A finance and insurance firm is taking a scientific manufacturing quality control system and applying it to the company's cust-omer service.
GE Financial Assurance's Auto Warranty Services credits what's called Six Sigma quality processes for its 109% increase in second quarter vehicle service contract sales.
Six Sigma - mathematical shorthand for 99.999666% - is a scientific approach to reducing defects, usually in manufacturing operations, by focusing on customer needs and improving processes. A Six Sigma company allows fewer than 3.4 defects per million opportunities.
Putting it in perspective, if an electric company was 99% efficient, power would be shut down seven hours per month. A Six Sigma electricity provider would only be down one hour every 34 years.
"That's the kind of thing we're trying to do," says Dan Munson, president of GE Auto Warranty Services.
"Continuous improvement is what it's all about," he continues. "It's measuring normal variations in an operation and working to reduce them."
Rather than measuring the variations or defects in a manufactured product, GE Auto Warranty Ser-vices studies each of its service processes.
Mr. Munson uses the claims process as one example. "We started with how the phone is answered and went all the way through to the payment," he explains. "You want the same claim to be paid the same, day in and day out...the same in California as it is in Colorado."
Improvements made via Six Sigma, says Mr. Munson, translate to reduced cycle times, lower costs, fewer errors and time saved.
"The result is good relationships with dealers and customers and that results in improved sales," says Mr. Munson.
"Implementing Six Sigma quality business practices has made a difference in our sales numbers," says Mr. Munson.
Once executed by outside consultants, the company's quality initiatives now are implemented by internal experts who are rated like martial artists - master black belts, black belts and green belts.
Green belts complete two weeks of class work, pass a two-hour exam and complete two quality projects. Black belts complete an additional three weeks of training, pass another two-hour exam as well as an oral exam. A master black belt completes yet another month of courses that includes statistical analysis, passes a four-hour written test, an oral exam and coach 20 quality projects to completion.
Teams of these black belts have streamlined processes and reorganized the company into groups dedicated to specific customer processes. They have also reduced processing and payment cycle times significantly.
Two years ago, GE started working on the claims process and customer service. The company looked at the kind of products and processes the dealers wanted. In 1999 GE entered the year with a slate of products developed with input from the "voice of the customer."
"It's been well received in the marketplace and that's why sales have taken off," says Mr. Munson. GE Auto Warranty Services' core products - which offer comprehensive coverage, reduced rates and flexible dealer profit programs - was updated and reintroduced in January.
The company introduced a new dealer participation program, GE Earnings Plus, in February. It gives dealers the opportunity for short-term and long-term cash flow while investing in the future of their dealerships.
That happens in two ways. Dealers who sell 90 service contracts over six months - without any falling through -will receive a payment equal to the amount of interest earned on its account balance in GE's interest rewards program. An earnings rewards program covers dealers who sell 240 net contracts over a year will receive a payment equal to the earned portion of its remaining account balance.
GE Auto Warranty Services' newest program, Quality Plus Certified, was introduced in June. This program allows dealers to sell pre-owned vehicles that have passed a multi-point inspection with a three- to six- month limited warranty.
"This is an assistance program for dealers," explains Mr. Munson. "It's a marketing program that allows the dealer to capitalize on his own brand in his marketplace."nce and insurance firm is taking a scientific manufacturing quality control system and applying it to the company's customer service.