Productivity Improvement

 

Northern Ireland Electricity use Six Sigma to reduce costs and improve the quality of their service. This has become so effective that they were awarded a European Six Sigma Excellence Award.

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NIE Wins European Six Sigma Award
Northern Ireland Electricity won one of the top awards at the 5th Annual European Six Sigma Excellence Awards. The Award in “Best Defect Elimination in Service and Transaction” was presented at a gala dinner in London during the Six Sigma Summit attended by representatives from all the finalists, and some of the world’s leading organisations and business people. Harry McCracken, Group Managing Director, Viridian Power and Energy, sees the award as an endorsement for the whole business community in Northern Ireland. “We are delighted to have won this Six Sigma Excellence Award. To take the top honours in a category which includes Hewlett Packard and Shell Gas Hellas shows that Northern Ireland companies can compete with companies that are world leaders in their field”.

Key Project Outcomes
This has been NIE’s most successful Six Sigma project to date.
A summary of the key project outcomes are as follows:

  • Change of Tenancy successes improved by 23% (i.e. 65% to 80%)
  • Debt chase productivity for delinquent accounts (defects) increased from 36% to 100% effectiveness
  • Settlement of debtor accounts increased from 76% success to 90% (up 19%)
  • Bad debt to sales improved; from 0.* to 0.*
  • Process Sigma from 0.5 to 2.8

Independent benchmarking, carried out by Leeds University Business School, against other UK utilities has confirmed the NIE process for Final Account Management is best practice. In addition, the success of this project has provided accelerated learning in a number of other key projects mainly Non-scheme Debt Management and Billing. NIE strategy has been to employ benchmarking as the strategic driver for project selection and improvement targets.
NIE is a regulated business and is targeted to reduce costs by greater than 3% per annum. Six Sigma methodology is the driver for the cost reduction strategy in the Supply business. The results of this project have been instrumental in achieving cost reduction targets.

Six Sigma Explained
Six Sigma is a disciplined, data driven technique for eliminating defects in any process and NIE is one of the first utilities in the UK to use this approach to improve processes, resulting in more effective solutions, improved customer satisfaction, strong financial returns and increased shareholder value. Six Sigma has provided tangible business results and cost savings that are directly traceable to the bottom line.

The opportunities for defects in NIE’s transactions are considerable and therefore so are the opportunities for improvements. For example, in their Supply business alone, they have over 20 million customer transactions per annum that can impact their business performance. They consider it is therefore important all their processes are continually measured and their performance meets our goals.

The winning project
In April 2001, the management team highlighted the trend in the bad debt provision for Removed Customers. As a result, a detailed review of NIE’s Debt processes commenced in September 2001 and concluded that customer moving between premises (Change of Tenancy) was the primary driver for bad debts. The latest best estimate for the ‘debt to sales’ ratio was ***, which was £0.6m higher than the average cost for the previous year, and had doubled over the past four years. NIE Supply, in partnership with local IT company Sx3, pioneered a Six Sigma project to improve its process to update customer information on Change of Tenancy and improve payment performance. Up to 80000 customers move premises per annum (Final Bills) and 1 in 3 did not settle their final bills.

This Six Sigma project took a proactive approach using technology solutions to improve billing processes for customers who are moving premises. Enhanced Change of Tenancy procedures have delivered savings of over £1.3m since the project began.

A number of Six Sigma tools such as Box plots, hypothesis tests, comparison tests, analysis of variance and multi-vari charts gave an insight to the relationships between key process input variables and key process output variables, and helped to develop an in-depth understanding of the process and data. From this analysis a number of improvements were identified and implemented by the team. Service Level Agreements between NIE and Sx3 were updated to take account of process changes and appropriate procedures and policies documented. NIE Supply Board and NIE Executive receive monthly updates on results against Key Performance Indicators (KPI’s).
The growing deployment of Six Sigma
Each business within NIE has developed a Six Sigma strategic plan, defining all key business processes and weighting these to the key performance indictors detailed in each business plan. This has highlighted key processes that strongly impact critical business outcomes and therefore giving strategic direction for Six Sigma focus.

To date the thirty-seven senior managers trained as champions, embrace Six Sigma's customer-focused, data-driven philosophy. Cascading measures through appraisal systems have obtained buy-in and engagement from middle management and other employees. Continuous monitoring of process sigma levels is a requirement, as is, understanding the costs and benefits of continuous process improvement. Six Sigma used in conjunction with best practices and benchmarking enables us to seek solutions to process problems outside the NIE customary structures of thinking. It also gives validity to their targets for improvement and allows them to quickly adopt proven best practices, enhancing the guarantee of reduced process defects.
Currently NIE have 4 full time Black Belts, and 49 part time Green Belts working across all areas of our organisation. The 17 projects completed to date have generated savings of £9 million (£4.54M Operating Cost Reduction and £4.46M Working Capital Reduction) and 44 projects underway are delivering 88% Green Belt deployment.
Every employee has the opportunity to be trained as a Green Belt in the yearly recruitment opening. Green Belts have gained key skills, experience and competencies, which gives them opportunity to develop and progress their career. The Six Sigma programme is recognised within the organisation to produce high calibre employees with a strong potential to progress significantly within the company. Each of NIE’s Black Belts, after a two-year secondment, have been successfully re-integrated with promotion to senior levels within the organisation.

Six Sigma is further endorsed by the concluding remarks of Harry McCracken, Group Managing Director Viridian Power and Energy, “For Northern Ireland Electricity, the implementation of Six Sigma throughout the company four years ago has contributed greatly to business excellence in our service, price and reliability. It is also a vital business tool for NIE as we prepare to enter new and competitive markets.”

For more information on how Six Sigma could help your organisation contact Michael O’Neill on 028 90737950 or michael.oneill@cforc.org

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