Ford
Team Uses Six Sigma to Reduce Costs While Improving Environmental Impact
Ford motors:
Ford Motor Co. made
"Quality Is Job 1" a household slogan in the 1980s as it introduced
revolutionary new products and used Total Quality Management to drive down
costs and capture market share. Lately, however, the No. 2 automaker has been overwhelmed
by quality gaffes that have cost it dearly in customer satisfaction and market
share. In fact, according to a recent J.D. Power & Associates survey, Ford
has fallen behind arch-rival General Motors Corp. in overall quality and now
ranks last among the big-seven automakers. Although Ford has recently
faced more than its fair share of very public quality problems, including the
Explorer tire debacle, it actually began overhauling its quality process nearly
two years ago. As might be expected with an organization with $180 billion in
annual revenue and 345,000 employees scattered around the globe, the results
take time to show.
Ford didn't just
decide to overhaul its quality processes; it has redefined the way it
approaches its business. Instead of acting like the manufacturing behemoth that
it is, Ford wants to be known as a consumer products company.
The corporation
that pioneered the assembly line is starting to seem more Sam Walton than Henry
Ford. "Ford Motor Company's vision is to become the world's leading consumer
company for automotive products and services," said Ford CEO Jacques
Nasser at a recent internal meeting. "To do that, we are focusing
intensely on our customers and have made customer satisfaction our highest
priority."
Nasser knows that
improving customer satisfaction translates directly into improvements in the
bottom line. "Our data show that customers who are highly satisfied remain
loyal," says Louise Goeser, Ford's vice president of quality. "In
fact, one and a half points of customer satisfaction drive about one point more
loyalty. In North America alone, this translates into more than $2 billion in
incremental revenue and roughly $100 million in profit."
Enter Six Sigma
To achieve Nasser's
vision of becoming a consumer products company and gain the coveted increase in
customer satisfaction, Ford turned to Six Sigma. The program, pioneered by
Motorola and made famous by Jack Welch's General Electric, utilizes many of the
same tools as TQM, QS-9000 and other quality initiatives. Its name derives from
its goal: to enable processes to produce results with no more than 3.4 defects
per million.
Ford began its Six
Sigma odyssey in late 1999 when the director of quality for Ford's global truck
business was looking for new ways to improve quality. "I was looking for a
way to improve our quality faster than we were," recalls Phong Vu, who's
now Ford's Six Sigma czar, officially known as director of corporate deployment
for Consumer Driven 6-Sigma. "I did research, visited with Mikel Harry of
Six Sigma Academy, and benchmarked with GE and other large companies that were
using Six Sigma."
Top management
seized upon Vu's suggestion as a perfect method to achieve their twin goals of
improving customer satisfaction and improving quality. Ford formally launched
its Six Sigma process, which it calls Consumer Driven 6-Sigma, in January of
2000. The first phase of Ford's Six Sigma effort is to focus on immediate
customer satisfaction issues. "In order to accelerate our quality
improvement efforts, we have identified the top 25 customer concerns by vehicle
line at each of our assembly plants, and there will be Six Sigma projects
associated with each of these concerns," Nasser explained.
And, unlike many
quality initiatives, Ford's senior management fully supports the Six Sigma
initiative. "We put together a plan to implement Six Sigma throughout the
whole company in October 1999 with a couple of leading groups," recalls
Goeser. "Two other groups jumped on board once they got through executive
training. In December 1999 and January 2000, we started with the top management
group, and then moved on to the officer group and the leadership group, which
comprises our top 350 people." In fact, not only did Nasser go through Six
Sigma training, but he also regularly champions Six Sigma projects.
Training for success
Once the top
leadership at Ford had been trained, the company quickly began rolling out the
process throughout Ford's entire global operations. Leadership training was
followed by training for the people who would become the backbone of the Six
Sigma process: Master Black Belts, Black Belts and Green Belts. In the first
year and a half of the initiative, Ford trained nearly 10,000 employees in Six
Sigma, a feat aided by the purchase of a $6 million training license from Six
Sigma Academy.
"We have 2,300
Black Belts trained currently," notes Vu. "We want to maintain about
2,500 Black Belts at all times. And we have a goal to train all of our salaried
professional employees to be Green Belts within the next four years. We already
have more than 6,000 Green Belts trained." Ford hopes to increase that
number to 10,000 by the end of the year.
An overview of the
key personnel in Ford's Consumer Driven 6-Sigma initiative follows:
Green
Belts. They receive one week of training that includes a basic
understanding of how Six Sigma works and an overview of the Black Belt tools.
Green Belts learn to help Black Belts do projects faster. Green Belt training
allows the people who are affected by the Six Sigma projects to be able to
continue to monitor and control the improvement and to do their jobs better.
Ford divides Green Belt training into three different classes: technical,
manufacturing and transactional, depending on the type of employee receiving
training.
In addition to
assisting Black Belts with projects, Green Belts often have the task of
maintaining the improvement once the projects are complete. "After the
Black Belt completes the project, the control has to be maintained by the
people who are there, the Green Belts," explains Vu. "If they don't
understand the control or cannot manage the control, you lose the control as
soon as the Black Belt is gone. You lapse back into the same problem that you
had before."
Black
Belts . Ford assigns Black
Belts to the Six Sigma process full time for two years. They receive four weeks
of intensive training on Six Sigma tools, particularly those used in the
define-measure-analyze-improve-control cycle, which is central to Six Sigma.
Black Belts typically use tools such as process mapping, cause-and-effect
diagrams, failure mode and effects analysis, design of experiments, and mistake
proofing in their daily work.
The training is
anything but theoretical, however. Black Belts work on actual projects during
their training. They follow each week of training with four weeks of
application, during which they go out and work on a relevant segment of a
project. Black Belt candidates must have a project approved and a Project
Champion before beginning the training.
Master
Black Belts. Usually hand-picked by management, Project Champions and other
Master Black Belts, these employees must also receive a tier-one or tier-two
ranking, which are Ford's highest levels of performance appraisal. Master Black
Belts' mission is to teach, coach and mentor. They teach Black Belt and Green
Belt classes, they coach Black Belts and Green Belts as needed to help complete
projects, and they act as mentors to Black Belts. "My core job
responsibility is to help Black Belts with the tools, eliminate road blocks and
support them during the various phases of their projects," explains Mike
Stock, a Ford Master Black Belt.
Master Black Belts
also manage large, complex projects called megaprojects. These projects usually
involve several Black Belts. In addition, Master Black Belts coach senior
leaders within Ford on how to apply Six Sigma within their departments.
Project
Champions. These employees,
typically managers, work with Master Black Belts to identify Six Sigma projects
and provide necessary resources to the key personnel involved. They receive
three to five days of training. To date, Ford has trained more than 1,700
Project Champions.
Ford selects Six
Sigma projects based on three main criteria: They must relate to customer
satisfaction, the results must reduce defects by at least 70 percent, and each
project should average $250,000 in cost savings. On average, Ford projects have
exceeded the cost-reduction goal.
Once projects have
been identified and assigned, the Black Belts begin to work through the DMAIC
cycle, asking key questions, using a variety of tools and focusing on
delivering specific results.
The Ford DMAIC cycle
follows:
Define. During this first stage, Black Belts
work to identify the customers involved and what matters to them. The Black
Belts define the scope of the project and form a team charter. It's important
that they also know the time frame for the project and the potential financial
gains. Common tools at this stage include a process scope contract, process
mapping and a CT matrix.
Measure. The second stage requires Black Belts
to develop process measures, called "Y's," which enable them to evaluate
the performance of the process. At this stage, it's essential that the Black
Belts ascertain the current process performance accurately so they can assess
it against the desired process performance. They also identify the input
variables that cause variation in process performance. Basically, Black Belts
need to know what the process is, which process outputs affect the customer,
which process inputs affect the outputs, how the process is currently
performing and the best level of performance the process is capable of
producing. Common tools at this stage include process mapping, cause-and-affect
diagrams, failure mode and effects analysis, gage R&R, and graphical
techniques.
Analyze. The third stage forces Black Belts to
prioritize the input variables that cause variation in process performance,
analyze data to determine the root causes of problems and opportunities for
improvement, and validate process input variables with data. The analyze stage
requires Black Belts to be certain that they know which process inputs actually
affect customers and by how much. They also look at possible combinations of
process variables to see their effect on the process. At this stage, Black
Belts begin to look at the effect of changing process inputs on the process
performance and how similar processes function at different locations. They
need to determine both the number of observations to make valid conclusions and
the confidence level required to make valid assumptions. Common tools at this
stage include process mapping, graphical techniques, multivariate studies,
hypothesis testing, and correlation and regression analysis.
Improve. At this point, Black Belts generate
solutions to the problem and select the one that best addresses the root cause.
They also face the sometimes-difficult dilemma of properly implementing the
best solution. This involves cost-benefit analysis, validation of the problem
solution, development of an implementation plan and communicating the plan.
Common tools at this stage include process mapping, design of experiments,
simulation and optimization.
Control. The final stage institutionalizes the
improvement and implements the ongoing control. The goal is to sustain the
gains that have been made. Black Belts complete a control plan, document the
project, translate the opportunities identified to other parts of the
organization, build systems and structures to institutionalize the improvement,
and complete an audit plan. Common tools at this stage include control plans,
statistical process control, gage control plans, preventive maintenance and
poka yoke (a Japanese concept, translated as "mistake proofing").
No Six Sigma
project at Ford is considered finished until the entire DMAIC cycle is complete
and Ford can audit the results to see the effect on customers and the bottom
line.
Roadblocks
Despite Ford's
high-level commitment to Six Sigma, it did encounter a few obstacles when it
began implementing the program. Like any new initiative in any organization,
Six Sigma hit a few roadblocks, chiefly skeptical employees, resource
allocation and data availability.
The first roadblock
couldn't be overcome with money; only time and success would prove Six Sigma's
value to Ford's employees. "Every company I've ever known gets excited
about various ideas and doesn't always stick to them," notes Goeser.
"Ford, too, has seen things come and go. Some people felt that this, too,
shall pass. Well, it hasn't passed. We are well into our second year and it has
stayed high on the agenda. Even the skeptics are starting to see that we are
committed to this. The results are impressive and so is the enthusiasm and the
great work that people on these teams are doing."
Commitment of
resources, primarily people, also proved difficult. Even for Ford, sending its
top-level management, senior managers and top 350 leaders through weeks of
training in a relatively short amount of time taxes resources. Add to that the
training of the nearly 10,000 others in the organization during the last two
years and the issues of time, money and productivity collide.
The other major
roadblock centers on data, which Six Sigma devours. "When we began, I
don't think that Ford's infrastructure was set up to fully run Six Sigma,"
recalls Stock. "Six Sigma requires a lot of data, and the internal
measures that we need to take for our projects sometimes aren't there. A big
obstacle is obtaining the necessary data to complete your project. We had to go
out and create measurement systems."
Ford is improving
the accessibility of data, which also happens to be a byproduct of Six Sigma.
"We are breaking down the barriers," says Stock. "Now, through a
network of Black Belts, we are able to talk to one another and understand what
we need to build databases that will enable us to share data. Six Sigma is
transforming the corporation from looking at variation from something that's
going to get you into trouble to something that's going to give you an
opportunity to improve."
Crossing the finish line
Even for one of the
world's largest corporations, Ford's investment in Six Sigma is no small
matter. Aside from the $6 million training license, Ford invested thousands of
hours in training, purchased new equipment and installed new software. But the
results are impressive. In 2000, Consumer Driven 6-Sigma contributed $52
million to the bottom line. Ford estimates a $300 million contribution from
closed projects and a two-point increase in customer satisfaction in 2001. Vu
estimates that 1,000 Six Sigma projects have been completed and that about 3,000
other projects are in various stages of completion. "We only consider a
project complete when we can show to other Black Belts that the control works,
the customer sees the results and the business sees the money," he says.
Vu sees tremendous
opportunity to use Six Sigma in the nonmanufacturing areas at Ford as well.
"We haven't fully tapped into the business side of the house," he
adds. "Many there haven't used any kind of statistical analysis before.
From a business and transactional perspective, we haven't even scratched the
surface, but we have seen some fantastic results from those projects that have
been completed."
Perhaps most
promising of all is the second phase of Ford's Consumer Driven 6-Sigma process,
which Ford calls Design for Six Sigma. This phase, which is just beginning,
focuses on using Six Sigma in product design processes to prevent problems
before they occur. An added benefit is using Six Sigma to develop new products
as well. "Design for Six Sigma isn't just for preventing problems; it's
also for creating exciting new products," says Goeser.
Words of wisdom
The Six Sigma team
at Ford has learned a lot about what it takes to drive a successful Six Sigma
effort. Beyond all of the training, the commitment of resources, the
accessibility of data and huge sums paid to consultants, Ford has learned that
Six Sigma success hinges primarily on two factors: committed senior leadership
and a dedication to understanding customer needs.
"If you don't
have complete buy-in from your senior leadership, don't try it," cautions
Vu. "It has to be complete buy-in; otherwise it doesn't work. Six Sigma
requires too many changes in the way the organization does business. If you
don't have complete buy-in, you'll run into one barrier after another."
Goeser, herself
part of the senior leadership at Ford, echoes Vu's sentiments. "You must
have your senior leadership team committed to doing this," she advises.
"Expect that the first year will be the most difficult, but it will get
easier from there."
Stock urges
organizations to study their customers before attempting Six Sigma. "Do
you truly know what the customer thinks about your products?" he
questions. "Do you have a clear metric, a clear measure of what the
customer thinks is going on? You have got to start with the customer, and you
have got to make sure that the measurements you use are truly relevant to what
the customer thinks the issue is. Without that, you can't even begin."
Ford's experience
with Six Sigma proves that even a huge organization can be nimble enough to
quickly implement a major restructuring in the way it thinks about the
customer, approaches quality improvement and utilizes its most valuable
resource -- its people. With the help of Six Sigma, Ford may yet make Quality
Job 1, again.
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