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SUMMARY

IndustryRetail

Business ProblemHigh level of payroll process rework

MethodologyLean Six Sigma

Soluti onStandardize payroll procedures for local stores

Benefi ts/Results- $565k annual savings- 60% rework reducti on

Analyze2 sample hypothesis testi ng

Key Tools Used Assessment Process Maps Value Stream Maps Prioriti zati on Matrix Risk/Reward Matrix Spaghetti Diagram Pareto Chart SIPOC SOPs 5S

“I believe in people and I believe in the structure of process improvement. By looking at how we do business and by es-tablishing an ‘owner’s’ mentality of continuous improvement, employees can infl uence greatly the success of our business. The Process Excellence initiative taking place at the ESC, is proof that leadership combined with process improvement, can be a powerful force in improving the operating results of any part of the organization that implements it.” - Russell M. Jackson, Sr. VP Human Resources, Safeway

Problem Solved.

The Challenge

Within the corporate walls of Safeway, at the Employee Service Center (ESC) in Phoenix,Arizona, a team of executi ves and employees have undergone a transformati on. The department is committ ed to spreading performance excellence among their own colleagues and the Safeway organizati on as a whole.

ESC Vice President Cathy Lord believes this initi ati ve can be att ributed to the adopti on of Lean Six Sigma thinking in her organizati on. The ESC is the fi rst group within Safeway to parti cipate in a process improvement pilot. The ulti mate goal of the pilot was to reduce operati ng expenses and streamline processes, but what Lord and her colleagues discovered was that the program did much more than that: it changed the ESC’s culture.

The Process

Assessment and Prioriti zati onThe fi rst step of the pilot was to assess the ESC’s performance and identi fy opportuniti es for improvement. During a two-week period, Lord, along with Sr. VP of Human Resources Russell Jackson, worked with the process improvement experts from BMGI.

Together, they used Lean Six Sigma tools to evaluate the current state of Safeway’s HR, payroll and accounti ng processes. The team developed both high-level process maps and detail-oriented value stream maps to help identi fy performance gaps, waste and

other opportuniti es for improvement. The assessment culminated in a list of 27 projects with the potenti al to dramati cally streamline ESC operati ons and contribute $1.3 million annually to Safeway’s bott om line.

Next, the assessment team used a project prioriti zati on matrix to organize the potenti al projects into a weighted list. They also applied a risk/reward matrix to determine the payoff relati ve to the required eff ort for each project.

Using Lean to Reduce ReworkLord and her team decided to focus immediately on process improvement projects they could solve with a rapid-improvement Kaizen event. The fi rst project aims to reduce the number of payroll RFAs, or Requests for Adjustment, by 60 percent. Given that the ESC receives an average of 5,000 RFAs each week, a reducti on of this magnitude would free up signifi cant payroll resources and would save a projected $565,000 annually.

Currently, RFAs have to be manually processed, which keeps 60 payroll clerks occupied full-ti me. Aft er gathering informati on on the number of RFAs by store and by reason code, the team met to analyze the data. It found a moderate correlati on between the number of employees in a store

A SIPOC helped team members identi fy key process inputs and outputs.

For video version click:htt p://www.bmgi.com/case-studies-video/safeway-serious-about-process-excellence

Pursuing Excellence at the Employee Service Center

CASE STUDY | Safeway - Retail

Global Headquarters | 1-800-467-4462 | +1-303-827-0010 | www.bmgi.com | © BMGI2

Problem Solved.

CASE STUDY | Safeway - Retail

and the number of RFAs generated during a pay cycle, but not a high enough correlati on to be identi fi ed as the culprit.

One of the stati sti cal tools the team applied was a Pareto Chart, which listed the possible root causes for RFAs, along with the frequency of each cause.

As it turned out, 78 percent of all RFAs are caused by four reasons (out of a possible 20). The primary causes include:

• Missing hours

• Paid benefi ts not in the Time and Att endance system

• Regular benefi ts or vacati on hours not in the system

• Incorrect pay rate

Based on a store visit, and anecdotal evidence from three team members with considerable store management experience, the team concluded that no standardized process exists across stores and locati ons for processing Time and Att endance data. Therefore, the biggest single causati ve factor for generati ng RFAs is likely poor management practi ces as a result of no standardized process.

The soluti on the rapid-improvement team proposes is a set of standard operati ng procedures for RFAs. Over the next few weeks, team members will visit several exemplary stores to observe best practi ces. The team will then meet again to develop and document standard operati ng procedures for every Safeway store to follow. The ESC is also taking responsibility for training store managers on the new procedures.

Changing a Department’s CultureNot only have the employees at the ESC succeeded in their fi rst process improvement project, they have also adopted Lean Six Sigma as the way they work, and the way they think about their work.

“This project has been an eye opener for the whole organizati on,” Lord reveals. “We’re getti ng smarter about how we work and how we streamline our processes.”

Members of the ESC are stepping outside of their silos and collaborati ng cross-functi onally with other Safeway employees. “They now feel like they are part of the larger organizati on,” says Lord. “The focus has been to truly partner with the organizati on and not live just within our four walls. They have ownership in what they do and approach problems with out of the box thinking. This has become a whole new way of life.”

The proposed improvements to the RFA system are just the beginning for the ESC. In additi on to future rapid-improvement events, the ESC group has started to use their new skills in everyday work life. Aft er just a few days of training, they applied a Lean method called 5S to help remove waste and ineffi ciency in their functi onal groups. By following the mott o, “a place for everything and everything in its place,” ESC employees saw a direct impact on the way they work.

The team has set its sights on a common goal—to become a center of excellence for the enti re company. It’s no small feat, but with the right set of tools and the knowledge to use them, the ESC will prove that real and lasti ng transformati on requires a commitment to change from the inside out.

Results

We followed up with this team aft er its project was completed and found that it reduced paperwork by 60 percent and lower overti me costs by 40 percent (or $565,000 per year). We also found that the passion for process excellence at Safeway had caught fi re far beyond the confi nes of this corporate department.

This Pareto Chart shows that 78 percent of RFAs are caused by four reasons.

Average RFAs Per Week

Before the rapid-improvement Kaizen event, the ESC averaged more than 5,000 RFAs per week. Aft er implementi ng Standard Operati ng Procedures (SOPs) for all stores and locati ons, the number of RFA’s was reduced to 2,000, a 60% improvement.

ABOUT BMGI

BMGI enables companies throughout the world to identi fy and solve their most important business problems, with a strong emphasis on sustainable results. During its long history, BMGI has developed soluti ons for a broad spectrum of businesses across many industries, driving the success of process-improvement, design and innova-ti on initi ati ves. Just a few of BMGI’s clients are General Dynamics, TNT Express, Avis Budget Group, China Chemical, Graphic Packaging, Siemens, Hitachi and Philips Electronics. For more informati on, please visit the BMGI website at www.bmgi.com

Lean Six Sigma principles are benefi cial to any company that wishes to identi fy causes of defects in their systems, improve business management processes, eliminate defi ciencies, improve operati ng effi ciency, minimize variati ons in manufacturing processes and reduce waste. All of these are bound to have substanti al fi nancial advantages.

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