Lean Six Sigma Is Ideal for Improving Supply Chains

Your supply chain must be agile and responsive to the changing needs of your customers

Published: Tuesday, August 3, 2021 - 12:02

Lean Six Sigma has improved manufacturing operations and processes for years now. Now the effect of the methodology is extending to supply chain and operations to help eliminate waste and reduce variation. Using lean to eradicate waste and Six Sigma to eliminate defects by reducing process variation creates a powerful tool for continuous process improvement and a resilient supply chain.

Building a resilient supply chain

An organization’s supply chain must be agile and quickly responsive to its customers changing needs. Companies that can deliver this will create a successful supply chain. In fact, there is a tool within Six Sigma known as critical to quality (CTQ) that requires organizations to measure progress in terms that customers consider critical.

Supply chain optimization

Today’s businesses must constantly seek out more efficient methods and processes. This has never been more evident when balancing demand, supply, and price optimization to sustain resiliency in this omni-channel world.

Lean Six Sigma provides a unified focus on two fundamental aspects of distribution and fulfillment: efficiency and quality. Every stage of material stocking and moving logistics offers an excellent opportunity to refine processes, solve problems, and reduce waste. The result is almost always a stronger bottom line.

Lean Six Sigma also helps supply chain managers ensure that every part of the process is defect-free and focused on the customer. By defining the customer base and needs early on, businesses align processes to focus on the ultimate goal: make customers happy about their investment.

This simultaneous focus on the customer and the process is what makes lean Six Sigma such a valuable, high-impact skillset. When everyone in a company unifies to serve the customer, businesses thrive. Supply chain performance requires a quick response to changes in supply and demand during the ups and downs of business cycles, as well as during crises. Companies with the most resilient supply chains are those that are tailored to the needs of the customer.

The quest for the perfect order

One important supply chain metric is the percentage of orders meeting delivery performance with complete and accurate documentation and no delivery damage. Six Sigma helps maximize order fulfillment by helping to identify 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.

An assessment of a company’s order-fulfillment system helps identify problems that should be addressed. This review usually finds that some obvious improvements are in order. Improvements may include system integration, automated picking, automated shipping planning, automated shipment verification, and reduced paperwork.

Six Sigma does its part to optimize order fulfillment by helping to spot problems in the system, and it can update planning processes for collecting independent demand for forecasting and planning execution. Lean then comes into play to reduce waste, optimize inventory levels, and improve pricing while improving order fulfillment.

Reducing errors to zero

Many points in the supply chain benefit from the lean technique of poka-yoke. This is a mistake-proofing procedure that prevents human error by making it impossible for a task to be done incorrectly. Digitization of the supply chain aids poka-yoka by reducing errors, streamlining the process, and enabling a collaborative framework for resolving issues as they arise. The result is a higher quality product, fewer supply-chain disruptions, quicker resolutions, and improved customer delivery and satisfaction.

The lean principle of 5S also reduces errors by eliminating the wastes that can cause them. The 5S method stands for sort, set in order, shine, standardize, and sustain. Digitizing the supply chain can support a clean, safe, efficient, and uncluttered environment that reduces the odds of human error.

Reducing waste

Lean eliminates activities that don’t add value to the customer, and it can help supply chains function more efficiently. Lean targets the greatest sources of waste:
Inventory excess: Building up a greater inventory than customers demand based on speculative forecasting. This results in high inventory costs.
Transportation: Moving materials around more than needed causes increased logistical costs and delivery time.
Poor distribution-facility layout: Causes additional work that adds no value to the product. Lean simplifies distribution to make the supply chain operate more efficiently.
Inefficient pricing: Minimizes profits and revenue while maintaining inventory levels that aren’t needed. It also moves products at rates that hamper the revenue stream.
Poor forecasting and planning across all constituents: Lean and Six Sigma can help coordinate the production plan with the integrated business plan to optimize optimal sales and operations.
Increased revenue: Organizations that use lean and Six Sigma to make their supply chains more efficient provide a consistent service level to their customers.

According to the USDA, about 31 percent of available food supply at the retail and consumer levels went uneaten. In this interview with David Cahn, product marketing manager at Blue Ridge Global, we discuss the logistics, transport, and retail side of food waste.

Dependable service leads to satisfied customers, which gives organizations more pricing power and higher revenues.

With so many moving parts that need to mesh perfectly, supply chain management is a delicate process. A seemingly small adjustment can have far-reaching consequences throughout the production cycle. This is why lean Six Sigma is such a powerful force. When applied correctly, managers can identify issues that would otherwise remain hidden.

Reducing the eight potential wastes that can affect a supply chain is a central objective of the lean methodology. The wastes are defects, overproduction, waiting, underutilized talent, transportation, inventory, motion, and extra processing. Perhaps more important is how supply chain analysts determine what is truly wasteful and unnecessary to the process. To do this, lean businesses focus on one variable: whether a process adds value to the customer.

Reducing defects

The insight into quality control processes provided by these methodologies is invaluable. Identifying the root cause of defects and refining the demand and fulfillment process accordingly is simplified using the lean approach.

Any complex, ever-changing, time-consuming process creates opportunities for human or technical error. By integrating the lean method with Six Sigma analysis, manual and digitized processes can be simplified and streamlined. This means fewer defects, which helps maintain quality standards and decreases the waste caused by defective products.

A lean business aims to deliver the highest quality product at the lowest possible price, which means using few resources as effectively as possible to bring that product to market. Any part of the process that doesn’t actively and directly contribute to that goal is considered waste.

About The Author

David Cahn

David Cahn heads up Product Marketing at Blue Ridge Global. Blue Ridge uniquely combines demand forecasting with pricing strategy, so that businesses can proactively understand the unpredictable and allocate the right inventory, right-priced across the entire mix, to accelerate top- and bottom-line results. He has been implementing, marketing, and product managing leading enterprise applications for over 30 years including ERP, SCM, TMS, and WMS solutions and lived the word of customer-facing solutions and customer experience for the past few years. David has held leadership positions at Phillips, KPMG, CA, AMR Research, Aptean, Infor, and Elemica.