Using quality management techniques to reduce expenses
When Blue Cross and Blue Shields of Florida Inc. released its annual report in 2004, some unanticipated numbers displeased the board of directors and forced them to think about an issue that never been expected to cause the company such a great expense . The problem was high printing cost as a result of inefficiency in printing process and inconsistency in printing quality.
Initial investigations revealed that the ratio of the Blue Cross and Blue Shields' employees to printers was markedly low compared with similar firms in the industry. According to a Gartner Group report, comparable organizations reported 6.3 users per printer. Surprisingly, BCBSF's ratio was only 1.7 per printer. They also had a remarkable number of desktop printers compared to networked printers causing a drastic increase in supplies and maintenance cost. (New Approach)
An initial thought that came up from senior managers and analysts was to discard a significant number of desktop printers and shift to networked printers. However, they realized that during this transition, some potential saving and improvement opportunities will be missed since there was no actual analysis had been taken place.
At this point, they decided to employ some modern quality management tools and techniques such as Pareto charts, Cause-and-effect diagrams and Six Sigma DMAIC project. They utilized these tools to study their employees printing needs, and verify whether reducing the number of desktop printers would actually aid them to improve the printing process and lower the printing cost without sacrificing quality and service.
Utilizing Pareto analysis technique resulted list of variables related to printing. They identified five major printing costly factors as consumables, paper, parts and labor, network printer depreciation and desktop printer costs.
Using Ishikawa's bonefish technique, they realized that these factors are all effects and not causes. They analyzed each factor separately and identified more than 50 possible route causes contributing to these various outcomes. They narrowed the results down to critical route causes using Cause-and-Effects Matrix.
The first route cause that they studied thoroughly was toner cartridges. They recognized potential savings by using remanufactured toners instead of new cartridges. The potential savings in this area was estimated to be over 60 percent. They conducted a quality test to make sure that remanufactured toners would not cause any inconsistency in terms of quality and serviceability. These toners turned out to be efficient and reliable.
They also studied potential savings by optimizing network printers' configuration settings. They examined more than 50 combinations of setting such as type style, toner density level, and resolution (i.e. light text, heavy text, light graphics, heavy graphics).
Over 60 employees from different departments reviewed the printouts for quality. Lowering the toner density from a default factory level of eight to four, produced adequate quality and resulted remarkable reduction in toner consumption by 50 percent.
Thus far, they achieved significant progresses and identified considerable saving opportunities from these improvements. Now it's a time to revisit the initial thought of shifting to network printers using the powerful six sigma principles.
They started a vast study on employees' printing habits. Outcomes were interesting. They realized that most of employees are not concerned about printing cost. They usually print for convenience and not because the printed copy was essential.
They initiated a program called "Print Behavior Communications" to train their people and improve their awareness about best practices. One of the courses for example, focused on saving opportunities resulted by printing black and white vs. color and duplex vs. single sided. Surprisingly, most of them did not know that their printers are capable of printing duplex.
They also conducted usability studies as opposed to similar size organizations in the same industrial sector. They realized that their printers are underutilized by at least 30 percent. This result proved that they had an enormous capacity to transfer the printouts from desktop to network printers. They analyzed the offices' layouts and designated proper spots for locating and installing network printers where the distance of each printer must not exceed 40-45 feet from an employee's desk.
From previous experiences by other organizations who attempted to transfer to network printers, Blue Cross and Blue Shields management knew that they will face some resistance and difficulties during the transition even though their employees seemed to be open to change. To overcome this issue they held focus group meetings and shared the ideas of moving from desktop to network printers. The bottom line was that this was an area where they can reduce their costs without laying off people. Most of the people appreciated this change.
The outcomes were tremendous when recommended improvements completely implemented. They discarded all of desktop printers as well as depreciated network printers. However, outcomes were different between departments.
In Information Technology department for example, the ratio of employees to printers improved from 7:1 to 16:1. Consequently, the cost per black and white printout reduced from $0.03 to $0.01. They also identified a host of other saving opportunities such as a centralized toner ordering and storage system, chargeback policy for color printing, duplex printing to reduce paper costs, a centralized service and maintenance system to eliminate unnecessary service charges and more.
The total savings associated with annual distributed printing costs was reported 1.4 million dollars on 2006 annual report (New Approach).This scenario is a great demonstration of utilizing quality control tools and techniques to control costs as a result of process adjustments. It also proves that understanding the best way to approach a problem is a key factor in overcoming it.
In order to grasp a better understanding of the process, it would be beneficial to study and scrutinize each of these techniques separately in more details.
As it is described previously, BCBSF prioritized problem areas using Pareto chart. This technique identified the areas where management should focus their efforts to achieve the greatest improvement. However, Pareto chart uses 80-20 rule, which states 80 percent of problems are often due to 20 percent of the causes. This rule looks at problems as a big picture without scrutinizing it enough to determine if there are any more causes. (Schwalbe)
To overcome this issue, they utilized Cause-and-effect quality control tool to delve the problem in more details. They used the famous 5 whys technique and recognized critical route causes each of which opened a new path for more saving opportunities and improved the quality of the whole process.
Up to this point, BCBSF made a significant progress in defining problems and identifying areas with potential savings. Now it's a time to optimize the printing capacity to cover business printing needs and establish an everlasting print culture and behavior among employees to raise awareness about best practices. BCBSF made an exceptional choice by selecting Six Sigma principles to achieve these goals.
Using a five phase DMAIC method facilitated a continuous improvement process that enhanced company's ability to define, measure, analyze, improve and control the printing quality and costs problem. They had already used previously mentioned techniques to identify problems, opportunities and potential savings. However, none of those methods approached the problem as scientifically as Six Sigma method.
First of all, using Six Sigma principles established an organization-wide commitment throughout all levels of employees. BCBSF made a huge investment on training its people to develop their knowledge about the company's current printing behaviors and consequences associated with these behaviors. Then, employees were taught some useful techniques to improve their print culture and to develop a better understanding of how those improvements affect their organization. These training expenses paid off by producing satisfactory printing quality and service at lower price as employees started practicing Six Sigma Principles.
Moreover, Six Sigma principles created a motivating learning environment for BCBSF's employees. People with higher levels of training were distinguished and recognized. This encouraged other people with lower levels of participation to be more involved in the program.
Unlike other quality management methods that are just a discipline to organizations, Six Sigma principles utilized BCBSF employees' creativity by allowing them to share their ideas. This method reduced employees' resistance to change since they felt that their voice count. The company also enjoyed free consultations from printer end users. This leads them to reach out their goals faster and attain the most benefits with the least amount of risks.
Many people think of quality control as a technique to improve quality. In fact, quality control process generates so many benefits and opportunities besides quality improvement. This case study clearly exhibits utilizing project management tools and techniques to reduce variations, improve the process, increase efficiency, and cut unnecessary expenses without giving up quality and serviceability. It demonstrates how and when each of these tools can come into play in order to maximize the process efficiency. Modern quality management methods study organizational behaviors to establish a continual improvement. These techniques emphasize on utilizing people capabilities and ideas rather than giving them disciplinary and non negotiable tasks to accomplish.
These tools and techniques are not new and have been used for many decades by other individuals and organizations. What is new was the BCBSF's ability to bring them together along with many different ideas and concepts that can be utilized on an organization-wide basis.
New Approach, "Using Six Sigma to Overcome Quality Problem". BMGI. 09/24/2007 < http://www.bmgi.com/eNewsletter/Feb/Article2.html>.
Schwalbe, Kathy. Information Technology Project Management 6e. Boston, MA: Course Technology, 2009.