MRO Today - AlliedSignal: Six Sigma

Six Sigma
AlliedSignal saved more than $2 billion
after implementing Six Sigma, an
all-encompassing quality and
improvement program. Could your
company achieve similar results?

by Paul V. Arnold

No hugs, no mugs.

Thats how Larry Bossidy differentiates Six Sigma from flavor of the day total quality programs.

If I see TQ posters on the walls and people hugging each other, I know theyve missed the point, says the chairman and CEO of AlliedSignal, a Fortune 100 manufacturer of diversified products.

To Bossidy, Six Sigma is substance, not fluff; action, not feel-good sloganeering. Every activity delivers a direct financial payback.

This much is true about Six Sigma: It saved AlliedSignal from certain death.

Larry had such a struggle with Allied (after taking over in late 1991), says Richard Schroeder, one of the worlds top quality experts and the man who brought Six Sigma to Bossidys company.

Bossidy had cut jobs and sold off plants in an effort to turn the tide. But the problems ran much deeper.

Schroeder advised Bossidy to dig.

In 1993 and 94, Schroeder and Bossidy planted the seeds for a Herculean program addressing:
" quality improvement
" behavior modification
" educational enrichment
" and, most important, bottom-line cash savings.

The vehicle of change was Six Sigma (view "Pursuing the Holy Grail" for an overview on the subject).

For AlliedSignal, Six Sigma is an overall strategy to accelerate improvements in its processes, products and services. It is also a measurement of total quality where focus is placed on eliminating defects and variation in any and all processes and products.

Four Sigma vs. Six Sigma
What does Six Sigma really mean? Heres the difference between Four Sigma and Six Sigma:

At Four Sigma, approximately six of every 1,000 invoices contain incorrect information. At Six Sigma, mistakes occur three times per million invoices.

A Four Sigma water heater leaves you without hot water more than 54 hours each year. A Six Sigma model leaves you out of hot water two minutes a year.

A Four Sigma car spends 37 minutes in the repair shop for every 100 hours of operation. A Six Sigma model spends 1.2 seconds in the shop for every 100 hours of us

Six Sigma involves every AlliedSignal employee and every company that supplies products to any of its 11 divisions.

Through 1998, Six Sigma saved the company $2 billion ($500 million in 98 alone), boosted profit margins and increased investor interest.

Firing up Engines
Arguably, no AlliedSignal division has benefited more, or had more at stake, than AlliedSignal Engines. This 1 million-square-foot manufacturing facility located in Phoenix produces jet engines and auxiliary power units (APUs) for clients such as Boeing, Airbus Industrie, Cessna, Lear and Bombardier. Such engines contain more than 100,000 parts.

If AlliedSignals Automotive Products division makes a bad batch of Prestone antifreeze and passes it on to the customer, few (if any) repercussions, emerge.

However, if Engines makes a defective APU or turbofan engine, and that product is installed on a commercial or military aircraft, there is the chance of a catastrophe.

Malfunctions bring down airplanes, says Russ Ford, the vice president of Six Sigma and quality at AlliedSignal Engines.

They also bring down companies.

If a defect is caught at the plant, theres still a major financial impact.

Every time you produce a defect, it takes time, material, floor space, people, resources in general, to A) detect it; B) analyze it; C) determine if it can be fixed; and D) either scrap it, with all the wasted labor and material, or repair it and recycle it through test and inspection again, says Mikel Harry, the CEO and co-owner (along with Schroeder) of the Six Sigma Academy, a Scottsdale, Ariz., business that trains corporations in Six Sigma methodology.

Defects reduce margin to the tune of 30 to 40 percent of sales for a typical manufacturing business.

Six Sigma aims to slash defects and variation to a mere 3.4 occurrences per 1 million opportunities. Achieving that mark, true Six Sigma, limits the cost of poor quality to less than 10 percent of sales.

Six Sigma also works to eliminate the need for inspection and repair.

If you look in most textbooks, the idea of quality is predicated around Four Sigma (allowing 6,200 defects per million opportunities), says Harry. Its referred to as fitness for use, or conformance to standards. Its B.S. I can crank up my repair loops in the factory, remove the defects at tremendous cost, and pass on a product that is quite fit for use. But the costs are transferred to the customer.

1994: A far cry from perfection
AlliedSignal Engines needed the Six Sigma strategy in the worst way.

In the late 1980s and early 90s, we didnt run the business on purpose, says Ford.

Pick a topic for Ford.

Maintenance? We were expert firefighters.

Engineering? We had designs that were hard to assemble; they had many unique components to them. This led to a lot of defects.

Standardization? We failed to standardize. Any time you have a process or product that isnt standardized, you introduce opportunity for mistakes.

Purchasing? We had errors in cost estimation, inaccuracies in fills and materials, and this propagated back into our supply chain.

Supplier relations? We were jerking them around and they couldnt provide things to us in an orderly fashion.

Overall? This translated into defective products and customer dissatisfaction.

Engines performance mirrored other AlliedSignal divisions. In 1994, at the start of the Six Sigma initiative, the Phoenix facility equaled the corporations overall rating: Two Sigma, meaning 308,733 defects per million opportunities. In a given process or product, imperfection, variation or failure occurred 31 percent of the time.

Today, the division and corporations overall Sigma rating is around 4.5 (1,350 per million). At Engines, Ford says design is currently at 5.0, manufacturing at 4.2 and supplier quality at 4.2. Engines hopes to surpass 5.2 Sigma in its design operation and achieve an overall 5.0 (233 per million) by years end.

In order to create such change, in 1995 AlliedSignal Engines began to create an army of Six Sigma experts and attack strategies focusing on:

Customer excellence: Find out what your core capabilities are and what your customer desires. Then, match the two to make sure youre good at what your customer wants you to be good at.

Operational excellence: Make the manufacturing processes more reliable, repeatable and standardized.

Technical excellence: You cant create Six Sigma products with Two Sigma designs or machines.

Total quality: Establish precise, logical ways to attack problems.

Lean manufacturing: Optimize and smooth flow through any given process. Remove waste and compress cycle times.

Root cause corrective action: Solve problems in a manner that ensures a permanent fix.

A company neednt be involved with a Six Sigma program to realize the intelligence and benefits of such strategies.

Enter the blackbelts
Leading the conversion was the first wave of employee experts, known as blackbelts in Six Sigma circles. They earn this title by enduring 160 hours of training, projects and review.

Six Sigma at work
In March 1998, a corporate jet experienced problems with one of its AlliedSignal-made turbofan engines. On a flight, a fuel line ruptured, filling the engine with fuel.

Upon inspection, the problem centered on a weld joint on the fuel line. After an FAA-induced recall, Allied found 50 percent of all fuel lines on this engine model had similar imperfections.

A project team made up of a blackbelt, two welding operators, several engineers and a consultant from the Edison Weld Institute received the task of figuring out what happened and why.

Using Six Sigma tools and strategies, the group whittled the critical variables to three:
- a lack of standardization in the TIG welding process (operators didnt perform the task the same way or use the same tools);
- gas porosity in the weld joint;
- a quality variation in tungsten-tipped electrodes used in the welding process (operators were hand-grinding the electrodes, creating variation from part to part; this hurt the integrity of the weld joint).

Training addressed the standardization issue. The porosity was linked to a cleaning procedure that acid-washed the fuel line (the wash introduced contaminants). The electrode problem was fixed by purchasing finished and polished electrodes from an outside vendor.

The results? Training and standardization lowered the defect rate to 23 percent. Eliminating the cleaning method and purchasing finished electrodes cut it to 2 percent. The changes increased capacity and triggered a savings of $400,000 per year.

Blackbelts target problems to attack and create teams that find solutions. They also train blackbelt and greenbelt (first level) candidates. One-hundred percent of their time is devoted to these pursuits.

In training, blackbelt and greenbelt candidates are introduced to a new way of thinking (focus on questions rather than what you believe to be the answer) and are armed with more sophisticated tools.

You wont find such tools in a toolbox. Six Sigma tools include:

Brainstorming, which encourages open thinking and allows team members to build on each others ideas.

Flow charts and process maps, which allow a team to identify the order of events in providing a product or service, uncover problems and compare the ideal work flow to what actually happens in the workplace.

Pareto charts, which identify the critical few issues that impact cost and/or customer satisfaction.

Root cause analysis, a method to help determine the true cause of problems.

Control charts, a method to observe and improve process performance.

While the first blackbelts came mainly from the engineering ranks, today, blackbelts represent more of a cross-section of AlliedSignal Engines. Former operators, mechanics and buyers are among the divisions 110 full-time blackbelts.

But Six Sigma is not confined to the few. Nearly half of the 5,646 employees at Engines are certified greenbelts, meaning theyve passed 40 hours of training and projects. The plants goal is to have every employee greenbelt-certified by Dec. 31, 2000.

We stimulate their brain, and its contagious, says Reza Eskandari, a technical excellence specialist who has achieved the companys highest level of certification, master blackbelt. We elevate their thinking, and then they go apply the knowledge.

The cream of the greenbelt crop is selected for blackbelt training. Only the top blackbelts are picked for master blackbelt training, which requires 18 months. Engines currently has 11 master blackbelts.

I knew nothing about Six Sigma before I started working here, says Janelle Hlusak, a newly hired purchasing employee. It took me about a day to get indoctrinated.

Playing by the rules
Employees jobs, and the way they do their jobs, changed under Six Sigma. In the past, a mechanic might use experience and common sense to tackle most problems by himself. Today, it is rare to fly solo.

If its just a minor problem, Ill check with my supervisor before I do it and then take care of it myself, says Danny Turner, a senior master mechanic. Most of the time, it isnt just me. If theres a problem, well get four or five people together and through our process map it, measure it, and usually well find and fix the problem.

For maintenance, this team approach and problem-solving structure works to eliminate recalls, where mechanics are summoned to fix a problem that was supposedly fixed a week or month ago.

The following team plan sets the stage to address problems in every department:

Define: A Six Sigma project team identifies a project suitable for Six Sigma efforts based on business objectives as well as customer needs and feedback. As part of the definition phase, the team identifies those attributes, called critical to quality characteristics (CTQs), that the customer considers to have the most impact on quality.

Measure: The team identifies the key internal processes that influence CTQs and measures the defects currently generated relative to those processes.

Analyze: The team discovers why defects are generated by identifying the key variables that are most likely to cause process variation.

Improve: The team confirms the key variables and quantifies their effects on the CTQs. It also identifies the maximum acceptable ranges of the key variables and validates a system for measuring deviations of the variables. The team modifies the process to stay within the acceptable range.

Control: Tools are put into place to ensure that under the modified process the key variables stay within the maximum acceptable ranges over time (the problem is fixed).

Shaping suppliers
Employees arent the only ones playing by new rules. Suppliers of direct and indirect materials also have experienced change, and increased expectations.

Seventy percent of the components that go into our jet engines are purchased from somebody else, says Ford. Our in-house components can be 100 percent perfect and weve only addressed 30 percent of the problem.

In regard to MRO supplies, inconsistent quality in such things as bearings; lubricants; bolts, nuts, rivets and washers; hose and accessories; and metal-cutting tools can affect the performance of machines and final products.

We recognized that in order to pursue a Six Sigma level of quality and process control, we were going to have to get the suppliers involved, he says.

This area was a trouble spot in the early 1990s. In 1992, Ford says the overall defect rate of direct and indirect parts and materials was 80,000 parts per million (2.9 Sigma). That rate was more than twice the corporate average (35,000 ppm, 3.3 Sigma). On top of substandard products, there were instances of poor or untimely service.

The first steps toward improvement came a few years later.

Every division of AlliedSignal began dumping poor-performing suppliers or suppliers with poor-performing products.

Between 1992 and 1998, Engines eliminated more than 70 percent of its suppliers of direct and indirect materials. Overall, the corporation went from 10,000 suppliers in 92 to around 1,500. In 1993 alone, vendor reduction and the negotiation of new contracts saved the corporation more than $15 million.

In order to be a world-class company, we need world-class suppliers, says Fred McClintock, corporate vice president of materials management.

Suppliers escaping the axe were then trained in techniques such as statistical process control, lean manufacturing and Six Sigma.

We provided this training free of charge, the same training that we had paid millions of dollars for a few years earlier, says Ford. We arent doing this because were a philanthropic organization. We did it because there was an impact to us.

By 1996, the defect rate on incoming parts and materials dropped to 6,000 ppm (corporate-wide, it fell to 1,902 ppm), a full Sigma improvement over 92 levels. Such drops across all divisions saved the corporation $1.2 billion from 1996 through 1998.

The company also sends materials team experts to live at selected supplier sites for up to three months in an effort to help suppliers reduce inventories, improve quality and (for direct materials suppliers) increase production cycle times. The program, called On-site Development, reduces supplier cost of quality, cuts leadtimes up to 75 percent, improves delivery performance and increases production capability.

Allied also seeks to reduce its own inventory, work-in-progress and product waste levels.

Nearly all purchasing departments use a constant. You take the quantity that you need and multiply it by 1.1 (you need nine but buy 10). Sometimes its higher, says Harry. Why is there a need for it? Why buy more than you need? They anticipate waste. So manufacturing says, if Ive got it, I might as well use it.

Harry says thats another difference between Six Sigma and other improvement initiatives.

If Im practicing kaizen or whatever and make an improvement that leads to a modest reduction in material, does the head of the factory see that improvement on the P&L (profit and loss), he says. No, because the reduction of material at the point of reduction, the plant floor, doesnt get translated as a reduction in purchasing because of that quantity constant. Purchasing goes on ordering the same amount, and I dont see squat change in my fixed and variable cost structure.

Total commitment
Can any company adopt Six Sigma and realize such all-encompassing improvements?

Size doesnt have anything to do with it. A company has to commit money, manpower and an extraordinary amount of time to seeing this through, Ford says. Some have good experiences with Six Sigma, and some dont. Weve found that ones who have bad experiences arent truly committed to it.

People jump into it, and get disillusioned when they havent saved the world two months later. The process is continuous. You have to stay with it to see the benefits.

For more info on AlliedSignal Six Sigma, view "The student is now the teacher."

This article appeared in the June/July 1999 issue of MRO Today magazine. Copyright, 1999.