Merger Marries Quality Efforts

Mergers are not always pretty, especially when two multibillion-dollar companies are involved. Cultures can clash and redundancies in operations can lead to thousands of layoffs as well as shaky morale. Even the melding of quality-improvement programs can cause management many sleepless nights. While last year's merger of AlliedSignal Inc. and Honeywell Inc. was not trouble-free, it did result in the marriage of two highly successful quality-improvement programs: AlliedSignal's Six Sigma and Honeywell's Quality Value assessment process. Now known as Six Sigma Plus at the newly formed Honeywell International Inc., it is paying big dividends. Last year's savings amounted to $600 million; this year savings are expected to reach $700 million. Ray Stark, corporate vice president, Six Sigma and productivity, for the Morristown, N.J.-based company, says the millions of dollars in savings are targeted in the company's annual strategic plan. "As we go into the operating plan each year, we have businesses identify projects to drive those improvements," he says. Led by Michael Bonsignore, chairman and CEO, Honeywell's Six Sigma Plus program targets not only manufacturing processes but also sales, marketing, and service functions. In fact, Bonsignore expects Six Sigma Plus savings in service areas to double those in manufacturing. The program's methodology includes several steps: defining a problem, measuring how the process performs, analyzing causes of problems, improving the process to reduce defects and variations, and controlling the process to ensure continued, improved performance. Six Sigma Plus, an enhanced version of the Six Sigma program first started more than 30 years ago and trademarked by Motorola Inc., measures quality by the number of defects per million opportunities. There are six levels of achievement, with Six Sigma being the highest. At Six Sigma, only 3.4 defects per million opportunities are allowed. Honeywell operates overall at about Four Sigma (6,210 defects per million), with some processes and businesses at Five Sigma (233 defects per million) or better. Jeffrey A. Berk, manager of benchmark development and services for Arthur Andersen in Chicago, says that recently there has been an increase in formalized continuous improvement activity among manufacturers. "There have been a lot more companies working to make sure they are doing everything they can to share knowledge and improve processes," he says. In addition to Honeywell, other IndustryWeek Best-Managed Companies using Six Sigma to improve processes include General Electric Co., Du Pont & Co., Texas Instruments Inc., Sony Corp., Nokia Corp., and Johnson & Johnson. GE, the best-known proponent of Six Sigma, realized approximately $2 billion in savings through the program last year. Honeywell teams gathered in May to share best practices and showcase improvements gained through Six Sigma Plus. Approximately 500 teams from Honeywell competed to participate in the 2000 Americas Quest for Excellence event in New Orleans; only 16 teams were selected to present their stories. More than 50 customers also attended. "It is a learning event," says Stark. "In some cases, it is the first time part of the company is seeing what other parts of the company are doing." Among the teams participating was one consisting of employees from Honeywell, its customer, Phoenix-based PING Inc., and Remington Arms Co. Inc., a supplier based in Illion, N.Y. The team produced a new type of golf club using Honeywell's PowderFlo metal-injection molding technology. Remington, which has been in the metal-powder industry for 20 years, helped Honeywell develop the technology. "Getting the customer involved is highly important," says Berk. "The same goes for suppliers. It strengthens relationships and builds trust." Honeywell's process is unique because it uses a binder system for Powder Injection Molding (PIM) that allows design engineers the freedom to design larger, thicker, and more complex parts than they could with traditional PIM systems. Steve Sesny, application development engineer, says PING could not make the club with its own technology. Using Six Sigma Plus methodologies and e-business processes, the team significantly reduced development time and opened new markets for Honeywell and its customers. Web-based software was used for online design modifications and real-time file transfers to exchange ideas and to decrease design cycle time. "This is all about making metal parts more easily," says Whitney Erickson, general manager, PowderFlo Technologies. "The customer does not have to do as many operations." Thanks to Six Sigma Plus, the PowderFlo team was able to reduce application development time by 50%. The new club is expected to generate significant new business for PING as well as Honeywell. The technology could open up $6 billion in market potential as new applications are developed for the PowderFlo material in products such as flatware, fan blades, and automobile turbine wheels. "What's exciting is that we are generating experts with our customers and partners," says Sesny. "Being part of the team, they were involved in the Six Sigma process. They were part of the solution." As part of Six Sigma Plus, all Honeywell managers, supervisors, and other professionals are expected to become certified as Green Belts-applying basic and advanced Six Sigma tools to complete projects that demonstrate improved company performance. Employees with Green Belt training complete an average of six days of project-based learning to drive high-impact business results. Black Belt and Master Black Belt certifications also are possible. Employees with Master Black Belts become familiar with the most advanced Six Sigma tools and also train and mentor those employees working toward Black Belt certification. The Honeywell/PING/Remington team was led by a Honeywell employee with Black Belt training. Specific Six Sigma tools included failure mode and effect analysis, which was used to anticipate and correct potential problems in prototyping and production phases; design of experiment, which was used to optimize feedstock, mold design, injection molding, and sintering and measurement functions; and design for manufacturing, which was applied to understand feedstock capability. Making a better golf club is just one of the Honeywell teams' accomplishments. At the company's headquarters, a safety improvement team used Pareto chart analysis, a Six Sigma tool, to identify 25 sites with the greatest potential for reducing medically reportable safety cases and lost workdays. "Pareto analysis is a sorting process whereby you look for and sort by various trends and attributes," says Danny Reese, corporate director, safety and industrial hygiene. "It helps you understand where your various problems might be." Other Six Sigma tools zeroed in on causes and effects of injuries at each site. As a result, the team reduced reportable cases at the sites by 43% and lost workday cases by 50% in 1999. The safety team also created an intranet-based tool kit that can be used by teams at every Honeywell location. The team's initiatives resulted in a 33% improvement in global safety performance and $1.4 million in productivity improvements in 1999. At Honeywell's Cleveland, Tenn., facility, a Failsafe team was formed to eliminate defects by using Six Sigma Plus tools. The plant, which makes disc and drum brake pads, was experiencing internal scrap costs in excess of $1 million per year, with defects at the rate of 1,000 parts per million in products delivered to the customer. The team used Pareto analysis and design of experiment to identify variables causing defects. The Failsafe team identified the optimum temperature setting in the disc brake pressing area, reducing defects by almost 50%. Internal plant scrap was reduced by 26%. The team also improved its overall ability to provide customers with products on time and in the exact quantity as a result of the continuous-flow processes. Non-value-added time was reduced and throughput was increased. Work-in-process inventory was reduced within the drum drilling operation, and drilling capacity was increased. In Honeywell's annual report to shareholders Bonsignore and now-retired chairman Lawrence A. Bossidy emphasized that they are counting on Six Sigma Plus to help the company better listen to its customers, anticipate their needs, and solve their problems: "Nothing is more important in achieving our growth ambitions than building and sustaining strong customer relationships," they said. "That's why we are striving to build a customer-centered culture in the new Honeywell."