This old article from Inside Knowledge magazine in 2005 shows how Ford was able to make massive savings through rapid replication of improved practices in its manufacturing sites.
I have already described the Ford Best Practice Replication system as one of my quantified KM success stories (as well as describing how difficult it was to replicate in other companies), but the Inside Knowledge magazine article contains some more value delivery data.
Many of the readers of this article have surely heard the Ford tag line, ‘Quality is Job 1’. This is not just a tag line, but an overall corporate policy at Ford. Supporting this policy are three key top-down strategies:
- Quality Operating System (QOS): Launched in the 1990s, this ensures adherence to a common standard set for procedures, guidelines, standards and metrics that are ‘critical to quality’;
- Quality Leadership Initiative (QLI): Established in 2002 to support the company’s back-to-basics strategy. The purpose of the QLI is to engage all employees to improve quality and customer satisfaction jointly as a team;
- Consumer Driven 6-Sigma: Launched in 1999 to improve quality faster. 6-Sigma is a methodology that applies a set of statistical tools to reduce and eliminate defects, and also help improve quality of products and services;
- Supporting these three top-down systems is a bottom-up employee-based KM system, including best-practice replication, which allows employees to capture and share proven quality improvement practices.
What are the results of these efforts?It is truly gratifying to note the results of replication on on-going quality improvements, as reported by newspapers and trade publications: “Between 1998 and 2003, Ford has improved about 18 per cent in initial quality”,
Brian Walters, director of Quality Research at JD Power Associates, in ‘Ford’s Quality Battle, Serious efforts appear to be paying off’, Automotive Industries, June 2003 Ford Motor Company reduced warranty costs by about $1bn since 2001, as quoted by the VP of quality, Detroit Free Press, 8 December 2004.
“Since 6-Sigma’s inception (1999), Ford has saved about $1bn in waste elimination globally. Year-over-year savings worldwide were $359m last year”. 6 Sigma in ‘Ford Revisited’, Quality Digest, June 2003
Getting maximum value of quality-improvement effortsSince 1996, BPR has been averaging close to 10,000 replications per year. There are currently 53 active communities of practice, each onesupported by a Gatekeeper and an average of 50 Focal Points. This, coupled with a high level of enterprise-wide quality-improvement efforts, has helped Ford Motor Company generate a value of $1.25bn. This goes to show that high rewards that can be generated when a high level of knowledge management activity is combined with a high level of quality-improvement activity.