Using Six Sigma to manage suppliers
By Staff -- Purchasing, 1/14/1999
When General Electric Medical Systems recently introduced its state-of-the-art $1.2 million "Lightspeed" CT scan, it was the first product developed and built under the company's Six Sigma business strategy.Teams of GE engineers, purchasers, and suppliers spent three years developing the body scanner that can capture multiple body images in 20 seconds instead of the several minutes that other scanners take. It can also show very precise body sections.
With Lightspeed, GE used Six Sigma methodology to avoid potentially devastating quality problems such as heat building up on printed circuit boards which can cause component failures. "Six Sigma helps us get the highest quality from the very beginning" says Eddie Maxie, manager of global sourcing for GE Medical Systems. "We are trying to identify the variables that would impact that product early on and take them out. The idea is to fix them at the design phase." That way any potential defects never make it to a new product.
But GE doesn't just use Six Sigma in new-product development. It uses it in all aspects of its business, including supplier management. Six Sigma is a statistical measure of variability around an average. Achieving Six Sigma quality would mean that a product would have a defect level of no more than 3.4 parts per million. Under Six Sigma methodology, GE measures every process and identifies the variables that lead to defects. Once the variables are identified, GE takes steps to eliminate them.
Since GE is very dependent on outside suppliers, the company wants suppliers to use Six Sigma methodology too. As might be expected, Six Sigma is affecting GE Medical's supplier base and its relationship with suppliers.
"We are using Six Sigma to evaluate suppliers and to reduce the number of them," says Maxie, who oversees the purchase of about $2.5 billion of power supplies, printed circuit boards, monitors, and other parts and manufacturing services.
While Six Sigma is not a requirement to do business with GE, it is highly encouraged. GE Medical has about 2,000 suppliers and plans to reduce that number within two years. For instance, GE Medical has 30 printed circuit board suppliers. Maxie says they should have about three. Six Sigma will play a part in determining which suppliers GE keeps. Obviously those suppliers who embrace Six Sigma will have an advantage over those who don't.
But GE doesn't tell suppliers "just do it" and walk away. The company provides a Six Sigma "black belt" to the supplier. "These are people who are steeped in this methodology," says Maxie. "It's their full-time job." The GE black belt consults with and trains the supplier in Six Sigma along with quality engineers. GE has 14 black belts who report to Maxie.
The black belts help a supplier identify the variation in the manufacturing process and then suggest ways to correct it. "We take a deep dive into the supplier's process capability to understand what defect levels we are getting and what the process will yield. We look at process defects, part defects, software defects, and prevalence defects," says Maxie. Then a process for corrective action is determined. Actions vary depending on the problem. A piece of manufacturing equipment or software may have to be changed or a factory floor rearranged.
Maxie says Six Sigma requires a high level of trust and a high level of communication and information exchange with suppliers. "If you don't have it, the methodology won't work," he says. Some suppliers are reluctant to provide that level of communication because as GE studies the supplier's processes closely, the supplier's cost to manufacture can be determined. In fact, when steps are taken to eliminate variability in a manufacturing process, cost is often reduced.
Six Sigma also requires a high degree of commitment from the supplier. "We look for management commitment from the supplier," says Maxie. "They need to have a dedicated black-belt resource, too. The supplier's black belt works with GE's black belt to implement Six Sigma. The supplier's black belt also needs a "champion" inside the company to support him or her.
Maxie says Six Sigma is not a new concept and is not a passing corporate fad. "Six Sigma is imperative for us and for our suppliers. We are trying to drive our quality levels to Six Sigma and we can't do it without our suppliers."
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