One of my master planners recently asked me: “Are lean and six sigma supportive of each other? And how do they work within a sales and operations planning (S&OP) process model?” Despite its thorny nature, I loved the inquiry.
In recent years, S&OP reached critical mass while lean and six sigma faded in, out and then back in to vogue. As organizations superficially cycled through training and implementation, many supply chain managers, including me, cynically referred to lean and six sigma as the “program of the month.” But I was wrong to think that way, and these questions made me probe my own skepticism.
To really get to the bottom of it all, let’s start with lean. According to the APICS Dictionary, lean refers to a philosophy that emphasizes minimizing the use of resources and identifying and eliminating non-value-adding activities. Furthermore, lean principles and practices facilitate the simplification of processes and the relentless removal of waste created by overburden and unevenness in workloads.
For those of us with a deep understanding of S&OP, the terms “overburden” and “unevenness” likely stand out in the previous definition. Clearly, lean concepts and S&OP have a common goal: a stable and predictable plan. Lean achieves this through simplification and waste reduction; S&OP focuses on balancing supply and demand in the long view by eliminating overburdened and uneven workloads. Taking that a step further, S&OP is a culling, measuring and decision-making process model that helps drive out supply chain waste such as overproduction, excess inventory, unnecessary movement and more. These are all examples of waste made visible via typical S&OP metrics.
Now, let’s consider where six sigma fits in. The APICS Dictionary reports that six sigma furnishes tools for the improvement of business processes, and six sigma projects follow a defined sequence of steps with specific value targets, such as removing the causes of defects, decreasing variability, reducing process cycle times, cutting costs, improving customer satisfaction and increasing profits. Of course, these are all areas of great interest in S&OP as well.
In my company’s S&OP-centric environment, we are realizing the benefits of the proper and judicious use of lean and six sigma. They are leveraged in a surgical manner to target improvements in critical process areas. Then, we use S&OP to assess and monitor the initiatives and maintain advancements through control measures.
For example, we applied lean concepts to streamline our order-to-floor and floor-todoor processes, cutting our order-processing time in half. In each step, we evaluated detailed data and process maps to determine which operations could be eliminated, improved or sped up. We also pushed to enable electronic data interchange partnerships with our customers, which reduced order fulfillment time by a full day. Lean techniques helped us improve our on-time-in-full delivery metrics by 7 percentage points within a year, simply because orders got out the door faster.
For manufacturing, our goal was to become more agile through batch-size reduction, without the pain of lost capacity. We increased line efficiency with lean tools that reduced the nonproductive time typically associated with changeovers or unplanned line stoppages. SMED (single-minute exchange of die) cut changeover periods and aligned economic order quantities with minimum order quantities to reduce component inventory hold and risk.
In these lean projects, S&OP helped us communicate the changes to stakeholders. Additionally, we found ourselves using six sigma techniques such as root cause analysis, fishbone diagrams and the five whys to further enhance the initiatives. Moreover, our use of such techniques let us identify problems and target solutions down to the shift level at a retailer’s receiving distribution point. We also apply six-sigma-esque root cause analysis to demand planning, examining each departure from expected forecast accuracy results. We look for missing data, abnormal events, bad adjustments or erroneous statistical forecasts. So far, we have reduced forecast error by 70 percent — amazing results by any measure.
Patrick Bower is senior director of global supply chain planning and Customer Relations for Combe. He is responsible for the company’s sales and operations planning process, order management, and third-party logistics management. Bower may be contacted at email@example.com.
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