Lean Six Sigma processes are used by many businesses without it being realized. Many companies today are adopting the Lean Six Sigma processes to aid in cost reduction and waste management. The Six Sigma program aids in eliminating the negative effects caused by variations within the supply chain. The Lean process is all about the speed, flow and elimination of waste concerning inventory. Although Lean and Six Sigma are separate programs, they complement each other.
Together these two programs provide supply chains with a tool that eliminates, “unnecessary inventories through disciplined efforts to understand and reduce variation, while increasing speed and flow in the supply chain. ”(Lean Logistics Understanding) Lean and Six Sigma are valuable for many processes, but the programs have been proven to be exceptionally valuable to logisticians. Implementing Lean Six Sigma will allow logisticians to effectively conduct supply chain operations by reducing waste in the following areas: Inventory, transportation, space and facilities, time, packing, administration and knowledge.
Lean Six Sigma saves supply chains thousands by reducing waist and redundancy. Lean Six Sigma is the key to supply chain success Lean management strategy was developed to eliminate waste and increase speed. This strategy can be trace back to the Toyota production system where it was used to tie customer demand and production together to improve the company’s production output. Six Sigma is statistics driven; it stabilizes variations and improves quality of processes. Lean Six Sigma is widely embraced by many companies and the DoD to improve processes and eliminated waste.
The DoD offers classes at various Air Mobility bases to train personnel on the implementation of LSS. Companies often adopt Six Sigma to improve facility operations. New Breed a third party company utilized Six Sigma to improve warehouse layout, reduce waste, and the overall flow of property being distributed. An increase of demands was encountered with the new Boeing V-22 program coming on board, the company experience deficiencies within its distribution operations.
The absence of customer and supplier collaboration negatively impacted the on-time delivery rate, increasing delivery time by 23%. In order to improve distribution operations; warehouse layout and efficiency was considered to be vital in the companies’ ability to package an additional 73 orders per day. After evaluation of the delayed distribution issue, it was determined that the root causes concerning the warehouse were; insufficient floor space, lighting, product preparation area, and material handling equipment.
Within 4 months of implementing Lean Six Sigma (LSS) process to improve distribution and warehouse layout efficiency, New Breed increased packaged orders by 73 per day, adaptability to customer orders by 5%, errors decreased by 503 parts per million after one month. “New Breed’s Lean Six Sigma-based warehouse redesign was so successful that the Swedesboro, N. J. , improvement team was named a 2008 finalist in the International Team Excellence awards presented by the American Society for Quality (ASQ). (Jacobsen, 2009) It is evident from the situation incurred by New Breed that Lean Six Sigma has valuable input in the streamlining the efficiency and effectiveness of warehouse facilities, and plays a major part in Supply Chain success. Packaging is something that rarely crosses the mines of logisticians. Packaging could be anything from containers, to dunnage. Packaging of good could either negatively or positively affect the supply chain and the amount of waste encountered. Some specific areas that are affected by packaging are storage efficiency, product protection, and handling.
One obvious way to relate packaging to waste it when packaging is inadequate and goods are damaged; resulting in waste. It is important that the appropriate size packaging is used for production to eliminate waste of storage space. Most packaging is utilized once and then it is thrown away. Packaging is a cost that is seen as inevitable by logisticians; however, this cost can be reduced by utilizing reusable and recyclable packaging. Manufactures have adopted the reusable container and save on disposal cost, as well as, improved product protection.
So, even thought packaging is not the number one concern of supply chains; it is a valid area to evaluate. Applying Lean Six Sigma to packaging in supply chains will reduce product damage, improved flow within the supply change, promote efficiency and overall save money. Logistics is the management of inventory at all levels. “Inventory can represent any where from 5 to 30 percent of a manufacture’s total assets and may represent half of a retailers assets. ” ()Inventory is one of the more visible forms of waste within supply chains.
The driving factor behind inventory is customer demands. The goal of any company who wants to stay in business is to have the product in the right place at the right time for the right cost. This leads to companies trying to forecast for future demands. Forecasting is never exact and demands are always over or under what was forecasted. In my job as a command Readiness Spares Package manager we utilize past fiscal year demands to forecast for the future fiscal year. Although I utilize several different analysis systems to forecast demands; it is never accurate.
The goal is to get the forecast as close to the future demands to eliminated customer wait time and save money. Many wholesalers in the supply chain tend to hold on to too much inventory. Some wholesalers over posture their warehouses in case there is a sudden spike in demands or there is a glitch with a manufacture and they are unable to get products. To have extra stock would seem like the solution to high demands or lack of products; however, it could also become a problem. When warehouses in the supply chain overstock inventory carrying costs come along with the added inventory.
The carrying costs of inventory are capital, inventory service, inventory risk, and storage space. An effective inventory is when sales are maximize with as little inventory as possible. When inventory is not utilized and not cost effective it is waste, resulting in an inefficient link within the supply chain. Transportation is an vital part of logistics. Without sufficient transportation a supply chain would run into major obstacles. According to Goldsby and Thomas, “transportation represents the biggest sing cost in logistics. (2005) The ingredients to customer oriented transportation are “speed, timeliness, reliability, flexibility, availability, safety, capacity, and cost efficiency. ” (Goldsby, Thomas, 2005) The transit time can become a major issue for manufactures, firms, and customers; during the transit time the product us inaccessible and costing money. There are many reasons why a shipment could be delayed, however, the customer will likely never find any excuse adequate. Lean Six Sigma is being utilized in transportation to reduce transit times and stabilize the average delivery times.
Inadequate transportation flow creates the need to increase inventory to accommodate inefficient transportation, utilizing inventory uneconomically and creating waste. Transportation waste starts with not utilizing equipment, operators, and time efficiently. One way to improve transportation is by consolidating shipments, this can be both cost efficient for the customer and firm. Implementing Lean Six Sigma into transportation create a effective, efficient, flow and satisfied customers. Storage facilities are another important part of the supply chain.
Storage facilities are often used by firms to remedy out of stock situations. Although storage facilities can be helpful in providing products at the right time, they can also turn into money vacuums. There are two cost when running a storage facility, they are fixed and variable cost. The fixed cost is the cost encountered no matter the productivity of the facility. The variable cost is dependant on the product in the facility. Some firms believe that the more facilities they have loaded with inventory; it is more likely that the products will be available to meet customer demands, however, this is false insurance.
When a firm determines the number of facilities it will need to be efficient, the decision should be evaluated from a system wide perspective. Considering Lean Six Sigma at during the evaluation of facilities will aid in determining the correct number of facilities and optimize efficiency. Time is the one thing that is irreplaceable, it is also very important in logistics. Wasted time within the supply chain is evaluated by examining the time between order placement and order delivery. “The five distinct steps of the order cycle are illustrated in Figure 6. , including (1) order transmission, (2) order processing, (3) order filling, (4) order staging and verification, and (5) order shipping and delivery. ”(Goldsby, Thomas, 2005) All of the order cycle steps require time to be completed; when the time to complete a step is increased from the normal time, it is waste. Some people may feel that administration is a non-value added process, however, administration processes are inevitable to get products to customers. An order is usually routed through several people that generate documents to ensure the product is received by the customer.
The typical order will need to have invoice generation, freight billing audit and payment. Administrative work in the supply chain can become wasteful because many administrative processes can be combined. Waste can also be observed when small mistakes are made as it passes though each stage of administration. Administration usually oversees logistic activity, flow of property, information, and cash. Waste occurs when administration is left to ensure the flow of these areas and there is a lack of efficient processes.
Waste in administration processes can be reduced by the use of information technology. Information technology will help to eliminate human error within administration; it will also reduce the number of processes that a customer’s order will need to go though. According to Bill Peterson; Fokker Aerotron, a company in LaGrange, Ga. , applied Lean Six Sigma to its administrative processes for two years and increased profits by 5%, delivery penalties decreased by 93%, and inventory was reduced by 39%. Administrative processes often hinder supply chain operations by creating delays.
If administrative processes are purged to eliminate waste, other areas of operation within the supply chain will become more efficient. (2010) With the utilization of Lean Six Sigma the company was able to reduce administrative work by 30%. Administration oversees many processes, however, oversight is a waste in itself. Alleviating redundancy will allow companies to focus on value added work. “Knowledge is perhaps the least recognized and least understood resource in the management and success of any business. (Goldsby, 2005) Knowledge in not tangible nor visible, however, it is a valuable resource and the most wasted resource. Knowledge is the at the center of business strategy, it is important to know what a customer wants, how to manufacture the product, and knowing how to appeal to the customer. Companies that obtain the advantage over their competitors do so because of innovative knowledge. Companies can increase knowledge levels by training, certifications, and seminars. Improvement of knowledge can be as simple as workers collaborating on issues and sharing experiences.
Many companies pay portions of workers degree programs to promote knowledge growth. Knowledge should also be shared to alleviate duplication of mistakes. In the Air Force, there is always a new system or some new process that is implemented, and it is usually implemented in phases. For instance, the process or system may be implemented at three bases at first the three more bases in the future. The first three bases will track issues encountered during their implementation and they will publish a lessons-learned document; which will be utilized by the next phase of bases to avoid duplication and waste of knowledge.
All improvement initiatives require process knowledge; without process knowledge there will be no success. Many companies may believe that if their employees have experience that there is an automatic understanding of processes; this is untrue. Lean Six Sigma places importance on comprehending the relationship between processes. Many employees within companies have learned processes by trial and error; however, processes must be understood in detail to enable improvement. The best way to strengthen process knowledge levels is by utilizing root cause analysis. (Willis, 2009)