Black belts and business excellence

Sanjay Matai explains the know-how and how-to implement the Six Sigma programme.

Six Sigma: A tool for business improvement was an introduction to the subject, the methodology and the benefits of Six Sigma. In this article, we examine the team and infrastructure required, the implementation strategy and some of the commonly used data analysis tools.

The team and infrastructure
Six Sigma is not a one-time department-centric quality improvement initiative. It is a continuous process. It cuts across various departments and functions in the company, and involves rigorous data measurement and analysis. Though experts are required to drive the initiative, it is not the solely the baby of a few experts. The initiative needs to be institutionalised; every employee must make it a part of his or her routine.

Therefore, creation of the necessary framework or infrastructure becomes the starting point. The important nuts and bolts of this framework would be the top management, the 'champions', the sponsors and the experts. These key players need to be adequately trained.

Top management
Six Sigma has to be implemented top-down. It involves changing many business processes, cutting across various departments. Therefore, the CEO of the company has to:

Actively lead the programme. Resistance to change is natural. He has to develop suitable compensation and reward structures to motivate the organisation to get involved in the programme wholeheartedly.

Develop a comprehensive plan and monitor its progress.

Align the Six Sigma programme with the broad vision and mission of the company.

Regularly communicate with the team and celebrate successes, to prevent the programme ending up as just another passing fad.

Ensure that all employees participate in the programme.

Champions and sponsors
Champions are persons amongst the top-management who understand Six Sigma and are committed to its success. They may, typically, be a business unit head who initiates the Six Sigma projects in their unit. As they understand the business, they would be most suited for selecting Six Sigma projects and ensuring their implementation and success.

Sponsors are the owners of processes and systems who, under the guidance of champions, help initiate and co-ordinate Six Sigma improvement activities in their areas of responsibility.

Experts
The day-to-day Six Sigma programme is managed by three levels of experts — the master black belt, the black belt and the green belt. They are the full time catalysts or change agents.

Master black belts are the most proficient persons in the team. Being experts in statistical and implementation techniques, they help champions to structure and co-ordinate projects. They provide the technical and day-to-day organisational leadership to the whole programme. They also train new black belts. Apart from possessing technical expertise, master black belts also need to be effective communicators and teachers.

Black belts are technical leaders that create and lead teams implementing Six Sigma. They must be experts in basic statistical tools and also possess strong management and communication skills. As agents of change, they must be able to think creatively and challenge conventional methods. They should be actively involved in the process of organisational change.

Green belts are individual project leaders who form and manage Six Sigma projects. These could be department heads. Trained in project management, quality control and problem solving, they help to incorporate Six Sigma methods into daily operations. They provide basic process knowledge and assist black belts in collecting and analysing data. They are not, however, employed full-time in the Six Sigma programme.

The Six Sigma programme can be managed by a small team of full-time personnel. A business unit with around 1,000 employees would generally need one master black belt, who would be assisted by a team of around eight to 10 black belts. Each black belt would complete about five to seven projects per year. Project teams are led by green belts. All the members of the team have a well-defined role with measurable objectives.

The training and infrastructure (computers, statistical software, etc) require a fair amount of investment. The top management must appreciate the value of this investment and give it their whole-hearted support.

The implementation strategy
The steps required to successfully implement Six Sigma are broadly:

Top management training
As mentioned earlier, Six Sigma is an enterprise-wide programme. It is usually effective only if implemented 'top-down'. Therefore, the Six Sigma programme should ideally begin with the training of the CEO and the senior management.

The idea of this training is to:

Introduce the principles of Six Sigma to the top management

Create an awareness of the various aspects involved

Develop the right perspective

Make them think and act cross-functionally
Only if the top management is fully conversant with the nuances of the programme can they ensure a successful implementation through their staff. Only if they are aware of the work involved, can they sanction the large budgets required in the initial stages of the programme.

The first stage also involves taking up a few representative projects to demonstrate the effectiveness of programme. It is important that these projects / processes are cross-functional and have some easily identifiable improvement parameters.

Strategic planning
Having familiarised itself with the programme, the senior management gets down to the business of setting up necessary infrastructure to support the Six Sigma programme, and sets up the steering committee. Employees who would be full-time in-charge — the master black belt and black belts — are identified and imparted the necessary training. All employees are put through an orientation programme.

The senior management must also spread awareness about the programme the concerned departments. An environment of innovation and creativity needs to be fostered. Policies and procedures regarding process selection, implementing improvements, rewarding success, not punishing failure, etc, have to decided and communicated.

Systems need to be developed to properly capture and integrate information, data and inputs that would flow from customers, employees, suppliers, etc.

Processes
With the entire infrastructure in place, the programme of process selection and improvement can start. The process selection team should be cross-functional, and also involve the owners of the processes. The processes selected should offer tangible benefits to the customers and be in line with the company's business strategy.

Six Sigma projects are conducted by small teams, led by green belts and assisted by black belts.

The improvement measures are identified and implemented. Regular tracking of the progress is essential, to prevent a waste of time, effort and money on non-viable solutions and to ensure the selection of measures which have large and long-term benefits.

Part of the system
Six Sigma should become a habit, a part of the system, an integral part of the organisational culture. A framework for continuous process improvement is established. All departments are actively involved. While some departments will identify and improve processes, other can assist and support them in this endeavour. For example finance will tracks costs and benefits, HR will communicate, IT will set up necessary systems, sales will gather customer feedback, etc.

This approach is simple, but not easy. But the results justify the efforts. It is seen that companies that have successfully implemented Six Sigma have performed better in virtually every business category, including return on sales, return on investment, employment growth, and share price increase.

Statistical tools help to derive useful information from the huge amount of data and help deal with process variations more effectively. The toolkit is diverse and flexible, and can be relatively sophisticated. Availability of user-friendly statistical software enables effective and broad utilisation of the statistical tools.

Some of the common statistical tools used in Six Sigma are discussed below.

Gauge repeatability and reproducibility studies help to estimate the contribution of variation attributable to the measurement system itself. They assess whether measurement processes and equipment produce consistent and accurate results. If these estimates indicate that the recorded measurements may be unreliable, this may impact all subsequent analyses. Without such studies, satisfactory parts might be rejected and unsatisfactory parts accepted.

Failure modes and effects analysis is used to identify potential failure modes of a product, the causes and effects of such failure, and possible solutions to reduce or eliminate them. During the design stage, it helps analyse and correct potential reliability problems.

Control charts display the results of a process over time. They are used to ensure that essential product characteristics remain constant over time and to determine the need for any process adjustment. Periodic sample measurements are plotted against the mean to check for any noticeable process shifts with time.

Process mapping. A process is defined as a series of connected steps or actions to achieve a desired outcome. A process map is a visual aid or a diagrammatic presentation of the work process, which shows how inputs, outputs and tasks are linked. It is one of the most effective ways of gaining an understanding of existing processes

Variance components analysis looks at different sources of variability and helps assess where the variations in product quality are occurring. It estimates the amount of variance attributable to the inputs separately. Isolating product variability problems is particularly critical to quality assurance, and provides insight into the sources of variability.

Pareto analysis is based on the principle that 'not all of the causes of a particular phenomenon occur with the same frequency or with the same impact'. Such uneven distribution of quality defects is very common and can easily be detected through a Pareto chart. This kind of analysis facilitates prioritisation and targeting these 'major causes' for cost-effective quality improvement.

Capability analysis. Process capability is a measure of the repeatability of a process. This information helps determine the proportion of output that will be acceptable. This tool assists in the maintenance of suitable product specifications. Such analyses can help evaluate both short-term and long-term variability.

Cause-and-effect matrix is also known as a fishbone or Ishikawa diagram. It is a brainstorming tool used for determining root-cause hypotheses and ascertaining potential causes (the bones of the fish) for a specific effect (the head of the fish).

Measurement system analysis aims at standardising the methods of analysis to ensure reliability and authenticity of the measuring systems. It is an experimental and mathematical method of determining how much the variation within the measurement process contributes to the overall process variability. It checks the bias, linearity, stability, repeatability and reproducibility of the measuring system.

Accelerated life tests help evaluate product life cycles and are particularly useful to test products designed to last for a long time. The estimate of the failure time distribution of products provides information about expected reliability in a short period of time, by accelerating the real-life conditions. Such tests are also good for finding dominant failure mechanisms.

Design of experiments is a structured method for determining the relationship between the factors affecting a process and the output of that process. It involves conducting controlled experiments and statistically evaluating the observations to determine how each input factor influences the output.

In the last article in the series, we will look at how Six Sigma is being employed in non-manufacturing situations and how it compares with other quality improvement tools.

Service with a Sigma-ile

In the final part of the three-part article on Six Sigma, Sanjay Matai shows how it can be used in service industries and compares it with other quality tools.

The earlier articles in this series acquainted us with the basics of Six Sigma, its benefits, the team and infrastructure required, implementation strategy and some common statistical tools. In the last part in the series we look at how Six Sigma is being employed in non-manufacturing situations and how it compares with the other quality improvement tools.

Six Sigma in non-manufacturing
Six Sigma began with quality improvement in manufacturing processes. However, its application has since been suitably adapted and successfully deployed not only in the non-manufacturing functions such as design, commercial, accounting, etc, but even in service-oriented industries such as IT, banks, schools, etc.

Consider the following facts:

Six Sigma is a broad framework and is essentially data-driven

It emphasises a cross-functional approach with a focus on overall business improvement

It is not restricted to just 'product' quality improvement

Many non-manufacturing processes and service functions relate directly or indirectly with the customer

Even in manufacturing, non-manufacturing elements like IT and after-sales service play an important role today
It is not only possible, but essential to bring non-manufacturing functions within the ambit of the Six Sigma programme.

Many non-manufacturing functions can be:

Looked upon as a statistical process susceptible to variation

Defined in terms of customer satisfaction metrics

Amenable to rigorous data collection and analysis

Appropriately modifiable to improve service levels

A few examples:

The time taken to answer the phone and resolve customer queries in a BPO

The number of customers handled per hour by a teller in a bank

The number of error-free bills generated by a telephone company

The minimum lead-time the logistics department can maintain, without disrupting production schedules

Minimising the time taken to book an airline ticket

The number of days it takes for an insurance company to settle a claim

The number of error-free deliveries by a courier company
Many such white-collar activities hold an enormous potential for improvement and can benefit from the rigour of the data driven Six Sigma approach. Whether it's R&D, commercial, accounting, banking, airlines or any other service industry, it is possible to identify a lot of functions that are repetitive, standardised and mechanical.

In a marketing department, for example, acquiring a customer may be a process that is unique to each individual or entity, and hence Six Sigma may not work. But there are processes, like dealing with quality complaints, which could benefit a lot from Six Sigma:

Cutting down the time taken to resolve customer complaints

Identifying common quality issues

Reducing costs

In market research, sampling techniques can be standardised and made more quick and accurate

In accounting, data flows can be streamlined and redundant activities eliminated to ensure faster and more accurate reporting of business numbers
The challenge, however, is that many such improvements may not be easily measurable, and the benefits may be more qualitative in nature than quantitative.

Six Sigma and other quality programmes
There are as many diverse quality improvement initiatives as the gurus that propound them. Some are successful, and some not so successful. Quite a few of them are no longer in vogue. A few of the popular programmes today include:

Total quality management (TQM)

Lean thinking

Theory of constraints

ISO 9000

Just-in-time

Toyota production system

Benchmarking

Value engineering

Each methodology has its own advantages and disadvantages. Depending on individual needs, budgets, management time, time frame, etc, the CEO and the senior management would have to assess the suitability of particular initiatives and adopt the approach that best suits the organisations needs. The choice of methodology adopted may differ, but there is no denying the fact that in today's competitive world customer satisfaction is paramount.

As far as Six Sigma is concerned, it does not conflict with other programmes. In fact, it complements and supports them by providing a focus:

Business focus: How to make the business more profitable

Customer focus: Quality improvement means not just improved products but consistently improving customer satisfaction

Enterprise focus: All employees are part of the initiative, not just a few quality control 'experts'
Even if companies have other quality improvement initiatives in progress, Six Sigma can only add value.

Six Sigma has its critics. They say that it has nothing new to offer; that most of the concepts and tools have been used in other quality initiatives; that it is focussed on problem solving and not prevention and that the failure of other initiatives may not have anything to do with the initiative itself, but come from lack of management focus, something that could happen with Six Sigma too.

But Six Sigma is not merely another quality improvement initiative. It looks at quality not as something external to the system, which need to be controlled and supervised, but assumes that quality can be in-built into the process. According to the Six Sigma definition, quality is what customers want, not what you can give.

To do this, it aims at improving and designing processes in a way that variations are practically eliminated, thereby creating products and services of the desired parameters, consistently. The focus is on processes and the people manning those processes, making them customer-oriented rather than job-oriented.

Process improvements help reduce defects to the minimum and as such result in huge cost savings. The methodology and tools used are standard and widely applicable. The entire effort is rigorous, data-driven and scientific. Six Sigma, however, is not a magic wand or panacea. Like any other tool, it needs to be used judiciously.

Six Sigma: A tool for business improvement - I

Six Sigma is a quality management programme that everyone has heard about, but know very little about. In this article, part of a three-part article, Sanjay Matai explains the nuts and bolts of this operational performance improvement tool.

The topic of discussion on a typical day in any company's top management would invariably revolve around two topics — costs and the customer. The business exists for the customer, and it is the company's business to meet the customers' needs to their satisfaction. Second, the more efficiently a company can manage its costs, the more competitive and profitable its business becomes.

It is in these two critical components of any business that Six Sigma has proven to be a successful process improvement and management tool. A quality management programme, Six Sigma is essentially a rigorous and disciplined approach that utilises data and statistical analysis tools to improve the operational efficiencies of critical processes, practices and systems aimed at reducing variations and eliminating defects in the company's processes and products.

It is based on a 'statistical thinking' paradigm: that everything is a process, that all processes have an inherent variability and that data can be used to understand and reduce variability through process improvement.

On the face of it, Six Sigma is all about achieving — consistently — a quality level where the defects are less than the statistical number of '6 sigma'. As the company moves towards achieving these quality levels, there is a profound impact on the 'customer' and the 'cost'.

The statistical number
Sigma is a Greek alphabet ( ? ) used by statisticians to measure the variability in any number about a mean. Say the mean was a desired customer specification. Then a process with +/- 3 tolerance would result in 67,000 defects per million; a +/- 4 tolerance would result in 6,200 defects per million. Traditionally companies have been following a standard of 3-4 sigma performance levels.

However, it was observed that with time, most processes also showed a shift in the mean from the target value. This was primarily owing to normal wear and tear, and increasing process complexities. Hence even 3-4 sigma processes resulted in significantly higher number of defects. This shift was empirically taken as an average of 1.5 sigma.

The 6-sigma tolerance levels, together with the mean shift, results in the defects reducing to just 3.4 per million, which means near-perfection quality levels of 99.9997 per cent. Today, however, Six Sigma is often interpreted to mean producing a product that satisfies the customer and minimises supplier losses to the point at which it is not cost effective to pursue a higher quality.

The methodology
While the objective is to reduce defects, the route that the Six Sigma methodology proposes is one of 'process improvement' rather than 'quality supervision'. The focus shifts from 'product specifications' to 'operational procedures'. The processes have to be so designed, that errors and defects are automatically eliminated or reduced.

Six Sigma advocates a broad and flexible framework: define - measure - analyse - improve - control (DMAIC).

Each company has to suitably fit its processes into this framework, to work towards achieving the quality levels it seeks. The real benefits of a Six Sigma programme are likely to be realised if the focus is on a few high-potential processes. The Six Sigma methodology employs advanced statistical tools and, therefore, needs experts to conceptualise, implement and guide the programme.

The DMAIC framework is suitable for improving existing process and systems. Variants of this basic framework, such as DMADV (define, measure, analyse, design and verify), DFSS (design for Six Sigma) and BPMS (business process management systems), are used for differing situations.

Define
The first step is to define the critical (important) customer requirements. These would become the process improvement goals or benchmarks, and create a platform for measuring processes and identifying the ones critical to achieving higher sigma levels.

For achieving excellence in operations to deliver a superior customer service and reducing wasteful costs, it is important to:

Identify processes which significantly contribute to the goal rather than dividing one's attention on insignificant processes

Focus on eliminating non-value activities from processes.
Objectives could be varied — from a higher ROI or market share for the top management, increasing the production throughput at the operational level, developing newer technologies for the R&D department or reducing the attrition rate in the company for the HR department.

It is important at this stage to involve the people who are a part of the process day-to-day. As they deal with the actual processes day-in and day-out, they often are the best persons to find meaningful solutions. Also, as they become part of the search for the solutions, the implementation becomes voluntary and, therefore, more effective and long-lasting.

Some of the tools adopted to identify key processes include process mapping, capability study and measurement systems analysis.

Measure
Once the key processes have been identified, the 'measure' phase is about gathering information on defects involved in the targeted processes. Valid and reliable metrics are established and used to obtain basic data on process performance, and to help identify problem areas.

The emphasis, again, is on the customer; measurement and data collection has to be from the customer's perspective.

Tools used include sampling techniques, gauge repeatability and reproducibility studies, variance components analysis, pareto analysis, etc.

Analyse
Analysis of this data gives an idea about the difference between the desired levels and the actual process outputs, and determines the extent of improvement required. It also helps ascertain the root cause(s) of the variations through trends, the patterns and relationships that emerge. Accordingly, necessary corrective steps can be deduced.

Techniques used in the analysis phase include cause and effect matrix, failure modes and effects analysis, reliability analysis, etc.

Improve
The improvement phase is all about finding and implementing solutions that seek to eliminate or reduce the problems identified during the analysis phase. This is best achieved by a combination of the black belts (experts) and people at the workplace.

Often, methods such as 5S, mistake-proofing, total productive maintenance, etc, have worked as potential solutions. Tools such as design of experiments, hypothesis testing and confidence intervals, etc, are used to assess improvements.

It is often necessary to iterate through the measure-analyse-improve steps. Once the target level of performance is achieved, control measures are established to sustain the performance.

Control
Having identified the necessary improvements, it is important to institutionalise the improved systems by modifying policies, procedures and other management systems. Process performance results are periodically monitored for any variations, so as to ensure that the productivity improvements are sustained.

The data collected and the experience of process improvements, serve as an important input into new product and service design.

Some companies use systems such as ISO 9000 to assure correct documentation. Various statistical tools (like control charts, time series methods, etc,) and non-statistical tools (procedural adherence, performance management, preventive activities, etc,) are employed in the control phase.

The benefits
The biggest companies across the world have implemented Six Sigma, like Motorola, GE, 3M, Citicorp, Ford, Apple, Microsoft and many others. Their experience has been very encouraging; most say they have derived significant benefits:
A reduced number of defects has resulted in huge savings on the costs that companies incur in rectifying defects and compensating customers. This saving adds directly to the bottom-line of the company.

A smaller number of products need to scrapped, lowering the consumption of raw materials, energy, labour, etc, that goes waste with the scrap.

Better quality translates into the company having a 'larger number of satisfied customers'. This not only means more number of repeat customers (and we all are aware that cost of maintaining a customer is much less than acquiring one) but also new customers through 'free' positive word-of-mouth publicity

Process improvements lead to increased product durability and reliability, and longer product life-spans.

The programme is data driven, and decision-making is more scientific and focussed.

Management vision becomes more effective, as it is aligned with more tangible benchmarks and achievements.

Apart from the monetary rewards that flow in with better profitability, the employees develop a sense of purpose and ownership in their work, which is one of the best motivators.
Six Sigma initiatives have helped companies to realise their vision and mission statements, and to achieve their strategic goals. Processes have become more flexible, enabling management to meet changes in market demands more effectively, both in terms of time and money.

Six Sigma started as a process improvement tool in manufacturing companies and physical products. It has, however, subsequently been adapted for service-oriented companies and transactions.

Relying on leadership

Magazine Article, Source : The Manufacturer US
Zone : World class manufacturing
Published : 23 Dec 2005 14:41

The measure of reliability is more than just data collection. Rich Weissman discovers that leadership has a major impact on both reliability and customer satisfaction

The newspaper is late again,” said my wife, frustrated in having her morning coffee with yesterday’s well worn edition. “For the past 15 years the morning paper was on the porch by 5:30 every day, no matter what the weather. Now that our regular carrier has retired, the new person is just too inconsistent. Her service is just plain unreliable.” But the issue may not be the reliability of the carrier. Perhaps the carrier’s car broke down. Or the delivery truck was late to the depot. Or the printing press broke down or the operator called in sick. All of these factors impact reliability, and ultimately customer satisfaction. “Just who is responsible?” she asked.

It depends. Like the recalcitrant child, reliability is often best when seen and not heard. We all have our personal definitions of reliability that include our car starting every time we turn the key, our hearts beating strong and consistently throughout our lifetime, and even the mail, or our newspaper, being delivered in snow, sleet, and rain. Yet reliability is often taken for granted, expected even, until the product or service breaks down. Then it is an issue.

The manufacturing industry often looks at reliability in a quantitative manner, measuring things like mean time between failure (MTBF) to determine a product’s probability of failure within a specific period of time. The computer on your desk and the milling machine in the metal shop all have their reliability defined by the elapsed time between failures. A decreasing MTBF for your car will have you looking for a more dependable model very quickly, perhaps even an alternate brand.

The service industry is also focused on reliability. In services, reliability relates to the ability to perform a promised service dependably and accurately. As more and more services are integrated into manufacturing, the often overlooked service reliability factor is gaining more focus. Logistical services, especially those used in a globally focused lean manufacturing environment, have become critical business operations where reliability is key in keeping production lines running and customers satisfied.

The concept of reliability finds its roots and popularity in formal quality training, where reliability is often a defined measure of success. Early quality improvement tools and a strong organizational focus not only improved the operational quality of products and services, but increased analysis and focus on product design and warranty costs, resulting in increased reliability. Mainstream quality related concepts such as statistical process control (SPC) and six sigma all work to identify and reduce waste and variation in a process, resulting in improved reliability and associated cost containment and management. Reliable products are cost effective, reducing service and warranty expense and improving customer satisfaction. Reliability is good business.

While the technical side of reliability can integrate sophisticated design criteria and MTBF data, the entire picture is incomplete without organizational leadership. How can the importance of reliability be woven into the fabric of organizations, even including the supply chain? Management must support the concept of reliability as it relates to their own organizations, customers, and suppliers. Reliability may mean different things to different managers, but they know it when they see it. And they understand its growing importance and focus.

“Our association is all about practitioners learning from each other and taking that information back to their organizations,” says Pat Winters, executive director of the Knoxville, TN-based Society of Maintenance and Reliability Professionals (SMRP), a 2,000-member trade association focusing on reliability in manufacturing. “Our members are industry leaders with a passion for process improvement.” Winters is proud that the organization’s new logo incorporates six sigma. “Reliability is all about improving processes and since six sigma is such a large part of process improvement, we felt we needed to prominently identify with it.”

Education, benchmarking, and sharing of best practices are also important elements of the SMRP. “We just had almost 900 reliability professionals at our national conference," says Winters. “This is the largest attendance ever, and it shows that the concept of reliability has become more mainstream.” He adds that the responsibility of reliability has been disbursed across organizations, and these meetings of reliability professionals contain a lot of benchmarking and sharing of best practices. “We see a lot of growth in the local chapters which shows that the interest in reliability is at an all time high.” The SMRP is doing its best to meet the needs of this increased focus with professional certification, benchmarking opportunities, and educational activities. “Our board of directors is made up of managers from companies that are at the leading edge of reliability in the manufacturing sector,” adds Winters. “Their support of the association tells me that these companies are serious about reliability.”

While the SMRP is focused on the large picture of reliability in manufacturing, other organizations look at reliability at a more granular level. “Reliability to me is making sure that my construction crews are well-trained, show up on time, perform their jobs well, and meet our customer requirements,” says Dickie Jones, the director of human resources for craft services for Sugar Land, TX-based Fluor Enterprises, a division of Fluor Corporation, the engineering, procurement, construction, and maintenance services giant. “We build things, such as refineries, chemical plants, and oil platforms that need to meet high reliability standards, and that reliability starts with a stable and motivated workforce.”

Jones says that his employees are well trained and operate a safe workplace which makes them more valuable to Fluor customers that include DuPont, Chevron, and Exxon. “In our business, reliability means productivity,” says Jones. Fluor, and its customers, relies on the construction crews to do a quality job. Part of that reliability rests with an organization that recognizes a reliable workforce is one with limited turnover, allowing for a more consistent product. “We recognize our employee’s career goals and work with them to meet those goals, including training and education” adds Jones. “That keeps them with us.”

Suppliers are also part of the reliability equation, and those who manage suppliers need to be out front on reliability issues. “We need to make product reliability an absolute requirement and hold suppliers responsible,” says Dr. Robert Kemp, president of Des Moines, IA-based Kemp Enterprises. “We can improve reliability by not accepting products that do not meet our properly defined reliability requirements.” Kemp, a career military officer with the US Army Corps of Engineers and former president of the Institute for Supply Management, is a recent winner of the association’s J. Shipman Gold Medal Award, their highest honor. He simply defines reliability as a non-negotiable requirement.

Kemp sees an industry-wide acceptance of poor reliability that allows for an increasing level of complacency. “There seems to be no consequences for poor reliability because many companies just accept it from their suppliers.” He sees a lack of demand, a lack of supervision, and a lack of leadership. “Reliability is a cross functional responsibility and everyone in an organization has a hand in it, including human resources, marketing, manufacturing, and operations,” says Kemp. “And that focus on reliability needs to cross over from operations throughout the supply chain. I’m not seeing that on a regular basis.”

Phil Zarrow works in an industry where reliability is defined in published standards which seems to be of some help in establishing a culture of reliability. Zarrow is the president of the Durham, NH-based electronics assembly consultancy ITM Consulting. His company works with manufacturing companies on manufacturing and electronic assembly issues including surface mount technologies, which often focus on high reliability components and assemblies. “The Association of Connecting Electronics Industries, known as the IPC, directly focuses on reliability in its written standards,” says Zarrow. “We focus on technical issues with our clients that will help them with reliability measurements such as mean time to repair (MTTR), but we see some management issues around the whole issue of reliability.”
Zarrow believes reliability is the foundation of the electronics industry, whether formally recognized or not. “Issues such as uptime, cost of ownership, and product accuracy are themes we constantly hear from our clients,” says Zarrow. “Reliability is at the heart of all of those issues, and that’s why management has to recognize the importance of reliability in design and manufacture. It is both a cost and customer service issue that has its roots in the product development process. Management needs to recognize it and support it from the outset with strong leadership and advocacy.”

Electric and gas utilities that support the manufacturing infrastructure are often the focus of cost discussions rather than reliability. The customer expectations are that power will be continually available to light our factories and run our equipment. But given the recent string of domestic and international weather related disasters, utilities are now often looked at in a far less secure light. Yet reliable delivery of electric and gas is critical to not only their customers, but to the utilities themselves.

“Our business is reliability and we need to keep our customer’s lights on,” says Susan Johnson, director of corporate performance management for the Massachusetts electric and gas utility NSTAR. “We spend hundreds of millions of dollars on infrastructure improvements on an annual basis. We take reliability of the delivery of our services very seriously.” Johnson’s leadership role is to ensure reliability of service and she uses cross-functional teams and data management to address system wide issues. “We have established operational targets and we measure company performance against some very aggressive goals”. She adds that the management of NSTAR understands the need for reliable and dependable service. “It’s been a bit of a culture change but we continue to make solid progress of providing dependable service for our customers.”

Reliability has gone mainstream and can be found in all corners of manufacturing. An increasingly sophisticated customer’s expectation of high product and service reliability will continue to grow. While quality tools, process controls, and data mining allow manufacturing companies to track product and service reliability, it is organizational leadership that is responsible for creating an environment where reliability is embraced and advanced.

Batelco to spend BD50m to be more competitive - Bahrain

Bahrain Tribune - 26/12/2005

Bahrain Telecommunications Company (Batelco) will inject BD50 million next year to accelerate company's competitiveness by implementing a farsighted agenda of innovative policy changes. Batelco, with largest market capitalisation on the Bahrain Stock Exchange, will also change its working days to align with business enterprises across the Kingdom. Friday and Saturday will be the official weekend for company staff in 2006.

Chief Executive Peter Kaliaropoulos said Batelco's inspired vision was evident by a comprehensive package of sweeping change ushering in a new era in the company. He said: "The ultimate aim is to serve customers even better and to deliver growth by focusing on mobile, broadband and ICT (Information and Communication Technology) opportunities.

"Batelco will launch Six Sigma process-improvement methodologies to streamline customer service, product development, billing and various information-technology processes aimed at more responsive customer care and a single view of the customer. The company has restructured its functional operations into customer-facing business units aimed at better supporting residential, government, corporate, wholesale and ICT customers," adding: "The company will continue to address better value for its customers."

Recently, it introduced significantly lower IDD (international direct dialing) rates via its 123 prepaid calling cards and also slashed Internet tariffs in half for customers with small to medium enterprises. Next year, the company's 16 dedicated retail outlets across the Kingdom will have a new range of services to demonstrate, adding to the strong mobile focus of the past.

Batelco also plans to invest another BD1.1 million in training and development for its 1,600 strong workforce, of which 96 per cent are Bahrainis. The company will also be implementing a range of new human-resource policies next year.
"Vacancies will be advertised simultaneously, internally and externally (via www.batelco.com). The focus will be on selecting the best person for the role and will not necessarily be restricted to seniority within the company."

A code of ethics will be introduced to ensure transparent and extremely ethical behaviour in dealing with customers and suppliers to avoid conflict of interest and favouritism. Development of employees, performance management, leadership development and succession planning will receive significant focus by the company's senior leadership team.

Kaliaropoulos said Batelco was astutely aware of the demands of its customers and the intensity of the competitive environment in Bahrain and the Middle East. "We have introduced our peak-performance programme aimed at creating one of the most competitive, best performing and customer-driven communications companies in the Middle East. We are building from the company's past solid foundations to a more responsive, innovative company aimed at contributing to Bahrain's competitive advantage in the region. By doing so, we will retain the respect and business of our customers."

Can science help sell cars?

BY TODD DAVIS

Retailing pioneer John Wanamaker - among the first to embrace retail advertising in the mid-1800s - is credited with the phrase: "Half the money I spend on advertising is wasted; the trouble is, I don't know which half."

It's an axiom the advertising industry hasn't been able to shake, since advertising is emotional and often unpredictable beyond never anticipating results greater than a single percentage point.

But scientist Ranjit Roy and automotive marketing veteran Michelle Morrissett want to change that perception. They call it MetaMarketing.

Using statistical analysis known as the "Taguchi method" to test the performance of advertising before it runs, the two say MetaMarketing has the potential to dramatically improve advertising efficiency similar to the gains achieved by applying the practice to engineering.

"You never know how effective your advertising is," said Morrissett, president of Troy-based Fouresquare LLC, a marketing and business development firm launched in 2003.

"This helps narrow the bull's-eye instead of scattering advertising all around."

A direct-mail trial run this summer for Hank Graff Chevrolet in Davison resulted in a 60 percent gain in responses over traditional advertising, the Fouresquare principals said.

Morrissett said future applications could include Internet marketing programs, advertising agencies and other retail advertisers.

New applications, new results

Roy, through his Bloomfield Hills-based company, Nutek Inc., has been teaching the theories of Japanese scientist Genichi Taguchi to engineers and managers of Fortune 500 companies since 1987.

Taguchi's "design of experiment" methodology provides the framework for performing multiple test parameters simultaneously. Traditional testing methods compare two sources of influence at a time - repeated for validation - before comparison with another set of data.

It has become an accepted form of quality control and validation for ISO/QS-9000 and Six Sigma practitioners around the globe, Roy says.

"It's applicable in many areas - from cars to Campbell's soup," he said. "Many who followed it were so preoccupied with manufacturing, it wasn't applied to other avenues."

Having worked in marketing for Ford Motor Co. for 16 years, Morrissett also realized the potential Taguchi's could have on the industry.

"(Design of experiment) is a tried and true discipline in many environments," she said. "Now we're applying it to the marketing and advertising arena."

For the pilot program at Graff Chevrolet, Morrissett and Roy analyzed a variety of marketing and advertising criteria that they gathered through a series of focus groups with sales representatives and customer surveys.

Roy crunched the data in a program based on Taguchi's method, narrowing 128 potential advertising options to eight.

Morrissett created eight ads based on the results of the program, mailing 1,000 direct-mail pieces in August based on each option.

The most-effective ad was a letter with two colors, a picture of Hank Graff in the upper right-hand corner and not much text. The returns demonstrate that an easy-to-understand offer and brand recognition work, Morrissett said.

According to dealership general manager Chris Graff, the results, delivered in October, were "astronomical."

"Statistically, they proved one of the eight ads was far more effective than the others," he said.

Morrissett compared 5,481 target customers to customers - identified through Graff's customer database - who purchased new cars during the test period. She said 2,519 were eliminated from the count due to duplication and technical difficulties obtaining data from the dealership's computer system.

Of the target customers, 59 bought new cars from Graff Chevrolet during the campaign. That's less than a 1 percent response rate overall, but an improvement of 61.2 percent over Graff's own previous best campaign.

Compared to the dealership's "average performing campaign," the ads resulted in a 135 percent improvement, Graff said.

Still, Graff said he remains a skeptic, holding off on final judgment.

"We're going to run that (same) sample again to validate the results," he said.

Once a "best method ad" is identified, a client can reuse the advertising and marketing data as long as they want, Morrissett said.

"The bull's-eye always moves," she said.

"It's reasonable to re-test after 12-18 months as market conditions change."

The costs can vary, depending on the complexity of the preparation and research, according to Morrissett, but are expected to be 5 percent-10 percent of the prospective campaign budget.

Todd Davis is a freelance writer.

Cost Reduction Essential To Competition

Industry Week

A global look at costs gives the big picture and a big advantage.

Friday, December 16, 2005
By Donna Covington, vice president/customer services, Lexmark International Inc.

Can effective supply-chain management help deliver substantial cost reductions year over year while continuing to achieve substantial improvements in cash-to-cash cycle time and customer satisfaction?

While these objectives can sometimes seem mutually exclusive, at Lexmark, the answer is yes.

We make and sell printers and printing solutions for the home and office markets. Ours is a hyper-competitive industry, and the ability to significantly reduce costs is essential to being competitive.


Donna Covington, vice president/customer services, Lexmark International Inc.

Over the past four years, we have targeted a significant reduction in both direct and indirect costs each year and have achieved hundreds of millions of dollars in annual savings, delivering greater value for both our customers and our shareholders.

Three important factors have helped us to achieve our cost reduction goals: creating deeper relationships with fewer suppliers, having a strong organizational structure that helps us get control of costs more quickly and, finally, a relentless focus on execution.

When we look at costs, we look at them on a global basis, not just by division or geography. This gives us the big picture and the scale with which to drive work to have the most impact.

In 2001, we strengthened an already strong focus on cost reduction. We began in the logistics area, where it quickly became clear that we were working with too many suppliers. We responded by reducing the number of suppliers, and by creating win-win situations as we did so.

Win-wins mean a greater share of our business for the suppliers remaining. And this, in turn, allows them to achieve efficiencies of scale and to win bids for which they may not have been competitive in the past.

Having fewer suppliers also means that we have more clout with those with whom we do business. This translates into tangible savings, but it also has other benefits. Our suppliers get to know us better. They understand our business better. And they are better partners, allowing us to work together to jointly achieve operational productivity improvements.

Another important key to our success in reducing costs year-over-year has been our organizational structure, which brings IT, purchasing, logistics and supply chain all under one roof.

These organizations all are part of my team, giving us the ability to both see and quickly influence all of the major drivers of direct and indirect costs.

Together, we view our jobs as driving change and driving continuous improvement.

In the end, however, achieving and sustaining cost reductions come down to a matter of execution.

Executing on a consistent and sustained basis requires commitment, a focus on metrics, and the undivided attention of management across the organization.

Lowering the cost of doing business is an imperative in our industry, but it is not enough. The true measure of effective supply-chain management is the ability to simultaneously reduce costs while also delivering improvements in cash-to-cash cycle time and in customer satisfaction.

In addition to the substantial cost reductions Lexmark has achieved, we have delivered a 45% reduction in our cash cycle over the past four years while continuing to improve customer satisfaction.

Ask yourself how you aim to improve

Bangkok Post

KANUTE NIRUNTASUKKARUT

At this time of the year, while people are relaxing and looking forward to the holiday season, many company executives are busy planning and reviewing next year's budgets. One element that these executives, especially in manufacturing, need to consider is the cost and expected return from continuous improvement.

Business success hinges on improvement from one year to the next. However, given the plethora of improvement concepts, executives often have difficulty selecting the "right" one. For instance, an executive of a leading dairy producer wonders whether the company should consider Six Sigma over the others, due to its recent popularity.

Some executives who have already started an improvement programme are still not certain whether they've chosen the right one. Sometimes, as a result of different opinions, organisations end up with more than one approach being taken at the same time.

For example, in one paper and packaging group, half of the companies are implementing TQM (Total Quality Management) while the rest are focusing on TPM (Total Productive Maintenance). While these parallel programmes may well be "right", the key point is how to select the initiatives that align with business strategy and drive the requisite process improvement.

The choice should be the one that is best able to support the company competitively in the marketplace and, therefore, involves many factors. However, the most important is whether the focus matches the type of manufacturing process. Typically, we think of five classic types: project, one-off, batch, line, and continuous process.

The "project" process normally makes large-scale, one-off, complex, products. The product is often too large to be moved or cannot be moved once completed. An example is civil engineering contracts.

The product from a"one-off" process is of an individual nature and requires that the supplier interpret the customer's specifications, while applying relatively high skills in the conversion process. The skilled employee's experience will be an essential facet of the process. This may also include responsibility for scheduling, liaison with other functions, and some involvement with arrangements for subcontracted phases. This one-off provision means the product will not again be required in its exact form. Thus, investment in the manufacturing process will not normally be warranted. An example is purpose-built tooling.

A "batch" process provides similar items on a repetitive basis, usually, but not always, in large volumes. The procedure is to divide the manufacturing task into a series of operations that combine to make products. The goal is simply to determine the most effective manufacturing route, so that low-cost requirements of repetitive, higher-volume markets can be best achieved. Suitable jigs and fixtures reduce processing times and investment, which is justified by the total product output over time. Examples include molding and metal cutting.

A "line" process is dedicated to the needs of a single or typically small range of products. The time of investment determines the breadth of the product range. In a line process, products are passed through the same sequence of operations. Changes outside the prescribed range of options (which can be very wide, for example, with motor vehicles) cannot be accommodated on the line itself. An example is car assembly.

With "continuous process", a basic material is passed through successive stages, and refined or processed into one or more products; for example, petrochemicals. The two salient features are very high volume demand and the materials involved lending themselves to be moved easily from one part of the process to another; for example, fluids, gases, and foods. The high-volume nature of the demand justifies the very high investment involved. The processes are designed to run all day, every day with minimum shutdowns, due to the high costs of starting up and closing down. Normally, the product range is quite narrow and often the products are purposely restricted to enhance volumes.

To choose the right continuous improvement initiative, then, consider the business implications of manufacturing process types. Next week, we will begin to discuss each one in detail.

Using Six Sigma to Reinvigorate Public Corporations

By Andre Pope

The Perspective
Atlanta, Georgia
December 16, 2005

Introduction

It is a known fact in Liberia that inefficiency runs deep in government. Successive governments, particularly in Liberia’s recent past, have had to grapple with this canker. Over the years, reorganization plans have come and gone, but the fundamental problem of inefficiency and mediocrity remains. This is why the President – Elect decision to get a first hand assessment of government is so important. I can only surmise here that the motivations and intentions would be to develop a plan to reorganize or reinvigorate government.

The purpose of this article, however, is not to address inefficiency in government in general, although we acknowledge its depth. The primary intent here is to address the question of performance in public corporations, where the problem of inefficiency is sharpest. If we can enhance these institutions performance, they will be in a better position to deliver on their objectives and truly serve the public good. Despite the fact that these agencies play a crucial role in the economy and the overall life of the Liberian people, which is particularly important in post war reconstruction, the level of mismanagement and sustained allegations of malfeasance suggest that a paradigm shift in the way they operate and are managed need to be explored.

There is no doubt that there are competing devices out there to make government work better and at a cheaper cost, but I would like to throw out for national dialogue a new and different concept to make our public corporations operationally effective. I am proposing the establishment of a National Public Corporation Commission with the objective of helping the various public corporations achieve financial and operational excellence through the introduction of “Six Sigma” methodologies and programs. Six Sigma, which is outlined with some specificity later in this paper, is a process or methodology that has and continues to be used by some of the largest and more innovative private companies across the globe, particularly in North America, Europe and Asia, to achieve breakthrough results. Companies like Motorola, where Six Sigma started, GM, Coke, GE, and my former employer 3M have all dramatically cut costs, increased profits and improve operational activities by using this system. I believe that Liberian Public Corporations can harness some of the efficiencies associated with “Six Sigma” to serve the public good. By combining some of the best practices and flexibility of the private sector with the public purpose of these establishments, public corporations can better achieve their goals and thereby help uplift the standard of living of Liberians.

Although public corporations have been a part of our national life, they remain basically unproductive and obscure in the general policy approach toward national development, a status they no doubt find convenient. While toiling in obscurity, they manage communication, power generation, airport and seaport, petroleum, agriculture, housing and insurance. Public Corporations remain an important partner in reconstituting Liberia’s economy and in many ways the bedrock for economic stimulus. I am confident that Six Sigma can play an important role of reducing variations and defects in various processes and improve operational excellence at all levels.

This article seeks to shed some light on public corporations and ask some hard questions about whether these agencies are properly accountable for the vast sums they spend, and for the public power and benefit they enjoy. More is at stake than just money or operational excellence. If these corporations are left to run loose, they tend to infringe the basic tenets of accountability. This analysis will concentrate on public corporations in which the government appoints managing directors and board of directors.

Establishing a National Public Corporation Commission.
As a general or a first step approach to revamping public corporation, I would like to propose the setting up of a five-member oversight board of public corporations with desk officers responsible for each corporation. This commission will have oversight responsibilities to include a quarterly review of financial and internal governance and the operational effectiveness of public corporations. The challenge would be to have corporations systematically disclose information that would be relevant to measuring their performance over time. Two systems of disclosure will ultimately be needed: nationally mandated disclosure of company-wide data and voluntary customized corporation reporting. The first disclosure must force corporations to disclose revenues and expenses to the public on a quarterly basis. This section must include strategies and programs for operational excellence. The second disclosure, as the term suggests, should be left to the corporation to disclose any other information they see fit.

The NPCC will work with management at the various corporations to define a vision of societal wealth and see them communicate it to the teams through what I call targeted engagement, reallocation of assets and broad public discourse. These activities will need to grow and expand. To make this happen, the NPCC will need to encourage government to empower the corporations. One way is to limit the number of presidential appointees at public corporations, and shift appointment powers to the Managing Director with consent of the board. This will enable MDs to drive change and make them accountable for the direction of the corporation.

Public corporations can create long-term wealth and societal benefit when, in addition to generating productivity gains, they preserve resources for future generations, create value with society, and do not externalize costs onto society. I am certain that we can achieve all these through the implementation of six sigma methodologies.
What is Six Sigma??

Six Sigma is both a set of tools and a way of thinking. It leads to breakthrough improvement using the Define-Measure-Analyze-Improve-Control (DMAIC) process to improve existing products, work processes and behaviors. Six Sigma also encompasses innovation, utilizing Design for Six Sigma methodology to develop new designs or redesigns that result in competitively advantaged products, services, processes, and systems. To raise operations to the highest benchmark, Six Sigma programs constantly measure and analyze data on the variables in any process, and then use statistical techniques to understand what improvements will drive down defects.

Six Sigma as a Policy Choice

The classic reason given for the creation of a public corporation is that a public corporation will be more efficient at achieving a specific national goal, especially if the program envisioned involves market transactions. The national goal is ordinarily stated in the statute or law that created the public corporation. Thus, the National Port of Authority in Liberia, for example, exists to manage all seaports in the country. The public purpose is to assure nationwide movement of people and goods and to help improve national security. In the abstract, public corporations seem to promise an alternative that everyone including fiscal conservatives might find attractive. Public corporations conjure up an image of business efficiency as opposed to the traditional bureaucratic cabinet ministry. This is the chief reason why we should strive to make our public corporation efficient and effective. It is in this vein that the full deployment of six sigma to improve performance is necessary.

Dr. Barbara Goski, professor of Organizational Theory and Behavior at the University of St Thomas once said, you can’t describe what you are doing as a process, you don’t know what you are doing.” I found that statement to be true then as I do today. Beyond strategy documents, team meetings, and memos, performance metrics enable corporations to translate strategy into results that you can measure and manage over time.

Bridging the gap between overall strategy and day-to-day execution requires organizations to:

· Understand how well ongoing tactics are contributing to organizational goals.
· Make timely course corrections in response to performance issues and market changes

Organizations and initiatives fail not so much for a lack of "strategy" as for the failure to effectively execute. The goal of making measurements is to permit managers to see their company more clearly from many perspectives and hence to make wiser long-term decisions. The Baldrige Criteria (1997) booklet reiterates this concept of fact-based management: "Modern businesses depend upon measurement and analysis of performance. Measurements must derive from the company's strategy and provide critical data and information about key processes, outputs and results. Data and information needed for performance measurement and improvement are of many types, including: customer, product and service performance, operations, market, competitive comparisons, supplier, employee-related, and cost and financial. Analysis entails using data to determine trends, projections, and cause and effect -- that might not be evident without analysis. Data and analysis support a variety of company purposes, such as planning, reviewing company performance, improving operations, and comparing company performance with competitors' or with 'best practices' benchmarks."

A major consideration in performance improvement involves the creation and use of performance measures or indicators. Performance measures or indicators are measurable characteristics of products, services, processes, and operations the corporation uses to track and improve performance. The measures or indicators should be selected to best represent the factors that lead to improved customer, operational, and financial performance. A comprehensive set of measures or indicators tied to customer and/or corporation performance requirements represents a clear basis for aligning all activities with the company's goals. Through the analysis of data from the tracking processes, the measures or indicators themselves may be evaluated and changed to better support such goals.

There must be a national policy that spells out the performance metrics for public corporations. The NPCC will then be charged to evaluate the performance of each public corporation on a quarterly basis. These evaluations will then become benchmarks for judging progress and improvement. Business icon Peter F. Drucker said, “You cannot manage what you cannot measure.”
Someone has said that the real problem with measurement is it works! Study after study, experience after experience prove it; you get the type of behaviors that you measure and reward. Yet how can this be true? After all, don't most companies measure profit? So why don't they get more profit? The answer is that profit is a lagging indicator. You can only measure profit after the fact. What you need to examine are the behaviors and actions that generated that profit. When you look at it that way, we often see that the real drivers of profit are neither being measured nor rewarded.

We have long maintained that the right metrics, implemented in the right way can be used to pull an organization into alignment. They can function as a lever becoming a catalyst to help generate outstanding performance.

The converse is also true. Failure to measure the right things and monitor them can have a devastating effect on performance. A study published in the Harvard Business Review estimates the average "strategy to performance gap" stating that on average corporate strategies deliver only 63% of their potential financial performance. More than one third of the respondents placed that figure at 50% or less.

Companies, and in this case public corporations, need to build an effective "sense and response" system that ensures that everyone receives consistent information that allows them to see the causes of underperformance and understand what to do about them. These systems are built not on lagging indicators but on leading indicators - things that predict future performance. What good is knowing that you missed a goal, without knowing why and what to do about it?

Great results come from focusing more on things that create value and less on things that don't. It sounds simple. But it can be tough. How do employees decide what to do with a myriad of competing priorities and demands? And while it may be possible to do strategic planning with a small group of executives, execution must be delegated to a much wider group. Measurement provides the type of clarity to allow us to decide between conflicting priorities

This approach has great rewards, but it requires effective implementation and a clear understanding of the barriers and resistance factors that can be expected. Measurement is about changing behaviors, and is always a tough task. It requires people to be accountable in a new way.

Implementing Six Sigma
In some very basic ways, Six Sigma methodology is no different from many private-sector implementations, although there are some little differences. Among them is the lack of free competition in the public sector because public agencies monopolize many services rendered to the public, and also there is no full accountability for the results, especially in corrupt countries.
To make Six Sigma successful in the operations of public corporations, there should be full accountability for success as well as for failure, commitment on the part of our leaders, moving away from “I am the boss” mentality and removing politics from public corporations to sustain Six Sigma when administration and leadership change. Six Sigma culture can only be embedded successfully under an honest, trusted and accountable government.

Public corporations are mandated to provide service without real competition from other competitors. Without real and free competition under the free market environment, many public corporations see no incentives to meet customers’ expectation. This is a real problem because defining customer requirements is crucial to success regardless of the nature of the organization. Let’s take NPA for example. The customers are business people and ordinary Liberians that use the seaport to conduct business and other commercial activities. Does it not make sense to identify the core processes, define key output, and define the key customers that they serve? A genuine focus on the customer, backed by an attitude that puts the customers’ needs first, as well as by a system and strategies that tie in the business to the particular and changing needs of the customer.

Additionally, six sigma can help improve the balance line of companies. Again, using the NPA’s example, let’s look at security at the port as a mechanism to reduce revenue leakage. Strengthening the Port security will no doubt ensure that everything that leaves the port was paid for. Six sigma doesn’t just stop here; it goes further by putting in place a control plan that takes care of whatever may go wrong. A typical control plan in this case might be a multi-layer of check and balance, including devices to scan receipts, undercover monitoring, random checks and even an incentive program for security officers.


Summary and Conclusion
Many Liberians, who are frustrated with the poor performance of public corporations, take the issue of reforming our public corporations seriously. The President-elect has taken what I believe is an important step toward understanding the problems with government and perhaps developing strategies to deal with them. While I would like to call on fellow Liberians to give the transition team a chance to assess the operation of government, I urge the transition team to be open to diverse concerns, views and recommendations from various sections of the public including advocates, elected leaders and ordinary citizens, and devise proposal to improve government efficiency. I am also asking the transition team to consider every idea, study every proposal and adopt a policy of transparency in conducting its task and identifying the problems as they are.

Finally, I would like to direct the rest of this contribution to the President-elect. Our country has seen presidents failed because they surround themselves with sycophants. Following this path will only add you to the long list of failed leaders. This is an opportunity of a lifetime; approach it with humility and tolerance. Adopt a vetting process for key appointments, let the press perform its role without harassment and encourage dissent within your ranks. This government must promote the basic tents of democracy. The success of your government would largely depend on how it withstands and honorably accepts the rigors of an evolving pluralistic culture.

My hats off to the people of Liberia for diligently conducted their national duty with dignity. .

About the Author:: Andre P. Pope, a Liberian Professional is Six Sigma certified and holds an MBA from the University of St Thomas in St Paul, Minnesota. He lives with his family and works near Atlanta, Georgia. Pope can be reached at andre.pope@whitakeroil.com

Getting the Laundry Out

Inc.com

We've been working on improving quality for a long, long time. In the last century we even decided that quality should be treated as a science and created the profession of quality management. Since then we've developed tools like quality circles, total quality management, statistical process control, and Six Sigma, all designed to help us reach the nirvana of zero defects.

Despite all that, my dry cleaner brings me someone else's clothes, my substitute mailman brings me someone else's mail, my order for a new IBM T42 laptop computer was mistakenly filled with a used one, and my surgeon removed the wrong kidney. Just kidding about the kidney, but unfortunately hospitals make errors that serious every day. Why do so many businesses find it so difficult to provide good quality to their customers on every single transaction?

Poor quality typically results from variability. The dry cleaner probably has a process for handling clothes that, when everything goes perfectly, gets the garments cleaned correctly and back into the hands of the rightful owner on the day promised. The same can be said of most businesses. The challenge is in getting the laundry out when things don’t go perfectly. The challenge is repeatable reliable performance.

To control quality requires controlling variability, or to design a sufficiently robust process that it can delivery quality despite high variability. What does that really mean?

My dry cleaner may have high employee turnover, which in turn means high variability in who is handling the laundry. He has two choices. The first is to find ways to control employee variability by focusing on reducing his turnover. His second choice is to design a process for handling laundry that can be successfully executed by someone very new to the company, even on his first day on the job. He may want to do both.

Mistake-proofing (a.k.a. "poka-yoke" if you Google) is a methodology to address variability of a process. And please don't call it idiot-proofing. Despite all my college degrees, I can assure you that more than once I have tried to order something on the Internet for which I didn’t enter the data correctly. Up pops up a note, usually in red lettering with an asterisk, telling me to correct the information before I can continue. I much prefer the term mistake-proofing to idiot-proofing, don't you?

Mistake-proofing recognizes that people make mistakes. We always have and we always will. The goal is to keep those mistakes from becoming defects.

For any given process, you will need to decide how far to take mistake-proofing. At one end of the spectrum, called prevention, you can eliminate the possibility of human error becoming a true defect. That can be very expensive. If you work in a nuclear plant or a transplant center, that may be money well spent. In a dry cleaner, it may be a poor investment unless you're talking about Environmental Protection Agency- or safety issues. At the other end of the spectrum, called detection, you may want mistake-proofing to ensure that all defects are caught before they leave the building. The extent of mistake-proofing that you decide to develop for a given type of quality problem is a business decision, no different from many others you make.

So how do you mistake-proof? Start by understanding that humans make mistakes and it doesn't mean that they don't care or that they're idiots. But also understand that you can find ways to keep those mistakes from becoming defects. Select a process where you have a quality problem. Look at the potential opportunities for error. Consider how errors are most likely to be made and the cost of those errors becoming defects. Many people begin by focusing on detection mistake-proofing, and then move toward prevention, but there is no one size fits all approach. Look at the nature of the problem and determine the right approach for your situation.

Many products you use are mistake-proofed:

Gas caps tethered onto cars to prevent driving off without them
Gas cap fitted with ratchet to signal appropriate tightness
Hole in bathroom sink to reduce chance of overflow
Color coding of vials for blood tests
Lawnmower handles that shutoff the power when released

Most forms of detection oriented mistake-proofing are simple and inexpensive. Start looking at your house, your car, the grocery store -- all the places where you work and play. Notice what is, and what could be mistake-proofed. You will get ideas of how simple and how valuable mistake-proofing can be. Then turn your attention to your own business. It’s time to get the laundry out.

Lilly Tells Wall Street It's Uniquely Positioned To Deliver Sustained Growth

Yahoo!

Friday December 9, 7:00 am ET

- Anticipate 2006 Earnings of $3.10 to $3.20 Per Share, Representing Top-Tier Pharma Growth

- 2005 Earnings Expected to be at High End of Company's Guidance Range

- No Major Patent Expirations Expected Through This Decade

- Nearly Tripled Product Portfolio with an Unprecedented 9 New Product Launches in 4 Years, Along With 9 New Indications and Line Extensions

- Newer Products Driving Growth; Anticipated to be Nearly One-Quarter of 2006 Revenue

- Increased Productivity 15% in 2005 and Steady Increases Expected Going Forward; Six Sigma Significant Contributor

- Rich Pipeline Result of One of the Most Productive R&D Organizations and Industry-Leading Partnering Capabilities as Ranked by Biotech Companies

- Late-Stage Pipeline Includes 5 High-Potential Products with Submissions Expected Over Next 4 Years, Plus a Number of New Indications and Line Extensions

- Company's Capabilities in Both Biotech Large Molecule and Traditional Small Molecule Combine for Key Competitive Advantage

- Anticipate Near-Term U.S. Submissions of Arxxant for Diabetic Retinopathy and Cymbalta for Generalized Anxiety Disorder; Recently Submitted Byetta for Type 2 Diabetes in Europe and Cialis for ED in Japan

GE's Insurance Unit Didn't Fit Six Sigma Format

Morning Star

CHICAGO -(Dow Jones)- In the end, General Electric Corp.'s (GE) Insurance Solutions business had to go because it just couldn't be made to fit into the Fairfield, Conn., company's strict Six Sigma discipline, which prizes steady results and rigid discipline.

But even as GE turns out the lights on its insurance venture, others are clamoring to get into the business, anticipating sharply higher rates for next year, as demand for reinsurance surges.

Robert Hartwig, chief economist of the Insurance Information Institute, said in an interview that at least eight new reinsurers had formed since Hurricane Katrina hit in August, primarily to capitalize on rising insurance rates for insurance policies set to begin next year. The hardening of reinsurance pricing may have helped GE get a price it was willing to take for the unit, after years of apparently failing to reach a satisfactory deal. "This is viewed as a propitious moment to expand in the reinsurance world," Hartwig said.

The volatility of a business that may turn a big profit one year, followed by a year with billions in claims, went head to head with a corporate culture at GE that prized steady returns.

"I think the property/casualty insurance and reinsurance sector in it is inherently volatile - you need look no further than 2001, last year and this year to see the volatility," said Donald Light, senior insurance analyst at research firm Celent. "GE built a corporate culture under [former CEO Jack] Welch of highly predictable results."

When GE announced Friday that it had agreed to sell most of its Insurance Solutions business to the second largest reinsurance company, Swiss Reinsurance Co. (RUKN.VX) for $8.5 billion, the company pointed to the insurance business's "tough strategic fit." with GE.

GE's insurance business lost $700 million over the last five years and required a $3.2 billion cash infusion. "By its nature, reinsurance is volatile and consumes capital to grow," said GE Chairman and CEO Jeff Immelt in a press release. "The terms of this transaction provide compelling value for our shareowners as well as more certainty and greater earnings consistency in the future."

GE is an ardent practitioner of Six Sigma management techniques, Light said. On the company's Web site, it describes the central idea behind Six Sigma as "if you can measure how many 'defects' you have in a process, you can systematically figure out how to eliminate them and get as close to 'zero defects' as possible."

Light said the company ran into trouble trying to apply that rigorous management methodology to insurance, and reinsurance in particular. "Terrorist attacks don't respond to a Six Sigma process," he said.

GE first soured on the insurance business after the 9/11 terrorist attacks, but was hampered in its plans to sell by a troubled reinsurance industry that saw big losses in the past few years.

Years before, Jack Welch built the reinsurance business with a serious of billion-dollar acquisitions, starting with a $1.1 billion buy of Employers Re in 1984. It was Welch's first over-$1 billion acquisition. The purchase of Frankona Re in 1995, reportedly for approximately $1 billion, gave the company global scale. In 1998 it bought the Medical Protective Co. from the family that owned the company. But in the wake of the 9/11 attacks, it has been selling off its business. Most recently, it sold its Medical Protective Corp. unit to Berkshire Hathaway Inc. (BRKA) for $825 million.

Hartwig estimates the deal will propel Swiss Re to the top position in reinsurance with 20.4% of the global market share in terms of global net premiums written, ahead of Munich Re, which has 17.3% of the market, by Hartwig's estimation. But "I don't think this ushers in a wave of consolidation, " he said. "In fact, we may see more new reinsurers be formed in the wake of what is generally viewed as a tightening reinsurance market, so demand is up for reinsurance while the supply is down, so prices will rise."

The book value of the Insurance Solutions business being sold is about $11.1 billion, a GE spokesman said, and Swiss Re will pay $8.5 billion including debt assumption. The difference in the value and the price includes the loss to GE, some goodwill and taxes.

Akmin’s SiteGalore implements Six-Sigma Quality Framework

By: Press Release
Thursday December 01 2005, 18:42:13
http://www.w3reports.com/?itemid=1153

Akmin, the leading provider of private branded online website building software SiteGalore (www.sitegalore.com) for ISPs, Webhosts, Domain Registrars, ASPs and other service providers has implemented the time-tested Six-Sigma methodology for ensuring the continual improvement and maintaining the highest quality standards for its online website building software.

The DMAIC approach that Akmin has adopted is focused on maximizing the competitive advantage for its customers and involves a structured, data-driven approach to identifying key performance indicators, managing processes, quantifying problems, increasing product quality and reducing costs.

Prashanth, CEO of Akmin says, "Given the fact that we are the first ever company in our line of business to launch an enterprise-wide Six-Sigma framework, we are certain that this initiative will delight our customers, who are looking to maximize their competitive advantage by offering a site building service that is truly unmatched in its quality.”

In its run up towards the successful implementation, Akmin has already trained its key employees through a rigorous 4-month Six-Sigma Black-belt training handled by qualified Six-Sigma specialists. Over the next One Year period, Akmin plans to deploy several Black Belts into every corner of the company in an effort to re-engineer the major processes in every function and discipline.

The present Six-Sigma implementation was pretty much in line with the media expectations given the fact the Akmin recently achieved a rare quality distinction by passing KPMG’s ISO 9001:2000 Quality Surveillance Audit without a single minor non-conformity for the 4th time in succession.

Dabbahwallahs hold ICFAI students in awe

Deccan Herald

DH News Service Bangalore:

Mumbai dabbahwallahs have set an example of grassroot-level management that will put even business gurus to shame.

Their excellent supply chain management have made them into case studies in Harvard Business School, clinched an entry into the Guinness Book of World Records and won them a Six-Sigma efficiency rating by Forbes Global Magazine.

Their logistic solutions have attracted corporate honchos like Virgin Airlines owner Richard Branson, and featured them in the exclusive guest list at the royal wedding of Prince Charles and Camilla Parker Bowles.

Students at ICFAI Business School were in for a brainstorming session with them on Saturday, when Raghunath Medge and G L Talekar, President and Secretary of Mumbai Dabbahwallahs’ Association respectively shared their knowledge about the 113-year-old business at the seminar on ‘Impeccable logistics and supply change management’. For an achievement of four lakh transactions a day, and an error rate of one in 16 million transactions, the Dabbahwallahs’ underlying management principles are surprisingly simple -- discipline, commitment, time management, team-work and ethics.

Race against time

Explaining the methodology, Mr Raghunath Medge revealed that the race against time of 5,000 Dabbahwallahs begins at 9 am, when they begin their collection rounds from the origin points.

The dabbahs change six hands before the cycle is completed.

Motivation is high, as every dabbahwallah is a shareholder in the business, added Mr Talekar.

The collections are equally divided among all the dabbahwallahs, and each one earns an income of Rs 5,000-Rs 6,000. There is no retirement age, and the average age of dabbahwallahs is 52 years, said Mr Talekar.

Each new entrant is given a six-month induction training under the local group leader, elaborated Mr Talekar.

Message

The dabbahwallahs association’s latest marketing strategy is carrying advertising pamphlets in the dabbahs.

This offer was taken up by Star TV, which publicised KBC-2 using this method. So did the Maharashtra Government, which distributed AIDS awareness pamphlets through the dabbahs on World AIDS Day on December 1, Mr Raghunath Medge added.

Six sigma

MENAFN.COM

Jordan Times - 02/12/2005

By Ammar W. Mango

Imagine being on a plane that is about to land. The flight attendant approaches a passenger calmly saying: "Excuse me sir, would you like the pilot to use a three sigma or a six sigma process during landing?"

A six sigma process results in 99.99 per cent safe landing, while the three sigma will result in 99.73 per cent. The difference might seem minor, but it is not. For planes landing at a busy airport like Chicago O'Hare, three sigma will result in two unsafe landings per day. Six sigma, on the other hand, results in only one every four years. A six sigma process results in 3.4 defects per million. Compare that to 64,000 under a three sigma process. A difference not to be taken lightly, especially on something so critical as landing a plane. Luckily plane landings exceed six-sigma quality standards.

Think of six sigma as a tool to ensure "safety" of an organisation, just as the safe landings in the above example ensure safety of a passenger. The quality improvement technique helps organisations become more competitive by reducing the errors in their processes and improving customer satisfaction. The tool is becoming more popular as a way to differentiate an organisation from its competitors.

Jack Welch, ex-CEO of General Electric (GE), found in six sigma a way to stay ahead. He was on a mission to make his company "10,000 times better than the competition," as he put it. He took GE from three sigma, where most of his competitors were, to six sigma. His initiative brought the company 11 per cent increase in revenue and 14 per cent boost in earnings within the first two years. In response to the great successes posted by GE, several companies followed suit. Today, these include Nokia, Toshiba, American Express, and Ford.

Six sigma was founded at Motorola a decade before Welch used it at GE. Bob Galvin, CEO of Motorola at the time, started the company on the six sigma path. After Motorola won the Malcolm Baldrige National Quality Award in 1988 their secret was out and GE and Allied Signal got on the bandwagon.

Companies that successfully implement six sigma report impressive benefits in higher customer satisfaction, improved profits, and lower operational costs. All of them translating to better competitiveness and shareholders value.

The name "six sigma" is derived from the Greek letter. It is a statistical term that refers to the standard deviation from the mean. Six sigma represents a distance from the mean equal to six times the standard deviation. Simply put, six sigma means that the process satisfies customer specifications even when deviating from the mean by plus or minus six standard deviations. In business terms, that comes to 99.99 per cent of production meeting quality standards, a near-perfect performance. That means bringing a business process to a level of capability where it produces no more than 3.4 defects in a million opportunities.

To reach the six-sigma level of performance, a company should follow the DMAIC approach, which consists of five phases: Define, Measure, Analyse, Improve, and Control. The Define phase of the methodology is highly dependent on project management and strategic planning best practices. The rest of the phases are very analytical, driven by data and statistics. Six sigma is implemented through a continuous flow of projects. Each project starts with the selection of a process to improve. Once the work on a process is complete, focus is given to the next process, based on its priority. Furthermore, six sigma utilises many of the tools already in use by earlier performance improvement initiatives like project management and lean manufacturing.

Six sigma can also be used for designing new products and services. The approach is called "Design for Six Sigma (DFSS)." The term refers to designing a product based on customer wants and needs, translated into specifications by implementing a variation from the DMAIC approach called the DMADV, which stands for: Define, Measure, Analyse, Design, and Verify.

Six-sigma implementation is not cheap or easy. Many companies who tried have failed, mainly because of a flawed implementation approach. One of the prerequisites is top management commitment. Many of the decisions for improvement require drastic changes in the way the company does business, and these changes can only be adopted with upper management approval.

One of the highlights of six sigma is its dependency on numbers and data. Practitioners follow W. Edwards Deming's advice. The quality expert once said: "In God We Trust, All Others Bring Data." Making any statement about the company requires a data driven proof. Therefore, six sigma insists on measurement of existing processes and analysis of its data before designing or implementing improvements.

Many look at six sigma as the modern successor of Total Quality Management (TQM), sighting a few similarities between the two techniques. Some even say they are the same. However, there are major differences between the two is in their implementation and philosophy. TQM focuses on small incremental improvement and is based on bottom up implementation, which means it is not highly dependent on upper management. TQM can be done for a single operation or activity, with engineers leading the whole effort. Six sigma on the other hand requires top down thinking and high level of commitment from upper management. Also, six sigma is about dramatic, not incremental improvements.

Companies who implement six sigma need experts to help them do it successfully. This is why it requires certification. The most notable certification body is the American Society for Quality, a non-profit organisation based in the USA. "Six Sigma Black Belts" are certified to lead organisations in implementing six sigma. Many companies have created their own black belt certification in house to keep up with their growing needs for these professionals. According to the Six Sigma Academy, black belts save companies approximately $230,000 per project and can complete four to six projects per year.

Back office outsourcing spurs growth at ex-GE unit

IT News

By Daisuke Wakabayashi, Reuters

BOSTON (Reuters) - Genpact, a global back-office outsourcing business 40-percent owned by General Electric Co, plans to more than double revenue by 2008 as part of expansion plans that may eventually lead to an initial public offering, a company executive said on Friday.

Genpact targets sales to rise to US$1.2 billion in 2008 from an estimated US$490 million this year as non-GE customers hire it to perform back-office functions such as managing procurement, accounts receivable and other processes, Tiger Tyagarajan, Genpact's executive vice president said in an interview.

Industrial, financial and media conglomerate GE sold 60 percent of its back-office operations, GE Capital International Services, to private equity firms General Atlantic Partners and Oak Hill Capital Partners on 30 December for about US$500 million.

Renamed Genpact, the company employs more than 19,000 workers in India, China, Hungary, Mexico and Romania, offering services ranging from operating call centres to performing risk analysis models for customers.

Genpact competes with IBM and Accenture for outsourcing business. Tyagarajan said it aims to gain an advantage by setting roots in new markets early and then use GE's six sigma operating system to lower costs and improve efficiency.

"We are really having the benefit of the GE connection without GE owning us fully," said Tyagarajan, a former executive in GE's equipment financing business.

While GE accounts for more than three-quarters of its business, Genpact recently added Wachovia Corp, the number four US bank, to its list of multinational customers including car maker Nissan Motor, drug giant GlaxoSmithKline Plc and Air Canada.

Outsourcing is a hot-button political topic with opponents arguing that it eliminates American jobs, but the opportunity to shave costs by up to 40 percent for even basic transactions — according to Genpact estimates — is a proposition that many large US businesses cannot ignore.

Genpact has not heard from GE's private equity partners about how they plan to cash in on their initial investment, but an initial public offering is a possibility for a company with profit margins in the 15 to 20 percent range.

"An IPO is one of the clear options that one could think about," said Tyagarajan, who added that there are no definitive plans or any target date for an offering.

The rapid expansion of outsourcing to markets like India has made some services such as operating basic telemarketing call centers into a commoditized business, Tyagarajan said.

The area with most potential, according to Tyagarajan, is what he called "decision support services" that require mathematicians and PhDs to crunch numbers and create models to analyse large chunks of data.

Not All Innovations Are Equal

HBSWK Pub. Date: Dec 5, 2005

So many bright ideas fade away at the execution stage—but it doesn’t have to be that way. This excerpt from a new book, 10 Rules for Strategic Innovators, tells how to forge ahead based on four different types of innovation.

by Vijay Govindarajan and Chris Trimble

There is no shortage of published ideas on how best to manage innovation. Empower employees. Encourage initiative. Cultivate risk taking. Overcome mindlessness such as, "We do it this way because it has always been done this way." But managers need more than such generic advice because there are many different kinds of innovation, and each requires a profoundly different managerial approach.

This book focuses strictly on strategic innovation, which differs sharply from three other categories of innovation:1

* Continuous process improvement involves countless small investments in incremental process innovations. General Electric excelled at this pattern of innovation through its well-known Six Sigma program.

* Process revolutions also improve existing business processes, but in major leaps—say, a 30 percent increase in productivity—through the implementation of major new technologies. For example, Wal-Mart is investing heavily in "smart tags" (radio frequency identification, or RFID, tags), which identify what a product is, where it is, where it has been, how it has been handled, and so on. The technology may revolutionize processes for tracking consumer products from production to consumption and yield dramatic new supply chain efficiencies.

* Product or service innovations are creative new ideas that do not alter established business models. Consumer product companies such as toy and game manufacturers excel in this type of innovation and are constantly priming developers for the next Cabbage Patch doll, Tickle Me Elmo, or Razor scooter.

* Strategic innovations, such as OnStar, Tremor, and MovieBeam, are the subject of this book. They may include innovations in process or product but always involve unproven business models. Innovative strategies alone—without changes to either the underlying technologies or the products and services sold to customers—drive the success of many companies, such as IKEA and Southwest Airlines.

The four types of innovation require different managerial approaches, because they differ along three important dimensions: the expense of a single experiment, the time frame over which results become apparent, and the ambiguity of results.2 For example, a single process improvement is inexpensive, and its effects are quickly evident and measurable against past operational performance. Process revolutions cost more and take longer. Major product or service innovations, even those that retain the proven business model, generally involve more capital still—enough that a string of failures could sink a corporation—and results may remain uncertain for several quarters. Strategic innovations generally require the greatest investments over the longest time periods, and results can remain indecipherable for years.

These differences in expense, time frame, and uncertainty factor into such decisions as who should lead and participate in an innovation initiative, how resources should be allocated, how progress should be assessed, when the plug should be pulled, and so on.

By choosing to focus on strategic innovation, we are not implying that other forms of innovation must stop. Leaders cannot allow NewCo's youthful quest for an entirely new future to cast CoreCo as an aging dinosaur. NewCo's future is uncertain, and CoreCo is the foundation. CoreCo must always strive to reinvigorate itself through continuous process improvements, process revolutions, and new product and service launches. For ex