NEW YORK — Albertsons and its parent company, Minneapolis-based Supervalu, were able to drive hundreds of millions in savings using the Six Sigma quality control systems, Jim Gentile, former senior vice president of Six Sigma Quality at Supervalu, said in a presentation at the National Retail Federation's Big Show here this month.
Gentile, whose 41-year career was spent primarily with Albertsons' Jewel-Osco division, was speaking on behalf of New York-based SSA & Co. (formerly Six Sigma Academy), not Supervalu, he said.
Albertsons tackled 556 projects using the system after it was introduced in 2002 by Larry Johnston, and before Gentile retired in 2008, he said. Supervalu stopped using Six Sigma last October, sources told SN.
Johnston, the former Albertsons chief executive officer, brought the Six Sigma system with him from General Electric. The average savings using the system, which previously had been used primarily in manufacturing, were more than $500,000 per project, Gentile said.
“There are thousands of half-million-dollar ideas out there,” he said, noting that the data-driven processes that Six Sigma utilized were highly enlightening to him as an executive. “I learned more about our business in the last four years than I did in the first 37,” he said.
Among the projects Albertsons undertook was an effort to improve bakery margins in Southern California. After weighing sample cakes over time from several different stores, the company determined that workers were making cakes much bigger than the company intended. By rewriting the recipes and adding scales for bakers to use during the process, Albertsons reduced the amount of icing used by 900,000 pounds, worth more than $700,000 in savings.
Another project measured waste disposal at the Jewel-Osco banner in Chicago, where it was discovered that much of the waste being placed into the chain's trash compactors was not supposed to be going there. In response, Jewel launched a comprehensive program to capture food that was no longer for sale and make food donations to local hunger organizations, and put signs up in English, Spanish and Polish explaining waste procedures.
In three months, food donations tripled, and Albertsons estimated the value of the savings at $500,000.
Yet another project tackled labor scheduling, through which it was discovered that some managers were not taking full advantage of salary concessions made by the unions concerning new hires.
The savings in one division alone after a comprehensive rescheduling effort was deployed: $4.5 million.
Of the five steps of the Six Sigma process — define, measure, analyze, improve and control — Gentile said the first three are the most time-consuming. Defining the problem — 50% of the time, companies misidentify what a problem actually is, he said — is the critical first step. Once the exact problem is discovered, managers can usually find solutions, he said.
“Experienced people know how to solve problems, the key is finding out exactly what the problem is,” Gentile explained.
By the same token, experienced workers often fall into a routine in the way they do things, and Six Sigma can help figure out where those routines could be improved for cost savings.
“Long-tenured associates tend to get stuck in the mud about the way they do things,” he said. “A problem arises and they say, ‘This is the way I solved it last time.’ The only problem is, the ‘last time’ was 1985.”
In addition, the typical metrics that retailers use to analyze their performance often do not go deep enough, Gentile explained.
He cited an example in which several Albertsons divisions were reporting their shrink numbers, and one division seemed to have extraordinarily low rates — until a deeper dive into the data revealed that the chain was not including perishables shrink in its calculations.
Despite its long history of use in manufacturing, Six Sigma can easily be adapted to retail, Gentile said.
“Think of it as a data-driven approach to solving problems,” he said. “More and more retailers are saying, ‘This is something I need to pay attention to.’”