Reference no: EM13598099

In this case the customer is using Six Sigma to reduce defects in a service.A number of merchants that accept American Express cards fail to place point-of-purchase materials that notify customers that they can use these cards at these establishments while displaying competing (e.g., Visa, Mastercard, etc.) point-of-purchase materials. American Express defines these merchants as "passive suppressors." In an effort to increase visibility, an external vendor that placed point-of-purchase material in the marketplace, identified passive suppressors, and measured placement and passive suppression rates was hired by American Express. However, the vendor had a significant rate of failure to contact or meet with the merchants. The leading reason for not meeting with the merchant was that the store was closed when the vendor stopped by.

Define and Measure

The objective was to reduce closed store uncallables (failures to contact), which represented 27.4 percent of total uncallables and 8.0 percent of the annualized attempted visits. The process represented a 2.9 sigma level and 80,000 defects per million opportunities.

Analyze

A Pareto chart pointed to the "closed store" category as the number one reason for uncallables. Byshadowing the vendor on merchant visits, American Express learned that the visits took place between 8:00 A.M. and 6:00 P.M. Of the closed stores, 45 percent were retail establishments and 16 percent were restaurants. Typically, these two types of establishments are not open before 10:00 A.M. Therefore, American Express hypothesized that the hours the vendor was calling on the merchant contributed to the high uncallable rate. It also was determined that if an establishment was closed, the inspection process was terminated with the merchant being reported as uncallable without first checking to see if any point-of-purchase materials were visible from the outside. This resulted in merchants who displayed point-of-purchase material being visited multiple times-leading to rework.

Improve

American Express then tested and validated their hypotheses. The call hours for all visits were changed to begin after 10:00 A.M. The vendor was required to continue the inspection process with respect to external placement of point-of-purchase material. The first change, revised call hours, resulted in a decrease to 4.5 percent from 8.0 percent in the defect rate. The second change, continued inspection, indicated that 35.4 percent of the remaining 4.5 percent closed stores actually had external point-of-purchase material displayed. Combined, these two changes had the following effects: the defect rate decreased to 2.8 percent, the number of defects per million decreased to 28,000, and the sigma level increased to 3.2.

Control

In order to achieve control, American Express uses a p control chart to track the proportion of closed stores over time and the vendor call report was revised to reflect the uncallable rate by reason.

Questions
1.In terms of "design quality" and "conformance quality," explain how using the Six-Sigma approach helped American Express.
2.In the case, American Express uncovered the two primary causes of the uncallable rate by "shadowing" the vendor. What Six-Sigma/continuous improvement tools might the vendor have used to uncover the same information and revise the process?
3.What are some of the limitations of the Six-Sigma approach when there is subjectivity in the metrics used?