Key Points

• Six Sigma is a natural fit for supply chain management.
• Ideal applications of Six Sigma in supply chain management can lead to increased revenue.
• Taking elements from other process improvement approaches can bolster your Six Sigma initiative.

Are you using Six Sigma for supply chain management? Just about any process can be improved, refined, and made into the best possible version of itself. Now, I’m a strong proponent of finding what works best for your organization and using it rather than following the crowd. However, I think Six Sigma is a fantastic approach for supply chain management.

Ultimately, supply chain management is about maximizing your throughput while minimizing waste. We often encounter this when applying Six Sigma to manufacturing, and the same thinking can be carried to your logistics. So, let’s dive in and explore why you’ll want to start using Six Sigma for supply chain management.

What Is Six Sigma?

Before we get stuck in properly with today’s topic, it is important to at least have a small refresher on Six Sigma. Six Sigma is a process improvement approach that has transformed the landscape of business over the last 40 years. Dreamed up originally by Motorola, this approach tackles waste while improving overall quality.

As such, it doesn’t come as much of a surprise that Six Sigma has become one of the operational standards for any manufacturing business. Further, the same principles from Six Sigma are being applied to numerous other industries where quality and customer satisfaction are vital to continued operations.

Six Sigma’s efficacy doesn’t necessarily come from the reduction of waste or the increase of efficiency. Instead, it comes from the use of data. Data is a hot commodity for any business, and using data to guide your decision-making process can help you achieve the desired 6 Sigma level of quality.

Achieving 6 Sigma Quality

What is 6 Sigma quality in production? There are a total of 6 levels for Sigma quality, with each level referring to a certain level of defects found within a given production line. Each Sigma level corresponds to a standard deviation from a given specification range for a product. The higher the level, the better the quality to make it simple.

We’ve touched on 6 Sigma quality quite a bit, which always makes for good reading. However, achieving this hypothetical nadir of quality means you’ve tailored your processes to their best. You’re hitting those KPIs with everything you’ve got, and you’re seeing few defects for a given million opportunities.

6 Sigma is an ideal. Most companies do well to hit 5 Sigma, which is a realistic level of achievement for any production line. 6 Sigma represents the fullest potential of your organization when production is firing on all cylinders. You can read all about it over here, as well as see how it corresponds to your capability indices and DPMO calculations.

Six Sigma for Supply Chain Management

Now that we’ve touched on some of the broader aspects of the subject, let’s dive in headfirst with Six Sigma for supply chain management. We typically don’t think of Six Sigma as an ideal partner for logistical planning for any organization. However, that’s a faulty line of thinking. There are plenty of suitable metrics to gather when collating data.

Further, a quick perusal of any local shipping facility will highlight the need for better, efficient processes. Modern shipping is a sight better than how things were a few decades ago. That said, there is always room for improvement when it comes to bettering your odds and meeting the specifications of your customers.

Six Sigma makes for a solid fit when it comes to supply chain management. This is a business sector that is ruled by the quality of the service concerning the demands of the customer. You’ll likely find that a hybrid approach integrating qualities of Agile alongside Six Sigma might yield the best possible results.

Decreasing Waste

Any sufficiently large shipping facility is going to have waste. That’s just a simple fact of life. I worked on a shipping yard during high school and remember all too well the less-than-ideal circumstances that lead to wastes like this occurring. However, this is a great area to focus your Six Sigma efforts. Six Sigma for supply chain management is ideal for eliminating the greater waste any facility has.

Essentially, you’ve got a few different areas of concern. Defects, like when a customer receives a damaged or incorrect product, are a common occurrence. We often hear about defects in the context of a logistics mammoth like Amazon. These are fringe occurrences, but ones that you’ll want to minimize as best as you can.

Additionally, other wastes to focus your energies on are things like overproduction, wasted time, staff left idle for extended durations, and so forth. There are several interlocking parts when it comes to conducting any large-scale shipping facility, and there are plenty of places to look at when reducing waste.

Preventing Defects

One area where you can leave a lasting mark when considering Six Sigma for supply chain management is defects. Now, I touched a bit on what you can consider defects in the context of a supply chain facility. However, this is where you can flex those mental muscles and start looking at the harder numbers.

You’re likely receiving customer complaints, just like any other business. This is where you can start making improvements on the whole. You might not need a full contingent of staff to handle a slower work day. Those wasted personnel are just soaking up time and getting paid to do so.

Take the time to look at your processes and ascertain the areas that need the most improvement right away. With the right touch, you’ll see your supply chain and operations begin to work as intended. This doesn’t have to be an overnight process; after all, few DMAIC projects are.

Improving Your Supply Chain’s Performance

Every stage of your supply chain is a great place to start your improvement efforts. Often, with shipping, it is easy to lose the forest for the trees. Any DMAIC or DMADV initiative serves as a great means of recontextualizing your workflows with the customer at the top of your list. After all, your business relies on customers to get the work done.

Your supply chain should be an efficient operation, but given enough time and age without proper management, you can see performance begin to lag. Take the time to consider what is important for the continued success of your supply chain.

You have a bottom line to consider, but you also have customers to please. Six Sigma tools for root-cause analysis are going to come in quite handy at any stage of optimizing your supply chain. Further, you’ll see greater benefits when considering your bottom line.

Establishing Solid KPIs

Finding ideal KPIs is going to be the biggest struggle in Six Sigma for supply chain management. Thankfully, this isn’t a difficult concept to wrap your head around. You’ve got several areas to note when it comes to overall performance, and these can serve as a great foundation when establishing metrics. Fill rates, order rates, cycle times, and turnover of stock are just examples of where you can cast your net.

Additionally, these serve as vital data points when constructing your DMAIC efforts. You’ll need data to construct any sort of process improvement initiative, and having solid metrics from your KPIs is going to inform your decision-making process as you move forward.

The Benefits of Six Sigma for Supply Chain Management

We’ve highlighted a few key areas where Six Sigma for supply chain management excels. Further benefits of integrating Six Sigma in your supply chain include things like increased visibility, risk management, and lower overhead.

Greater efficiency and reduced waste are a given, at least from what we’ve espoused regarding Six Sigma in the past. It might not be an ideal fit for every supply chain operation, but it provides a solid foundation when picking and choosing elements from different approaches.

Using Different Approaches for Efficiency

Before we wrap things up, I would like to highlight a point I touched upon earlier. Agile is as far from the shipping yard as you can imagine, given its roots in software development. However, Agile Six Sigma is a very potent combo when it comes to creating a lean, mean supply chain. As Agile is an iterative approach, you can take components and work upon them while applying Six Sigma principles.

This leads to a better, more efficient supply chain while you’re contending with happy customers. No approach is perfect, but the modern era has emphasized the need to adapt and work with components from a variety of different approaches.

Other Useful Tools and Concepts

Looking for a little something extra before leaving us today? You might want to take a closer look at when to pivot from your startup strategy. Navigating the business landscape when at the helm of a new and risky venture can be tough; make sure you pay attention to the signs before making the change.

Additionally, you might want to take a closer look at how Six Sigma in education functions. We’re all for the alternative application of this approach to just about anything. It makes for a great and stable means of streamlining the educational experience and provides ample opportunities for everyone’s voice to be heard.

Conclusion

Six Sigma for supply chain management is a match made in heaven, much like peanut butter and jelly. With the right application, you’ve got everything you need to make a successful venture happen. Don’t be afraid to take components from other approaches as well. After all, there’s no such thing as a right and wrong way of implementing Six Sigma, but rather taking the components that work best for your business.

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