A Six Sigma approach worth imitating
By Paul Teague, Editor in Chief -- Purchasing, 8/16/2007 6:00:00 AM
Farley Blackman is a guy who knows how to get things done. As the vice president of indirect procurement and Six Sigma at UK-based BP, he manages the company's $8 billion spend on facilities, travel, information technology, consulting, human resources and financial services. That's what BP hired him to do five years ago, and he brought an aggressive approach to the job. "We start with the assumption that with indirect, everything is a commodity," he says. "It's a mindset that helps us manage costs efficiently." For example, though one supplier covers 85% of the locations company personnel travel to, he still pushes the commodity model for corporate travel because other suppliers cover the most expensive routes.
But as effective as Blackman's approach has been in controlling indirect costs, he is leading BP to unexpected savings in one other area: streamlining internal processes through Six Sigma. The interesting thing is, that wasn't part of his original job. He just decided to take it on.
His first step was to initiate a Six Sigma project in his own department. When others saw his progress, they decided they wanted to launch projects too, so Blackman detailed members of his own staff to help them. Among the projects: working with BP's solar business to increase yields from manufacturing operations. Demand for solar modules is outstripping supply. Getting more product from the same amount of raw material is critical since silicon, the material required to make photovoltaic cells, is a constrained commodity, he says. The Six Sigma projects have reduced silicon-wafer breakage, increased power output from modules and reduced scrap. Results: $1.6 million in savings so far. He says the company is on target to deliver more than a 15X return on investment on the incremental costs.
Blackman's cooperative and boundaryless approach shows the potential purchasing professionals have for producing savings and value throughout an organization. It's an approach worth emulating everywhere.
The view to the East
We have written several reports on the migration of electronics manufacturing to Central and Eastern Europe, including a cover story in February 2006. In this issue, we've singled out one country, Hungary, for our "World Tour" series. You'll find the report on page 59.
Hungary is rich in history, and was perhaps one of the most liberal of the former Soviet-block countries before the Soviet Union collapsed. Today it enjoys the highest amount of foreign investment in that part of the continent, largely because of the skilled and educated work force. Austin, Texas-based National Instruments opened a 144,000 square foot manufacturing facility in Debrecen in October 2001.
"We chose Hungary because we are a global company and needed manufacturing in close proximity to European and Asian markets," says Mark Mirelez, director of global procurement and a member of Purchasing's Editorial Advisory Board. He spends three weeks a month there, and for good reason: NI now does the majority of its manufacturing in Hungary.
So what observations does he have about doing business in that country? "There's a strong need for relationship building, both with suppliers and local employees," he says. Supplier meetings can be quite lengthy because of the value the Hungarian culture places on business partners getting to know and trust one another. "You typically will need to invest a fair amount of time with your new Hungarian suppliers—getting them to understand and internalize your business/supply chain model, setting expectations and following up to monitor progress."
That sounds like good advice for all supplier relationships.
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