Behind the Scenes of Six Sigma

I always say, that working in Supply Chain is like working "behind the scenes". Some people, like my Aunt for example, have never really understood what I do. Of course, it's hard to explain beginning with why am I a Black Belt without ever having being in Judo, then I go on to explain that I spend most of my day trying to reduce variation and waste, looking at bottlenecks, asking people "why?" all the time, and always striving for perfection by implementing something called "Six Sigma". Well... you can imagine my Aunt's face!

I am not saying that organizations today are like my Aunt...but sometimes it can be difficult to understand the concept of Six Sigma and how it can be applied to improve their Supply Chain. Perhaps I can start by defining Six Sigma and in particular Six Sigma applied to the Supply Chain.

What is it all about? Six Sigma is all about achieving a near "error free business performance" through the implementation of a simple performance improvement model called DMAIC or Define-Measure–Analyze-Improve-Control. 

The Greek letter sigma (σ) is used to denote variation from a standard. Six Sigma philosophy proposes that if you measure how many defects are in a process, you can actually eliminate them by applying a specific methods and tools that will get you as close to perfection as possible.

What is "error free" in the Six Sigma world? Well, imagine a process operating at Six Sigma with the possibility of failing 3 times per million transactions...A company operating at Four Sigma will produce over 6,000 failures per million transactions.

How do we get close to  an "error free" process? Six Sigma goes straight to the bottomline, identifying and eliminating costs which provide no value to customers, while focusing on customer requirements, defect prevention, cycle time reduction and cost savings, Six Sigma truly eliminates waste costs!

Want proof? If you work for a non-Six Sigma company, you may be surprised to find out that your company spends about "25 and 40% of their revenues trying to fix problems". This is known as the Cost of Quality. If you work for a Six Sigma company, it will not be a surprise to find out that your company only spends "about 5% of revenues fixing problems."

In fact, in a study presented by GE, it was estimated that the "gap between companies who are 3 to 4 Sigma and 6 Sigma was costing them between $8 billion and $12 billion per year."

Sigma levels measure error rates, and it costs money...sometimes lots of money to correct an error, don't you agree?  What happens if the error rate drops? Well, the sigma level goes up, and your costs decrease.

All right...this is nice, but what about my Supply Chain?

How can we identify waste in the chain?  By eliminating waste we can increase speed and performance in the supply chain flow. The waste in logistics and supply chain is often overlooked, but as any other functional area in the organization, waste and errors are not always that obvious. In fact, it has been suggested that "more than 80 percent of the work of logistics takes place outside the view of supervision." Some common examples of waste in supply chain functional areas are: Inventory and Cycle time waste, Transportation waste (including Returns and Replacement shipments), Facilities waste (space), Packaging waste, Administrative waste.

Who needs to be Six-Sigmatized? Once we focus Six Sigma on a supply chain process improvement, there is no question that Six Sigma contributes positively to the supply chain. A key element to its success is to make sure  that everyone that needs to be involved is involved and most significantly the executive board and corporate. Everyone needs to understand and support the Six Sigma value proposition. This does not mean that the company must become a Six Sigma organization prior to implementing a Six Sigma project in their Supply Chain.

Is Six Sigma just a trend?  Six Sigma models and tools are not a trend or fashion. Remember TQM? Well, Six Sigma takes a handful of proven methods and trains a small group of in-house technical leaders...that become known as Black Belts. It all began to take shape in the 1980's when Bob Galvin, Motorola's CEO at the time, started the company on the quality path known as Six Sigma and became a business icon, after what the company was able to become a quality and profit leader in the industry. Motorola has reported over US$17 billion in savings from Six Sigma as of 2006. The rest is history...Many companies have adopted the Six Sigma flag and have witnessed new levels of customer service and productivity.

It is key, as with any methodology, that you choose and adopt its principles and tools, applying them to best suit your particular process. Those principles and tools will help you design a supply chain excellence model that will fit the culture and goals of your organization or department.

Can we apply Six Sigma to any area of the Supply Chain? It is important to understand that Six Sigma can be applied to any functional process within the supply chain with an overall operational strategy. We have seen Six Sigma succeed in transportation, warehousing, reverse logistics, customer service, order management, material handling, inventory control, sourcing, procurement, product development, production...

What about my Aunt? Well, I would simply tell her that I help companies be better...

And...what about eKNOWtion? At eKNOWtion, we are convinced that Six Sigma tools and methods can be applied successfully throughout your supply chain(s). We will be covering more of Six Sigma as this dialogue grows within the eKNOWtion community. In the meantime, I would love to exchange more ideas in detail, and you are always welcome to contact me directly to share comments or ideas for this discussion.

I also invite you to visit our Knowledge Academy for more information on our business cases and available trainings and Six Sigma workshop. 

For direct contact with our Six Sigma Black Belt: ana@eknowtion.com