Lean Six Sigma is the combination of two methodologies that complement one another when applied to logistics and supply chain management. We need to put them together to appreciate fully how they dovetail and complement each other.
Lean Six Sigma Logistics: Lean and the Logistician
The impact of Lean on the logistician is significant. A common misconception of Lean philosophy is that it only finds application in manufacturing settings. The goal of Lean is to eliminate waste, decrease work-in-process inventories, and, in turn, decrease process and manufacturing lead times, ultimately increasing supply chain velocity and flow. Lean also has a vital cultural element to it that is crucial to the logistician, the concept of “total cost.” The Lean practitioner does not focus on individual cost factors such as transportation or warehousing, but rather focuses on total cost. With inventory carrying costs representing 15 to 40 percent of total logistics costs for many industries, making decisions based on total cost has dramatic implications for the logistician.
Lean Six Sigma Logistics: Six Sigma and the Logistician
At the heart of Six Sigma is the principles of variation reduction. If we can understand and reduce variation in our processes, then we can implement improvement initiatives that will center the process and ensure accuracy and reliability of the process around customer expectations. For example, an average order-to-delivery cycle time of five days may reflect a variation between two and eight days. It is this variation that leads to customer non-confidence and the resultant inventory buildup and/or loss of sales.
So, in summary:
- Logistics is about managing inventory.
- Lean is about speed, flow, and the elimination of waste.
- Six sigma is about understanding and reducing variation.
Now that we have covered Lean and Six Sigma as they individually apply to logistics, Lean Six Sigma Logistics can be defined as:
The elimination of wastes through disciplined efforts to understand and reduce variation, while increasing speed and flow in the supply chain.
The Logistics Bridge Model
Both Lean and Six Sigma lend distinctive disciplines and tools to logistics. Using these disciplines and tools will allow an organization to uncover and deal with wastes and inefficiencies. Although Lean and Six Sigma tools are very powerful, we need to remember that for Lean Six Sigma to work in logistics, a fundamental mind shift must occur. This mind shift requires that we first begin to make decisions based on the concept of “total logistics costs,” and second, we have the courage to eliminate waste in its various forms. This may sound simple, but reality with prove otherwise. Organization norms, management tradition, and financial accounting methods will fight against “total cost” and will continue to support our natural tendencies to create waste. The Logistics Bridge Model provides a template for the design and implementation of a logistics strategy based on Lean Six Sigma principles.
The Logistics Bridge Model is a model that can be used as a compass for the logistics professional. That is, it will provide direction and insight on how to solve today’s logistics challenges and set the course for ongoing success. At the heart of these challenges is the need to bridge our suppliers with our own processes and then bridge our processes to the customer. All of this must happen while we face competitive and shareholder pressures to reduce costs and increase market share.
The Logistics Bridge Model teaches us that Lean Six Sigma Logistics is made up of three main principles. These principles are:
- Logistics Flow
- Logistics Capability
- Logistics Discipline
Logisticians can draw from these principles to design their own, personally tailored solutions to meet the specific challenges faced by their organization.
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