Supply Chain Management For Dummies. Daniel Stanton

Supply Chain Management For Dummies

of Lean Manufacturing are described in Japanese terms.

When someone identifies a need to innovate or improve a process, the key stakeholders are brought together for a kaizen event. (Kaizen is pronounced to rhyme with “Hi Ben.”) During a kaizen, the stakeholders form a team and look at how the process is working, come up with ideas for how to make it better, and then implement changes. That sounds simple, and it should be. But business cultures often make it hard for people to speak up or be heard, so a formal approach like Lean helps get everyone involved.

A core value of Lean is that people must be treated with respect because all the workers have ideas to contribute that could benefit the company.

Under the Lean approach, companies should continually drive eight kinds of muda out of their processes and supply chains:

Transportation: Any time you ship something from one place to another, you’re consuming time and money. The less you need to ship a product, the better.

Inventory: Any time you have products sitting around in inventory, you’re wasting money by tying up space and working capital.

Motion: Any time you move something when it isn’t necessary, or when it isn’t somehow making your product more valuable to a customer, you’re wasting time and money.

Waiting: Any time you have to wait for one thing to happen before you can do something else, you’re wasting time and money.

Overproduction: Any time you make too much of a product, or make a product before you can sell it or use it, you’re wasting time and money.

Overprocessing: Any time you do something that doesn’t add value — that a customer won’t pay for — you’re wasting time and money.

Defects: Any time you make a product that you can’t use or sell (including scrap and rework), you’re wasting time and money.

Untapped skills and employee creativity: Any time you fail to engage and inspire your employees to offer ideas, implement improvements, or identify waste, you’re wasting an asset that you’re already paying for: their brains.

An easy way to remember the eight wastes is to use the acronym TIM WOODS. (The S at the end comes from skills in the last item.)

Toyota originally identified seven kinds of waste, but as Lean has been adopted in other companies, most of the experts have come to agree that untapped human skills and creativity is so important that it needs to be included as an eighth form of waste.

Six Sigma

Six Sigma is a process improvement method that’s built on statistics. The basic idea is that variation is bad. When you’re running a manufacturing process or a supply chain, you need consistency and predictability. If you don’t have consistency, some percentage of the things that you make probably isn’t useful for your customers. If you do have consistency — that is, if you have a process under control — there’s a much better chance that the products you make are useful. Consistent processes lead to a high quality level for products.

Statisticians describe the variation of a process in terms of the amount of deviation from an average value. The symbol used to represent deviation in a mathematical equation is the Greek letter sigma (σ). Any set of data about a process has some deviation, and the less deviation you have, the more stable your process is. So the statistical basis for Six Sigma is to reduce process variability so much that defects occur only at the sixth sigma (6σ), or just 3.4 defects out of 1 million events.

I don’t want to get too deep into the math here; you can find plenty of other books that do. The important thing to understand about Six Sigma is that the goal is to have a very small number of defects — that is, improved quality — as a result of decreased process variation. You get there by measuring processes and using mathematical tools to improve consistency.

There’s so much overlap between Lean and Six Sigma that some people combine them into a single discipline called Lean Six Sigma.

You follow five steps to apply Six Sigma as a process improvement methodology. These steps create the acronym DMAIC (pronounced “duh-may-ick”).

Define

Measure

Analyze

Improve

Control

Another Six Sigma approach called DMEDI (Define, Measure, Explore, Develop, Implement) is used to design new processes.

Step 1: Define

The first step is to clearly define the process that you’re trying to improve and why you want to improve it. During this phase, you need to build a business case for why the project is important and what resources you need to complete it. An important part of building the business case is to get feedback from the people who deal with the outputs of a process: the customers. This feedback is called voice of the customer (VOC). The overview of the project, including the VOC, should be summarized in a Six Sigma project charter.

Writing up the project charter can be harder than people expect. Don’t get hung up worrying about making the charter perfect. Instead, just create a rough draft that explains what you are trying to do, which will make it easier to clarify your thinking and to get input from other people. The charter is your starting point. It’s okay to make changes and improve it as the project moves forward.

Step 2: Measure

The second step is measuring the process that you’re trying to improve. Because Six Sigma is a mathematical approach, you need to collect data so that you can measure how the process is working and calculate the amount of variation. Taking good measurements is critical so that you can calculate benefits during the next steps in a project. If your measurements aren’t accurate, your improvement efforts are probably going to be misguided.

Step 3: Analyze

After you collect data about the process, you analyze the data. In the world of Six Sigma, this analysis often requires a solid understanding of statistics and the use of some statistical analysis software. Generally speaking, the data helps you identify variations in a process and shows how those variations affect the quality of your products. Data analysis can help you understand what things are causing the variability — the root causes — so that you can look for ways to improve the process.

SIX SIGMA TRAINING AND CERTIFICATION

Lots of programs are available to educate people about Six Sigma, and many of them will even grant you a certificate when you’re done. Generally, there are four levels of training and certification:

Yellow Belts understand the basic concepts and terminology of Six Sigma and can contribute as a member of a process improvement project.

Green Belts have a solid understanding of Six Sigma and can lead process improvement projects on their own.

Black

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