Application of Six Sigma in Supply Chain Management

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Application of Six Sigma in Supply Chain Management

Anoop P. S.

Abstract: This paper hypothesises that, whilst Six Sigma as a change and improvement strategy is delivering significant business benefit to practitioner organisations, it has not been successfully adapted to deliver similar benefits across supply chains. It demonstrates by reference to the literature that most published applications of Six Sigma in supply chains are related to the application of traditional internal Six Sigma methodologies to the internal processes of a supplier to the “Six Sigma Organisation”. In this paper, the issues particular to an application of Six Sigma in a broader supply chain context are discussed, with reference to specific supply chain issues. It is concluded that Six Sigma does have something novel to offer organisations over and above the contribution of existing approaches to supply chain improvement, and a conceptual model is proposed that is consistent with the literature and has potential to support such an introduction. Although rooted in the supply chain realm, SCOR adherents see a role for the methodology as the gatekeeper – identifying the projects most likely to render ROI using SCOR, Lean or Six Sigma. There is already a natural link between Lean and Six Sigma at the program and project execution level. The model integrates the Balanced Scorecard, SCOR model (Supply Chain Reference model) and Six Sigma DMAIC (define, measure, analyse and improve) methodology in a two-level framework. This is a strategic-level cycle, developing focused projects to generate maximum business benefit, and an operational-level cycle, applying Six Sigma and lean tools in a DMAIC cycle to deliver supply chain improvements. Cautions and requirements for the success in practice of such a model are discussed and it is concluded that the model should be tested in practice to validate and develop further the methodology.

Keywords: Six Sigma; Supply chain improvement; Lean; SCOR model; Variability reduction


1.1 General Introduction

Six Sigma Process Improvement is a rigorous approach to improving business processes by addressing the underlying causes of variation that lead to poor performance as experienced by the ‘customer’, who is the recipient of the outputs. The early exponents were Motorola and GE in the 1980s. Since then, many organisations ranging from manufacturing to service in all sectors, have successfully deployed Six Sigma to deliver measurable cost, quality and time based improvements.


In the past, Lean and Six Sigma have at times been viewed almost as rival methodologies, with some companies choosing one or the other as their primary improvement vehicle.

Two of the most powerful forces in manufacturing and now the broader supply chain are “Lean” and “Six Sigma.” Traditionally, many companies have adopted one or the other as their primary approach to operational improvement, or in some cases used both but as fairly independent tools.

Increasingly, however, companies are seeing the benefit of combining the two techniques into a more integrated strategy that uses the best of each approach, which can be highly complementary. Many believe this “Lean Six Sigma” strategy is the best way to improve overall supply chain results and tackle process improvement more holistically.

Lean, the name given to the Toyota Production System in the book The Machine that Changed the World, has traditionally been associated with the elimination of waste in business processes. Lean was originally focused on improvement on the factory floor, but has since been used in some cases to power broader supply chain improvements. European retailer Tesco, for example, used Lean principles to engineer improved store replenishment processes.

Six Sigma is a quality improvement methodology that in general seeks to reduce process and results variation. Originally focused on...
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