Lean Six Sigma for Supply Chain Management

Improving Your Supply Chain with Lean Six Sigma

Today’s environment is very dynamic. Lean or six sigma approach in this dynamic environment cannot bring the full potential to improvements if applied in isolation. Integration of Lean & Six Sigma ensures exceptional improvements. In this management approach, traditionally the lean methodology is used first to remove the waste in a process. Later, the Six Sigma tools are used to improve process variations. However, these two methods go hand in hand in today’s time. The combination of these two methods helps to develop streamlined processes with high quality & results. It improves bottom-line profits and helps meeting business goals. 

Similarities and Differences between Lean and Six Sigma

Lean and Six Sigma both signify a system for continuous improvement of business processes. While Lean focuses on waste reduction/elimination, process simplification, value stream mapping, and reduce rework in the value chain. Six Sigma focuses on setting up a set of systems and people-aligned processes focusing on improving consistency of quality outcome to customers. 

Lean helps increase process efficiency by focusing on speed and cost optimization. Lean ensures the stability of processes.

Six Sigma focuses on quality improvement by reducing variation using statistical tools and techniques.

Six Sigma employs the DMAIC model (Define, Measure, Analyze, Improve, and Control) for existing products/services while DFSS (Design for Six Sigma) is deployed for new products/service design. 

Lean Six Sigma evolved over the last few decades as a convergence of both these methodologies was imminent to many organizations. Lean Six Sigma blends both the methodologies and thereby creates a pragmatic approach to process improvement within a company. It is characterized by a multi-pronged approach to problem-solving thereby fixing value chain blockages and ensuring consistent delivery of quality products/solutions.

The foremost benefit of a blended Lean Six Sigma approach is that it aids focus on customer goals and caters to building efficiencies which is important from an investor standpoint. It also takes away the misperception of a long-drawn deployment duration across large businesses as both foci on outcomes that are the highest priority from a customer standpoint.

Lean Six Sigma can help enhance supply chain efficiency in the following areas.

Perfect Order Fulfillment – This is measured in the percentage of orders meeting delivery performance with complete and accurate documentation and no delivery damage. Six Sigma methodology can help maximize order fulfillment by identifying where possible problems lie, such as outdated planning processes and inefficient execution systems. Lean can then be used to target areas of waste and enhance performance.

Reduce Order Fulfillment Cycle Time – A Lean Six Sigma review of the company’s order fulfillment system helps identify problems that need to be addressed. This review will most likely conclude that some obvious improvements are in order. Improvement may require system integration, automated picking, automated shipping planning, automated shipment verification and reduced paperwork. The Six Sigma DMAIC cycle can help improve current processes; DMADV can help implement new processes.

Increase Supply Chain Flexibility – Supply chain performance requires a quick response to changes in supply and demand through the ups and downs of business cycles, as well as during crises. Companies with the most agile supply chains are those that are tailored to the needs of the customer. Establishing critical to quality (CTQ) customer requirements in the Define Phase of Six Sigma helps companies build customer focus and thus flexibility into their supply chains.

Zero Errors – Any supply chain that is losing efficiency because of a high error rate in the system is a prime candidate for Lean improvement. The Poka-Yoke or mistake-proofing Lean approach prevents mistakes by forcing the user to do a task one way. For example, lawnmowers now have safety bars that must be engaged before the mower will start. The mower will stop when the safety bar is released.

Implementing the 5S Lean method – Sort out, Set in Order, Shine, Standardize, and Sustain – also reduces errors that interrupt the supply chain efficiency by providing a clean, safe, efficient, and uncluttered environment.

Zero Waste – Lean methodology was created to eliminate waste, which can be defined as activities that don’t add value to the product or customer. Lean helps supply chains function more efficiently by targeting and eliminating non-value added processing:

Over-production – Producing more ahead of demand as the result of a speculative forecast results in high inventory costs.

Transportation – Unneeded movement of materials adds to production cost and cycle time. Lean seeks to eliminate unnecessary transportation.

Non-value added processing – Poor production facility layouts cause additional work that adds no value to the product. Lean simplifies production to make the supply chain operate more efficiently.

Increased Revenue – Organizations that use Lean Six Sigma to make their supply chains operate more efficiently are able to provide a consistent service level to their customers. Dependable service leads to satisfied customers, which gives organizations more pricing power and higher revenues.

Organizations that apply Lean Six Sigma principles to their supply chains can create a competitive advantage, increase revenue and improve employee morale.

Six Sigma Phase

Define

In this stage, project objectives are outlined. A project charter is an important component of this phase. A project charter is a blueprint document for a six sigma project. A typical charter contains the following information:

Business case

Problem statement

Goal statement

Project scope

Resources

Timelines

Estimated benefits

Measure

Process variables are measured at this stage. Process data is collected. The baseline is obtained and metrics are compared with final performance metrics. Process capability is obtained.

Analyze

Root cause analysis is done at this stage. Complex analysis tools are utilized to identify the root causes of a defect. Tools like histograms, Pareto charts, fishbone diagrams are used to identify the root causes. Hypotheses tests are conducted to verify and validate root causes, Viz Regression test, ANOVA test, Chi-square, etc.

Improve

Once the final root causes are identified, solutions need to be formed to improve the process. Steps to identify, test, and implement the solutions to eliminate root causes are part of this stage. Simulation studies, Design of experiments, Prototyping are some of the techniques used here to improve and maximize process performance.

Control

After implementing the solutions, the performance of the solutions must be recorded. A control system must be in place to monitor the performance post improvement. And a response plan is developed to handle solution failure. Process standardization through Control plans & work instructions is typically a part of this phase. Control charts show the process performance. Project benefits are discussed and verified against the estimated one. The main purpose of this phase is to ensure holding the gains.

Lean Methodology

Waste

Definition of waste

D/Defects

The efforts involved inspecting for and fixing errors, mistakes through reworks.

O/Overproduction

Producing more products or services that the customer needs or downstream process can use.

W/Waiting

Idle time created when material, information, people, or equipment is not ready. It includes high job set up time in manufacturing. Or excessively high data processing time in the service industry.

N/Non – Utilized Talent

Not adequately leveraging peoples’ skills and creativity. Employee empowerment can counter this waste as advocated by Japanese quality pioneers.

T/Transportation

Moving products, equipment, material, information, or people from one place to another, without any value addition to the final product or service.

I/Inventory

Unnecessary/ Unwanted stocking or storage of information and/ or material (eg WIP, WIQ – work in the queue)

M/Motion

Unnecessary movement of people or machines that takes time and uses energy. It may cause fatigue to workmen due to unwanted movement of a body.

E/Extra Processing

Process steps that do not add value to the product or service, including doing work beyond a customer’s specification.