Motorola, a global leader in integrated communications and embedded electronics solutions, prides itself on excellence in EHS. In one Six Sigma project, that commitment to excellence transcended traditional EHS boundaries, as an initial EHS-led effort to reduce pallet-related injuries evolved into a major initiative yielding significant supply chain and customer service benefits.

Motorola's cross-functional team, comprised of EHS, Logistics, Quality, Finance, Packaging and Sourcing representatives, developed a comprehensive approach that standardizes packaging and pallets; dramatically reduces the pallets handled, stored and disposed; maximizes the packaging density to reduce transportation costs; and addresses associated injury costs and occurrences. This project has already yielded over $1 million in cost reduction, and is expected to save over $5 million in 2004.

Critical to realization of these benefits is the compliance of Motorola's suppliers with new guidelines and specifications for all inbound shipments. To insure that compliance, the Motorola cross-functional team developed a customized Inbound Discrepancy Report (IDR) system. IDR is the key vehicle that Motorola is using to track supplier compliance, update supplier scorecard performance, and quantify the cost of non-compliance for potential recovery of costs due to supplier defects. IDR users at Motorola's distribution centers record all inbound discrepancies at the receiving dock, using simple keystroke entries, scanning, and digital imaging. The IDR system is linked to several other enterprise systems (purchasing, inventory, order entry, etc.) to provide access to detailed vendor, shipments, purchase order, and stocking information.

This robust information system is providing significant and valuable "real time" information to both Motorola management and vendors that are linked on-line through the purchasing system. Automated Pareto reports can be viewed on-line or selectively emailed to focus on the vital few suppliers or defects that have the greatest impact upon distribution center operations. The IDR system uses discrepancy data to influence the supplier scorecard performance ratings, and automatically generates detailed cost breakdowns for use in supplier negotiations.

The IDR project has achieved significant, tangible results in the first two years, 2002-2003:

• 58% reduction in pallet-related injuries, saving $400,000 in avoided Workmen's Compensation cost
• 12% reduction in discarded pallets, which equates to $120,000 of cost avoidance in pallet purchases
• $400,000 savings in reduced transportation expenses
• $100,000 savings in reduced handling and storage of pallets
• 16% improvement in recycling rate of non-hazardous wastes.

As the global adoption of the IDR system continues at all Motorola distribution centers, cost savings and improved EHS performance are expected to increase exponentially.

In April of 2004, the project received a Motorola CEO award for developing the IDR as a permanent institutionalized tool that drives not only EHS savings but also improvement in multiple Supply Chain organizations.