Measure for Measure
Kum & Go embraces Six Sigma for maximum process improvement, customer enjoyment
[Editor's Note: This is the last in a three-part series of stories featuring the strengths and strategies of CSP's 2008 Retail Leader of the Year, W.A. "Bill" Krause.]
WEST DES MOINES, Iowa -- While Kum & Go LC co-founder, W.A. "Bill" Krause, may have had a magic touch when it came to business opportunities, his son and successor, Kyle Krause, likes to take a more scientific approach. "He operated much more entrepreneurial, much more intuitive, than maybe how I operate," Kyle Krause, president and CEO, told CSP Daily News. "He loved numbers, loved information, [image-nocss] but would operate more almost from a touch and intuitive standpoint. Today, as our organization grows, we tend to be more data-driven, more measurement-driven."
This is most clearly evidenced by Kum & Go's embrace of Six Sigma, a measurement-based quality-management methodology originally developed by Motorola Inc. to eliminate manufacturing defects. Six Sigma has since been adopted by companies beyond the manufacturing realm to iron out imperfections in their own business processes.
Krause first encountered Six Sigma about 15 years ago after reading Out of Crisis, a book by quality-management guru-and Six Sigma inspiration-W. Edwards Deming. The methodology's core tenets: Define opportunities-or process-improvement goals. Measure your current performance. Analyze data to better understand why a process is imperfect. Improve your performance, or optimize your process. Control your performance to prevent defects.
"I said, 'How do we apply that to what we're doing?'," Krause said. "We had an analytical-oriented company, so it wasn't a completely foreign language, but before you do something like Six Sigma, or any quality process-improvement initiative, it can't just be something you try for six months or 12 months or 18 months. So senior management talked about it and decided together as a team that it made sense culturally for us to go down that path."
From Kum & Go management's point of view, Six Sigma provided the ideal framework to isolate and implement best practices from across its vast chain.
"Why not take those best practices from any one store, and what they do, and perpetuate it in the other 440 stores in the organization?" Krause said. "What's the best way we're doing something, how do we improve upon that, how do we do it in other stores, and spread it throughout the entire chain of stores?"
To help implement Six Sigma, Kum & Go hired an employee to run its quality process improvement (QPI) department in 2006. Based on projects implemented in 2006, the retailer saw its first measurable impact from the initiative in 2007, which Krause quantifies as $1.4 million in process-improvement savings. He anticipates $3 million in improvements the company can attribute directly to QPI and Six Sigma by the end of 2008.
Where exactly do the savings come from? Krause said the company is constantly undergoing "dozens" of Six Sigma projects, from those tackling food costs, to labor scheduling, to retention of people, to cash handling. "Some are revenue generation, some are cost savings, some are cash flow, some just make the stores better," Krause said.
For example, one Six Sigma project focused on improving the cleanliness of restrooms.
"If someone comes into a restroom and it doesn't meet their standards, then we look at that as a defect of the process of making sure the restroom has delivered in a great manner," explained COO Dennis Folden. "So we put a team together and we studied it. Are they being cleaned in a similar way? Are we using the right materials? Is the timing right? Is the process mapped out? Do we really train people to do it correctly?"
By thoroughly examining restroom cleanliness by these angles, Kum & Go was able to improve its mystery-shop scores "significantly." While it's nice to measure the return in dollars, for some projects, the reward is simply greater store traffic.
"If you talk to people and say, 'Do you like clean restrooms?' people say 'yes,' and therefore, the ultimate measurement in that is the growth in inside customer count for us, which we had a great summer with that," said Krause. "Ultimately, that project pays out, but it doesn't have that specific intrinsic dollar value attached to it."
"With Six Sigma, it really gave us another tool to definitely know how a process change has impacted the organization," said Folden. "We thought for a long time that we were very good at executing at the highest level. What we found is, until we really got measuring everything in that process, we didn't know there were gaps, didn't know there were things we could improve, didn't know the processes that could be made better. That's really what Six Sigma has brought to us."
Click hereto read Parts I and II of the series.
To read more about Kum & Go, Bill Krause and the Retail Leader of the Year award ceremony, see the November issue of CSP magazine.