Albertsons Six Sigma Update

Larry Johnson, CEO of Albertsons, spoke at the Lehman Brothers Retail Seminar on April 26, 2005. He gave a detailed update on the progress they have made with their Six Sigma deployment. The webcast is available from Albertsons Investor Information until May 17, 2005. The following quotes were transcribed:

“All of these initiatives, along with many others are delivering results. We announced recently, that we achieved our 1 billion dollar cost savings goal a full year ahead of schedule. A significant portion of these savings were generated by the Consumer Demand Chain [CDC] initiative that I just mentioned. We are pleased with the cost savings we have generated to date and realize that we must continue to take cost out of the business to be successful and competitive in this challenging industry. Consequently we once again increased our savings goal during our last quarterly earnings call by an additional 250 million dollars over the next two years for a combined total of 1.25 billion dollars in cost savings.

“Six Sigma is one of the tools that we plan to use to achieve these new aggressive cost saving targets and become a more efficient operator. Albertsons is the first food a drug retailer to implement a company wide continuous quality improvement program employing the methodology of Six Sigma.

“We currently have 75 Black Belts deployed in our first 3 waves of implementation and more on the way.Each BB will manage multiple projects touching almost every area of the company. Recent waves of implementation have focused heavily on shrink opportunities for we expect to drive significant cost savings through real process improvement. We plan to have over 300 black belts deployed over the next three years managing hundreds of projects across the company.

“Because of the success that we’ve had reducing costs and becoming more efficient in our processes we have also been able to invest some of these savings in lower prices. As I mentioned earlier the primary driver of the savings have recently been realized as result of our CDC initiatives. The next big cost break will come from Six Sigma.” April 26, 2005, Lehman Brothers Eighth Annual Retail Seminar, The St. Regis Hotel, New York City

Here is a CEO of a Fortune 50 company telling customers they can expect lower prices because of the savings being realized from their Six Sigma initiative.

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Albertsons Six Sigma deployment is a premier example of the Six Sigma methodology properly integrated with the strategy of a company. Albertsons has five strategic imperatives and Six Sigma is one of the initiatives that falls under the strategic umbrella.Six Sigma at Albertsons is helping execute the strategy, it’s not the strategy itself.

For Full Review, See Albertsons Inc. Six Sigma


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