Six Sigma is a methodology that can be applied to various business processes, including supply chain management. In the supply chain, Six Sigma can help to improve the quality, efficiency, and effectiveness of the processes involved in the movement of goods and services from suppliers to customers.
Organizations all over the world are adopting Six Sigma in supply chains because it helps in the elimination of wasteful activities and decreases variance in their supply chain activities.
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Importance of Six Sigma in Supply Chain Management
The Six Sigma methodology helps increase efficiency in several ways as described below:
- Reducing the Order Fulfilment Time
- Creating a Responsive Supply Chain Process
- Reducing Errors
- Optimization of the Order Fulfilment Process
- Waste Reduction
Reducing the Order Fulfilment Time
The application of Six Sigma to an organization’s order fulfillment system helps in identifying those areas which have high waste and process variance. After identifying all inefficiencies in the order fulfillment process, this process can be improved by reducing paperwork and introducing automated processes such as picking, shipping planning, and shipment verification. The DMAIC cycle can be used to improve and enhance the existing order fulfillment process, and the DMADV methodology can be used to create a new process.
Creating a Responsive Supply Chain Process
The changing needs of customers are the drivers of change for an organization’s supply chain processes too. The supply chain processes should be responsive enough to adapt to customers’ changing needs.
Lean Six Sigma, an improved version of Six Sigma can be applied to supply chains having high error rates. One such lean technique is the Poka-Yoke technique or mistake-proofing of procedures by preventing human error by ensuring that a user completes the assigned tasks correctly.
For example, a software-enabled drill may be programmed to drill a particular number of holes and an alarm would be generated if the required number of holes has not been drilled.
Another lean technique called the 5S lean principle can be used for reducing errors in the supply chain. This technique helps in the reduction of errors by eliminating wastes that can cause errors. The 5S method stands for Sorting, Setting, Shining, Standardising, and Sustaining.
Optimization of the Order Fulfilment Process
An order fulfillment process is considered to be precise when the orders are delivered on time with complete and accurate documentation and with no damage caused during delivery. Six Sigma helps in improving the order fulfillment process by identifying problems in the system such as an outdated planning process, inefficient execution, etc.
The Lean Six Sigma methodology helps in eliminating non-value-adding processing or waste. Lean focuses on the management of the following sources of waste:
- Over-Production: Accumulating high levels of inventory of final products and/ or of parts based on speculation results in high inventory costs.
- Transportation: Unnecessary movement of raw materials, finished products, or work-in-progress materials leads to an increase in production costs and cycle time.
- Non-value-added Processing: A poor production facility layout may lead to additional work that does not add value to the product or service. Lean Six Sigma can be used to simplify production leading to the efficient functioning of the supply chain. Consequently, an efficient supply chain would provide a competitive edge to an organization and also help in increasing its revenue.