one of seven dailies in the initial pilot. There are now more than 50 participating papers in the project. Many have branched out from advertising and circulation to tackle problems in editorial, operations and other divisions.

"There's not much difference between Six Sigma and what we did. In fact, it was pretty much the same,"Brown said. Although the Partners 2000 program was custom-designed for newspapers, it was based on Sigma-like principles, with statistical measures and project teams. At The Sentinel, one team's goal was to improve page flow and reduce late pages by 67 percent within 60 days. Not only did the team accomplish that goal, it implemented more than 10 other page-flow process improvements, said Brown.

Brown, who cut her professional teeth on process improvement, with stints at Motorola, Qualpro, and Elo Touchsystems, said she sees nothing but good coming from continuous process improvement initiatives such as Six Sigma.

"In fact, there are some industries that really need Six Sigma, where availability is critical; for example, the airline industry and the medical profession. Technology companies could also benefit from Six Sigma," she said. "In fact, wherever availability is a critical factor, continuous process improvement can ferret out those variables that contribute to downtime."

And, Qualpro's Holland points out that, through good times and bad, process improvement is a necessary part of any company's best practices. "Companies will always invest in process improvement. When the economy is going well, companies have more income to fund improvement, but when things turn down, they have a greater need to become more efficient."

Jacquelyn D. Brown currently works in the Marketing Department as Community Services Manager for The News-Sentinel, and writes for

Copyright 2001, Reprinted by permission.


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