Applying Lean Six Sigma in Supply Chain - a Solution?

As never before in history, “Supply Chain” as a problem has been identified over and over again in the media in the last couple years.  The pandemic and resulting disruptions have impacted everyone at some level.  Whether you’re an executive in a large company pulling your hair out over supply shortages and disruptions, or a stay at home mom who is annoyed with shortages of desired products at the local grocery, you may be saying under your breath repeatedly, “Fix the (insert expletive) supply chain!”

As both a Lean Six Sigma master blackbelt and a Certified Supply Chain Transformation Architect, I get questions about whether or not addressing the on-going and pervasive supply chain issues should incorporate best practices embodied in the Lean Six Sigma.

I have been carefully watching things unfold and talking with executives around the world about what they are experiencing.  For example, I conducted a survey early in 2022 for The Next Level Purchasing Association of chief procurement officers (CPOs) spanning a wide range of industries around the world.  These folks have been living the supply chain pain more than most since it’s their job to manage all the suppliers.

The top-most issues reported by CPOs were:

• Cost / Price / Inflationary Issues – 23%
• Supply / Supplier Risk Management, Supplier Development & Management – 20%
• Logistics / Logistical / Transport – 19%
• Staffing – Us & Suppliers – 12%

For each of these elements, there are some common and unique aspects of Lean Six Sigma to close the gap.   First, we’ll narrow in on cost increase issues.

For Cost increase issues, we first do a Pareto analysis (a.k.a. 80/20 rule) to isolate the 20% or less of the suppliers creating 80% of the impact.  From there we zero in on the few suppliers who are most of the problem and from there plan some Kaizen activities to engage them in discovery about what can be done to address the cost issues.   To keep it simple, let’s assume you are a manufacturer of capital goods or equipment, and the supplier of an expensive assembly is asking for price increases.

Create value stream maps with your supplier(s) that breaks down at the step level these kinds of data for the end-to-end supplier process to deliver that assembly to you:

1. What happens and how often?
2. Who does it and how long are they touching (working on) it? Which machines are used for how long at each step?
3. How long does our ‘thing’ being processed wait in queue after delivery to be worked on?
4. What percentage of time is the step one-and-done for good quality, or what’s the failure rate?
5. Which IT systems come into play for each step? How much of the task time is working purely someone working with a computer?
6. What is the material or supply value consumed at each step?
7. For each step probe for pain points that subject matter experts report.

With this sort of data, it’s relatively easy to quantify and sort for which steps have the biggest impact on cost, quality, time and frustration.  By zeroing in on the parts of the process with big dollar consumption of labor, material and other costly resources it leads to quality discussions about what might be done to roll-back some costs.

For example, from such an exercise I was able to reduce the amount of foam backing material being used on a textile product by 5% on average, with no impact on the utility of the product.  Why put foam all the way to the outside edges when that’s all going to be trimmed-off later and discarded?  A side benefit had to measure was reduced landfill costs and carbon foot-print from discarded foam.  We shared the savings with the supplier and were able to offset some of the price increases.

Each of the elements identified by Chief Procurement Officers deserves a closer look, In upcoming blogs, we will discuss:

• Supply / Supplier Risk Management, Supplier Development & Management
• Logistics / Logistical / Transport
• Staffing – Us & Suppliers