Lean Six Sigma and Supply Chain Management – the Time Has Come to Converge

Supply Chain Management (SCM) and Lean Six Sigma (LSS) have operated pretty much independently of one another as each of the disciplines has evolved over the last 20 years.  What I have found interesting in my work with large and small organizations in the implementation of LSS in operations, and in sales and marketing, is an interesting common thread.  In almost every case as organizations progress down the path of implementing LSS – we end up working on supply chain projects.

Why?  It’s really not difficult to understand once we realize that initial efforts in LSS usually focus on internal operations and naturally migrate to look up and down the supply chain.  This most often first occurs when the organization begins to look to increase the component of the Voice of the Customer (VOC) in their activities.  Both Lean and Six Sigma advocate strongly the importance of knowing the customer in intimate ways so that we design and execute internal and supply chain operations in sync with the market’s expectations.  Some organizations excel in really knowing their customers, but I know from experience that they are a decided minority.

I have proven this repeatedly by conducting simple exercises with teams of people in organizations where we conduct simple VOC (Six Sigma related) exercises that demonstrate the level of alignment between what we call the “inside reality versus the outside perception.”  I can’t cover the process in detail here, but it involves:

• Listing the good things an organization does to bring value to the market.
• Ranking each for the degree the market is aware of these things.
• Ranking each as “must do” or “differentiator.”
• Evaluating the differentiators against what we think customers care about.
• Evaluating them with respect to whether or not customers want to pay for them.

More than 90% of the time we learn that the most important differentiators about an organization, that customers will pay more to get, are not adequately communicated to potential customers.  This suggests the “outside perception” of the organization is broken.  The other thing this proves is this: We don’t really know what prospective customers want – we only have an unproven hypothesis.  If you are wondering what this has to do with applying LSS to SCM, bear with me a little longer.

One of the most important parts of Sales and Operations Planning which ultimately drives supply chain design and execution is staying ahead of changes and predicting outcomes.

A Simple VOC Exercise to Test How Well You Know Your Customers

We teach a concept called “inside reality versus the outside perception.”  To learn it best I recommend assembling a cross-functional team that has a good view of your organization and your customers.  This typically might be five to seven people representing production, design, sales, marketing, customer service, supply chain and finance.

Start with a blank piece of paper or a flipchart/white board, and leave some white space on the left and right borders.  Then brainstorm a list of things that are great about your organization.  Be specific.  For example, “great customer service” is not specific enough – what exactly is great about it?  The speed of response?  The friendliness?  Another example is “great quality.”  What exactly do you mean – what is it about the quality that is good?

I recommend sticking with this until you have at least 10 to 15 things that are “great” about your organization.