Supply Chain Management For Dummies. Daniel Stanton

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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 Belts have mastered Six Sigma and can teach other people how to manage process improvement projects.

       Master Black Belts have such a high level of mastery that they can train and supervise Black Belts.

      Step 4: Improve

      The next step is putting the knowledge you gained from data analysis into action by making changes to improve the process. These changes can happen all at once, or they can be introduced over time. Commonly, this phase includes some pilot studies to provide confirmation that the changes provide the expected benefits before you implement them throughout a process. If you decide that several improvements need to be brought online over time, you can sequence them in a multigenerational project plan (MGPP). An MGPP is like a road map that shows the order in which you will implement improvements.

      Step 5: Control

      The funny thing about improving a process is that sometimes, when you stop paying attention to it, the process goes right back to working the way it did before you improved it. In Six Sigma, the final step is establishing a system to ensure that the improvements you made become permanent. Control often involves performing ongoing measurements and reporting to show that the improvements remain in place and continue to provide consistency over time.

      Theory of Constraints

The Theory of Constraints (TOC) is one of the simplest, most powerful supply chain concepts. The basic idea is that every process is limited by some kind of constraint. (Think of the saying “A chain is only as strong as its weakest link.”) TOC is about tuning an entire supply chain to run at the same pace as the slowest step in the process.

      There are many examples of how constraints control all the processes around us. In the world of auto racing, there are times when you need to limit the speed at which cars travel around the track, so you send out a pace car that no one is allowed to pass. When you’re draining a bathtub, the rate at which water flows out is constrained by the size of your drain. In other

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