Achieving

Six Sigma
in Shipping
Processes
In todays economy, companies must now take an integrated,
enterprise-wide approach to control shipping costs. At Pitney
Bowes, we call this approach package management. An effective
package management solution not only gives you the ability to
initiate, track and validate deliveries of documents and parcels,
it allows you to compile information about these transactions and
analyze them quickly and easily.
New technology is the driving force behind improved package
management. In particular, Web-based desktop shipping
applications provide the functionality required to define, measure,
analyze, improve and control factors that internal and external
customers consider critical to quality. And those five actions are
the recognized means for achieving the highest levels of efficiency
and maximum cost reduction.
Six Sigma Requires Automation and Control
Six Sigma is a management process widely touted by companies
like GE, Allied Signal and others. Subir Chowdhury, Six Sigma
expert and author of Design for Six Sigma, offers this summary
of Six Sigma: Six Sigma is a management philosophy focused
on eliminating mistakes, waste and rework [it] focuses on
defense doing many of the things youre already doing, but
doing them better, with fewer mistakes. Six Sigma is about
improving processes and reducing opportunities for errors. This
pays off in reduced costs and increased customer satisfaction.
Until recently, applying Six Sigma to shipping processes was
difficult. Two key factors stood in the way: lack of process
automation and lack of centralized control over shipping decisions.
In most companies, employees who are not members of the mail
center staff initiate a significant number of expedited envelopes
and package shipments. Few of these employees understand
the costs associated with the delivery agents or service levels they
select. Employees usually handwrite air bills, so the possibility
of an incorrect address is higher. Often, they dont include a
chargeback code on the air bill or the number they provide is
incorrect, which means those who are in charge of managing and
billing these costs must then do extra legwork to determine the
appropriate numbers.
Customers Define Quality
If your company fits the description provided, whats the first step
to achieving Six Sigma in your shipping processes? Listening to
your customers. Quality is the goal, and the issues or parameters
most important to your customers define quality. If you are
responsible for the functioning and efficiency of a corporate
mail center, you have two sets of customers to whom you must
respond: internal and external.
The needs of your internal and external customers are known
as your critical-to-quality (CTQ) factors. And even without
conducting an in-depth assessment, you can probably tell if
youre meeting these needs. Just listen to your customers.
Technology Provides Six Sigma Framework
If what youre hearing from customers tells you improvements
are needed, your next step is to define your situation, which
includes identifying issues that impact CTQ factors. Within an
organizations mail center function, several typical issues or
circumstances can negatively impact CTQ. Youll see many of
these reflected in customer comments.
Inability to measure shipping activity
Carrier and service selection errors
The use of off-contract carriers
Errors in cost center allocation
Lack of centralized data for cost analysis
Address errors
Improving and controlling
critical-to-quality factors
By
Bruce
Beatty
REPRI NT
Repetitive manual processes (such as having to re-key
addresses from a database onto a shipping label)
Lack of control over employee carrier selection
To define your organizations situation, you need to conduct a
formal analysis, which can be accomplished by following these
five basic steps:
1. Perform a Thorough Analysis of All Shipping Processes
It may not be easy to assess your current situation due to a lack
of detailed data. That, however, is an indication of the benefits
to be achieved once the processes are automated. For this reason,
it is often best to focus on a representative department or unit
rather than tackling the whole enterprise at once.
2. Identify Opportunities for Improvement
Review carrier bills, interview internal and external customers
or those that interact with them. Identify process errors and
determine why they occur.
3. Calculate the Extent of the Issues
Measure the frequency with which errors occur. Determine
which errors are having the greatest impact on your customers
critical-to-quality factors.
4. Suggest Process Improvements
Focusing on the issues of greatest importance to customers,
identify process changes and tools to reduce the incidence of
defects or errors. The holistic view of package management
represents a greater opportunity for overall savings, as it supports
the ability to optimize processes without regard to the delivery
agent handling the transaction.
5. Estimate the Potential Savings from Improvement
Estimate the opportunity for savings if information and controls
were available to the desktop users. Extrapolate these gains to
the enterprise to determine what level of return is available to
justify investments to improve existing processes.
This is where technology can lend a hand. New desktop tools can
automate and control processes to ensure accuracy and supply
administrative tools to help measure, analyze, improve and
control shipping processes. Pitney Bowes DeliverAbility, for
example, provides a Web-based solution that provides enterprise
package management. Information related to each shipment
including carrier, service, origin and destination locations,
departments, cost centers can be analyzed, opportunities for
improvement identified and business rules defined and deployed
to maximize consistency and compliance. Systems like
DeliverAbility support Six Sigma business practices.
Six Sigma Principles at Work
Heres one example of the gains that can be achieved through
automation and control. Pitney Bowes Information Based Solutions
(PBIS) is a global business group that focuses on expanding
Pitney Bowes product and service offerings, manages financial
and payment services and manages products and services for the
small business and home office market. Along with Pitney Bowes
customers, PBIS recently helped Beta-test DeliverAbility.
Within PBIS, shipping and reporting have always been manual
processes. Departments within PBIS tracked and reported each
express shipment by logging pertinent information in a weekly
express shipment log created within a spreadsheet. Each week, these
spreadsheets were handed off to someone in accounts receivable,
who manually reconciled the logs against the up to 50 express
shipment bills that arrived weekly. Amounts then had to be
charged back to each individual cost center for third-party billing.
This manual process was cumbersome and inefficient. In addition,
shipping policies couldnt be enforced among employees, and no
accurate data trail was available to dispute charges if necessary.
An audit revealed PBIS had been overcharged for shipments by
approximately two percent.
After one quarter of use, PBIS users of DeliverAbility report the
new system is faster and easier to use than the old manual
process. The address book, a critical feature, received high praise
from PBIS staff as a time-saving feature. The new system also
improved mail center efficiency and reduced address correction
fees by two-thirds. Theyve also had success in improving internal
distribution of packages and packages sent to affiliate
organizations. DeliverAbility is also changing employees shipping
habits: PBIS reports that employees are more often selecting next-
day afternoon delivery, which costs slightly less than the morning
delivery they typically selected.
A Starting Point
The PBIS experience illustrates that package management
solutions are a means to achieving gains in efficiency as well as
improvements in customer service levels. The PBIS experience
also demonstrates the power of information, which figures so
strongly in the philosophy of Six Sigma. Simply put, this
philosophy is the following:
We cant improve what we dont know.
We dont know until we measure.
We dont measure what we dont value.
We dont value what we dont measure.
Even for companies that have not embraced Six Sigma principles,
package management solutions can put this philosophy to work
and return the benefits. The results will be clearly visible in the
companys bottom line.
Bruce Beatty is director of Strategic Business Development for
Pitney Bowes Distribution Solutions. For more information,
visit www.pb.com.
Web-based desktop shipping
applications provide the
functionality required to
control factors customers
consider critical to quality.
Copyright 2003 by RB Publishing Inc. A reprinted excerpt from Parcel Shipping & Distribution magazine, 2901 International Lane, Madison WI 53704-3128;
608-241-8777; Fax 608-241-8666; Email rbpub@chorus.net; www.rbpub.com. For a free subscription call 800-536-1992 or log-on to www.psdmag.com.