GE's Wealth of Free Advice

Five years ago, Warren Coopersmith's family-owned distribution firm in Takoma Park was at one of those crucial "grow-or-die" junctures. Its biggest customers, movie theaters and video-rental outlets, were consolidating and looking for suppliers big enough to provide all popcorn, candy, soda pop and cleaning supplies to their expanding empires.

Coopersmith decided that his company, Marjack, was going to be a survivor. He began by recruiting experienced professionals to his management team. He made a few acquisitions, expanded his business with such existing customers as Regal Cinema, and developed new lines, such as providing candy and snacks to Office Depot and Kinko's outlets. He even embarked on a bit of vertical integration, buying his own popcorn company.

But as Marjack's revenue grew toward $150 million, five times what it had been, Coopersmith and his team realized that there were problems. Their profit margins weren't what they should have been and their systems weren't up to handling the increase in volume. A small but annoying number of orders were going out incomplete or incorrect.

That's when the folks at General Electric's Commercial Finance unit, which had just financed Marjack's new warehouse in Landover, knocked on Coopersmith's door with an unusual offer: Would he be interested in having a team of GE's famed Six Sigma management experts come out, perform their rigorous statistical analyses of warehouse operations, and find ways to cut costs and improve quality? And here's the thing: It would be absolutely free, with no strings attached.

You might well ask why a $25 billion division of a global corporate behemoth would want to go through the time, hassle and money of helping Marjack pick and pack Milk Duds and red licorice. The answer is pretty simple: For the $15 million that Six Sigma costs a year, GE Commercial Finance buys a ton of customer loyalty and sets itself apart in what is otherwise a commodity-service business. Perhaps even more important, the program increases the odds that the mid-size firms to which GE is lending money will not only stay in business long enough to pay back the loans, but will be more likely to grow in the future -- as will their need for capital. "We know instinctively that the benefits to us are substantial," said Sharon Garavel, who heads up the program. "Our customers have told us that they intend to give us a larger share of their business." By her reckoning, it has already generated 350,000 hours of free consulting services to more than 3,000 customers since 2002, saving them collectively more than $1.2 billion.

In fact, under chief executive Jeffrey Immelt, who started offering Six Sigma assistance to customers when he ran GE's medical equipment division, all of General Electric's units have an "At the Customer, for the Customer" program. It is a brilliant example of how a company has taken an internal skill -- in this case, change management and continuous improvement, for which it is world-renowned -- and turned it into a marketable product.

Among those who sing the program's praises are Mike Woods, chief knowledge officer at Red Robin Gourmet Burgers, a Denver-based restaurant chain. Red Robin uses GE for 80 percent of its franchisee financing. Woods, who became part of the Six Sigma cult after spending a week at GE's Crotonville, N.Y., management training center, invited GE's gurus in to solve one of the chain's most vexing problems: getting patrons their milkshakes within four minutes of their orders.

This had long been a goal of a company catering to families with young children, but it was meeting it only 36 percent of the time. When the staff at restaurants was asked why, they said there weren't enough mixers or enough bartenders (yes, that's who makes the milkshakes). But after a GE team analyzed the problem, more important facts turned out to be that the first orders in weren't necessarily the first ones out, and that because of uneven workload among the wait staff, shakes were sitting undelivered for longer than they should have. The purchase of a minor piece of equipment, and introduction of procedures requiring any waiters passing by the bar to deliver finished drinks to any table, got the success rate up to 77 percent.

Another happy customer is Stephen Carter, president of the American subsidiary of Komori, a Japanese maker of printing presses. An important part of Komori's business involves getting replacement parts to customers when their machines are down, which they had been doing within 24 hours for 87 percent of their customers. GE's Six Sigma "black belts" saw that most of the orders that took longer involved items that were out of stock. After analyzing more than a decade of parts orders, they found a way of ensuring that the most-sought items, or those with long lead times, were never out of stock, while reducing inventory for slow-moving and less hard-to-replace components. The result: 95 percent of orders now go out on time.

At Marjack, GE's experts meticulously analyzed the steps taken by the warehouse staff members as they moved their carts up and down the aisles, filling the weekly orders from movie theaters and retail outlets. As is often the case, there weren't any major fixes -- just a whole bunch of little things, like collecting all the used carts in one place, clustering all the most-used items near the packing stations, dispatching forklift drivers with walkie-talkies. But in the end, according to in-house strategist Chris Paladino, the warehouse staff improved productivity by 35 percent while cutting in half the number of customer complaints. As a result, Marjack now dispatches 500 boxes to customers each day with almost the same size staff that used to send out 350.

Coopersmith says that as a result of the culture change and confidence that GE's collaboration has generated, he'll invest heavily in new scanning and truck routing technology that will further enhance productivity while allowing the company to push into new product lines.

"The process with GE was a real catalyst in getting our brains going again," he said -- a fact he says he won't forget the next time Marjack's inventory financing goes out to bid.