Wednesday, December 5, 2007

Quality is Job One...Again

Is this an American turnaround success story in the making?

Will this be one of the most storied turnarounds in American business history?

Can America ultimately compete with Japan?

In a time when buying American could bolster the American dollar and counter China's threats to our economy and currency...will this ring true with American automotive consumers?

If increased American quality and value coincides with a weak dollar, could we actually stem the tide of decades of trade deficits?

Duncan Hunter raised the issue in the most recent Republican debate.

On the issue of trade with China, Rep. Duncan Hunter said China is "cheating on trade ... and it's in the interest of the United States to stop China's cheating. Buy American this Christmas season -- that might keep your neighbor from losing his job."

I think its safe to say that all things remaining equal, we would all buy American if we could. The fact of the matter is, the American automotive industry has let us down so many times with poor quality and poor value, that even if quality and value were to improve, it may take many years for buyers to come around.

Until recently, the fate of the American automaker has been held in the hands of self-serving union leadership or short-sighted and arrogant corporate executives. Meanwhile the Japanese, and now Koreans have been invading our marketplace with lower-priced and higher-quality alternatives.

As for Ford, this auto maker's very heritage represents some of the earliest applications of lean manufacturing by the master himself, Henry Ford. But somewhere along the line domestic automakers, drunk with near 100% market share with no competition in sight, introduced the concept of planned obsolescence in combination with stagnant designs and engineering, and consequently lost the confidence of the American consumer at the very time the Japanese arrived.

Now, Ford Motor has been implementing Six Sigma quality processes for some time now. Not only are they turning their cash flow around, their success is manifesting itself in their relative quality ratings.

The company improved in “things gone wrong” (TGW) by 11 percent versus last year, while the report’s average industry-wide improvement rate was 2 percent. Plus, 16
Ford Motor Company models ranked in the report’s top three places for customer satisfaction, TGW performance – or both – after three months in service. Ford Mustang Shelby GT500, Ford E-Series, Ford Crown Victoria, Mercury Milan, Lincoln Mark LT ranked best in their respective segments. Ten Ford models outperformed their competition, traditionally the best in class.

Six Sigma at Ford has been in the works since 1999, when the company's former director of corporate deployment for Consumer Driven 6-Sigma sought an effective method to improve quality. Top management soon joined the cheering section, and Six Sigma efforts have been persistent ever since.

This year Ford celebrates its 100th anniversary, and quality has been a pivotal factor since the beginning. In fact, Henry Ford introduced several principles and practices that are now considered the backbone of lean manufacturing. Since that time, Ford has tried its hand at total quality management, and now Six Sigma.

It is encouraging to see Ford Motor reaping tangible financial rewards for their commitment to improving quality.

Ford's quality record at the beginning of this decade was so bad, the automaker was spending billions on warranty repairs, while simultaneously turning off potential buyers in droves.

The blue oval has been righting the ship for the past couple of years, with vehicles like the Fusion and Taurus leading a quality renaissance that has the automaker nipping at the heels of its Japanese competition. That quality improvement has been cutting losses, with $900 million in savings achieved in 2007, and more on the way. The embattled automaker is forecasting an additional $300 in savings for 2008, which means Ford is expecting additional quality improvement.

The most effective way to measure a quality management system's effectiveness is by looking at the numbers. Since Six Sigma's inception, Ford has saved about $1 billion in waste elimination globally. Year-over-year savings worldwide was $359 million last year. Moreover, customer satisfaction has risen five percentage points in the company's internal customer satisfaction survey.

Results like these don't happen overnight. Ford invested heavily up front to train its employees as Six Sigma Green Belts, Black Belts, Master Black Belts and Project Champions. The company also implemented a project-tracking system in which members of separate project teams can observe via an internal database what others are working on.

Can you imagine what it would take for a repeat Honda buyer to consider a Chevy Malibu or a Ford Taurus? Ford is apparently striving to answer that very question.

1 comment:

Bike Bubba said...

Reality is that the "Detroit 3" have had quality programs, including Six Sigma, for about four decades. These programs can be used to actually increase quality, but all too often, it simply becomes a way to "drive cost out." In other words, to make things cheaply.

Now consider the fact that one of the biggest complaints about the domestics is that they have used cheap materials in place of good ones--I remember reviews that suggested that GM's cladding was made by Fisher-Price, for example.

So is this a triumph of Six Sigma, or did someone in the corner offices finally figure out that you can't make a racehorse out of a mule, and they worked to open the pocketbooks to get good components done right?

I'm going to suggest the latter.