Vendors seek Sigma savings

Wednesday, November 30, 2005

SANFORD, Fla. - Moving manufacturing operations offshore helps companies cut costs and become more competitive, but a number of HME vendors have gone to even further lengths to stabilize product pricing.
Last fall, TBM Consulting Group awarded Invacare's Florida plant its 2005 Perfect Engine Site Award, which recognizes a company's success in using LeanSigma techniques to streamline operations, reduce waste and in turn boost productivity.
"We face the competitive pressure of our payers in our marketplace--or providers do," said Matthew Mullarkey, Invacare's vice president of global operations. "If we are not serious about taking waste out of the system, where and when we can, we are not going to set ourselves up for success. The pricing pressures will be too much for the margins to bear."
While Lean Sigma and Six Sigma may not be common terminology for the HME industry, manufacturers in other industries have used them for years to improve their operations. In short, Six Sigma looks for ways to streamline the manufacturing process. Lean Sigma looks for ways to make products faster by eliminating waste.
General Electric, one of the founders of Six Sigma, began using it about 15 years ago. The auto industry adopted it seven or eight years ago. Invacare's Florida operation, which makes beds and respiratory equipment, began LeanSigma in 2001. LeanSigma combines Lean and Six Sigma into a single, coordinated initiative.
"It is such a powerful tool," said John Schwartz, vice president of operations for the Roho Group, which also uses Lean and Six Sigma. "Every time you reduce waste, you reduce cost, which in turn makes you more competitive."
By implementing Six Sigma in its new plant that opened last year in Belleville, Ill., (HME News 09/05), Roho reduced its "opportunity for error" by about 50%. Also, by being more efficient and automated, Roho was able to decrease its labor costs "dramatically." Labor savings come not in the form of layoffs, but in the company's need to hire fewer people going forward, Schwartz said.
Mullarkey reported similar results.
"We are determined to be competitive, and we are going to find a way to lower the total cost in a way that puts our providers in the best position to be successful," he said.