Documente Academic
Documente Profesional
Documente Cultură
Individual Assignment
Submitted to:
Dr. Rajesh K. Jain
Submitted by:
Ankit Kumar
161107
The concepts of Lean and Six Sigma disciplines have been at focus for the operational
excellence strategies in the manufacturing industry for decades. The new complexities that
have emerged in the manufacturing industry while serving demanding customers with a rapidly
increasing number of products and services have tested the limits of Lean Sigma. In response
to this, manufacturing firms are looking to technologies that instrument processes (e.g., the
Internet of Things) and analyze information (big data/cognitive) in real time to rejuvenate the
value chains and create a new approach towards operational excellence.
Due to increased globalization and constant technological advances taking place throughout
the world and other competitive pressures, have forced the organizations to accelerate their
pace while adapting to these new situations. This climate of change has introduced a lot of
opportunities as well as threats. Among all the available methodologies, Six Sigma is the most
popular quality and process improvement methodology which focuses on the elimination of
defects in the processes. The concept of Six Sigma can be traced back to Motorola and it has
been adopted by many companies including GE, Ford, General Motors, and Xerox etc. The
primary objective of Six Sigma is to reduce variations, in products and processes, to achieve
quality levels of less than 3.4 defects per million opportunities (DPMO). It is safe to say that
Six Sigma is a culmination of several decades of quality improvement efforts pursued by
organizations world over due to pioneering work done by quality experts like Shewart, Deming,
Taguchi and others.
Six Sigma when coupled with ‘Lean Principles’ is called ‘Lean Six Sigma’ which professes
eliminating waste in process steps by using ‘Lean Tools’ which are based on Toyota
Production System(TPS), which enhances the value in Six Sigma implementation further by
increasing the speed by identifying and removing the non-value adding steps in a process.
Execution of Lean Six Sigma project uses a structured method of approaching problem solving
normally described by acronym ‘DMAIC’ which stands for Define, Measure, Analyze,
Improve and Control.
Six Sigma
Six Sigma is a quality improvement methodology invented and mastered by Motorola in 1980s.
It is a highly disciplined process improvement method that directs organizations to focus on
developing and delivering near perfect products and services. Six Sigma is a statistical term
that measures how far a given process deviates from perfection. The central idea behind Six
Sigma is, if we are able to measure how many “defects” that exist in a process, it can be
systematically figured out how to eliminate them and get close to “zero defects”.
The term ‘Six Sigma’ was coined in the year 1985, by Bill Smith, a Motorola Engineer. He
explained that Six Sigma represents 3.4 defects per million opportunities, which is the optimum
level to balance quality and cost. It was a real-breakthrough in quality improvement process
where defects were measured against millions of opportunities instead of thousands which was
the basis those days.
Many leading companies have applied this bottom-line enhancing strategy to every function in
their organizations. In the mid-1990s, Larry Bossidy of Allied Signal and Jack Welch of GE
saw the potential in Six Sigma and applied it in their organizations which resulted in significant
cost savings in progressive years. GE reports stated that Six Sigma had delivered $300 million
to its bottom line in 1997, $750 million in 1998, and $2 billion in 1999.
DMAIC (Define-Measure-Analyze-Improve-Control)
It is an acronym that describes the key phases of the Six Sigma methodology. Each phase has
defined tasks and objectives to be completed as a foundation for other ones.
Sigma (6) Level: The ability of a given process (such as order fulfillment) to perform
defect-free work. Sigma is a statistical measurement of process variation.
Defect: Anything that causes a customer to become dissatisfied. Customers may be internal
or external and are sometimes defined as the next stakeholder in the process.
DPMO: Defects Per Million Opportunities, a key metric in Six Sigma that is a focus of
reduction efforts.
Six Sigma Performance: A very restrictive level of performance that many companies
never reach. It literally means exceeding 99.99% defect-free performance for a given
business process. It is estimated that many best-in-class companies operate more in the 1
Sigma range.
Process Capability: The measured ability of a process to operate within its specification
limits (between the upper and lower specifications).
Black Belt: A designation for a person who has successfully managed Six Sigma projects,
completed testing on the subject matter, completed prior belt requirements and is
responsible for attaining the results of the successful project.
Sigma Quality Level is a measure used to indicate how often the defects are likely to occur.
Sigma is a mathematical term and it is the key measure of variability. It emphasizes need to
control both the average and variability of a process. Table shows different Sigma levels and
associated defects per million opportunities. For example, Sigma level 1 indicates that it
tolerates 690,000 defects per million opportunities with 31% yield. Sigma level 6 allows only
3.4 defects per million opportunities with 99.9997 yield.
Along with being a statistical approach to measure variance, Six Sigma is also a process and
culture to achieve excellence. Following its success, particularly in Japan, TQM was very
popular in organizations which preached quality as fitness for purpose, and strived for zero
defects with customer focus. Even though TQM was considered as an efficient management
tool in the 1980s, by 1990s it was regarded as failure and was written off as a concept because
it failed to deliver. Against this background, Six Sigma emerged to replace the ‘overworked’
TQM philosophy.
The key success factors differentiating Six Sigma from TQM are:
Transportation allows organizations to deliver the right goods in the right quantity to their
customers at the right time, yet excess transportation movement creates waste and added costs
to the customer. Transportation is a necessary component of most businesses and adds value
that is recognized by customers; consequently it should be considered a strategic part of any
operation. However, there are often hidden wastes within transportation. Transportation waste
is often a result of deploying excess assets (inventory) to cover transportation lead time and
lead time variances. Lean transportation laws can explain where and how transportation
processes may be suboptimal and how the application of lean in transportation can positively
impact overall organizational performance.
Many Lean transformations often hit a road block when the tactical plans are given to
transportation managers. Lean is typically implemented first in the manufacturing operations
and then in the external transportation. Lean implementation in manufacturing is generally
focused on the implementation of small batch manufacturing, one-piece flow and the reduction
of inventories. As a result, the transportation manager faces the challenge of moving smaller
quantities more frequently for both inbound and outbound shipments. Although this seems
extremely counter intuitive since it contradicts the traditional large lot size based cost efficiency
assumptions. It becomes easy to discount Lean from a transportation point of view.
Increasing the complexity of this paradox is the fact that many transportation managers are
measured and perhaps compensated on transportation cost-based metrics. This creates an
environment where transportation professionals may not embrace Lean initiatives under the
assumption that smaller, more frequent deliveries and shipments will only serve to drive up
transportation costs. The transportation managers need to be explained that embracing Lean
effectively can reduce the shipment sizes, reduce inventories, and reduce transportation costs
in the process. Lean transportation can also be used as a customer service differentiator by
minimizing the transit time. Reducing the length of the supply chain and getting new products
to customers faster is a constant challenge for manufacturers. The critical component in this
process is to recognize that transportation must support Lean strategies based on inventory
reduction to create supply chain velocity.
Just in Time
The term Just in Time (JIT) means delivery of inbound and outbound material in exactly the
required quantities at exactly the required time. A Lean transportation network must be
designed to support the Lean delivery requirements. Materials arrives in smaller quantities on
a more frequent, predictable schedule. Once shipment sizes are reduced and delivery frequency
increased, the shipments need to be leveled over available working time.
Lean transportation networks successfully support the triple goal of increased delivery
frequency, reduction of lot sizes and leveled flow of material.
The use of small package delivery, multiple stop milk runs, LTL consolidation and mixed
product container building at the point of origin all play a vital role to achieve Lean
transportation. The milk run is a specific Lean transportation technique that helps to facilitate
small lot sizes, increased delivery frequency and leveled flow. Milk runs are pick-up and
delivery routes that deliver goods to manufacturers at fixed times during the production cycle.
They typically involve picking up or delivering at multiple suppliers with the same truck. The
goal is to deliver small lots in frequent delivery cycles. The challenge of implementing smaller
more frequent shipments is controlling transportation costs.
There are tools and techniques to achieve the three Lean goals i.e. frequency, lot size and
leveled flow and even reduce the transportation costs in the process. Two of these techniques
are daily transportation variability optimization and transportation event management.
Six sigma vs Lean
Both of these methodologies focus on business processes and process metrics while striving to
increase customer satisfaction by providing quality, on time products and services. Lean takes
a more holistic view. It uses tools such as value-stream mapping, balancing of workflow, or
Kanban pull signaling systems to trigger work, streamline and improve the efficiency of
processes, and increase the speed of delivery. Six Sigma takes a more data-based and analytical
approach by using tools to deliver error-free products and services, such as the following
examples:
Six Sigma uses an iterative five-phase method to improve existing processes. This method is
known as Define, Measure, Analyze, Improve, Control (DMAIC), and normally underpins
Lean Six Sigma (LSS).
Lean Six Sigma came into existence with the combination of Lean and Six Sigma. The fusion
of Lean and Six Sigma is required because Lean cannot bring process under statistical control,
and Six Sigma alone cannot dramatically improve process speed or reduce invested capital.
Lean Six Sigma is a disciplined methodology which is rigorous, data driven, and result-oriented
approach to process improvement. It combines two industry recognized methodologies evolved
at Motorola, GE, Toyota, and Xerox to name a few. By integrating tools and processes of Lean
and Six Sigma, an organization is able to create a powerful engine for improving quality,
efficiency, and speed in all the aspects of business. Embedding a rigorous methodology like
lean six sigma into organizational culture is not a short journey, but it is a deep commitment
not only to near-term results but also a long-term, continuous, even break-through results.
Lean and Six Sigma are initiatives were born from the pursuit of operational excellence within
manufacturing companies. While Lean serves to eliminate waste, Six Sigma reduces process
variability in striving for perfection. When combined, the result is a methodology that serves
to improve processes, eliminate product or process defects and to reduce cycle times and
accelerate processes. Lean and Six Sigma are conceptually sound technically fool proof
methodologies and is here to stay and deliver break through results for a long time to come.
UPS conducted a research to gauge the pace at which manufacturers are evolving. The results
indicated that the gap is widening between the companies that are aggressively embracing
smart operations principles and those that are falling further behind. Those companies that are
taking the lead are much better positioned to achieve the level of operational excellence needed
to be competitively effective in today’s demanding markets. The research also revealed another
prominent success factor — the increasingly important role of external service providers.
Manufacturing companies recognize that they must focus on their key internal competencies
while leveraging the scale, technology and skills of those providers that can deliver crucial
support processes. Companies must assess how they are progressing relative to their industry
peers.
There are three components of Six Sigma that connects so well in basics of logistics. The first
component in Six Sigma is the financial savings and benefits which can be linked to the
reduction of logistics waste (packaging, transportation mechanisms, vehicles, etc.). The second
component in Six Sigma is principle of variation reduction that measures and monitors the
logistics and distribution processes in order to improve the outcome. Finally, the third
component refers to the strategic alignment that Six Sigma projects require to have significant
impact in the business which is directly related to the key performance indicators or innovation
procedures that takes place in the logistics. The linkage between Six Sigma and Logistics
process can be seen in Figure below
Literature Review
In this extremely competitive environment, companies always tend to search for ways in which
they can cut costs and maximize their profits. In a bid to achieve this objective, organizations
are extensively searching for cheap sources of raw materials, shifting production to places with
low wages etc. Thus, this increased competition has led to a labyrinth pf complex supply chains
which extend very thin. As an effort to reduce the number of errors and deficiency the
companies tend to use Six Sigma methodology and thus make their supply chains “Robust” but
they ignore the possibility of the sudden changes in the environment and fail to assess the extent
to which their supply chain can handle it.
Today, a common product or service package does not serve all the customers and adding to
this, the extreme levels of uncertainties in the environment has added to the complexities. In
order to tackle these situations, flexibility, redundancy and a risk management culture must be
built into the supply chains. An efficient supply chain’s inherent feature is the minimization of
unpredictable variations and uncertainties. A combined Lean Six Sigma management
philosophy is the key to create and maintain a supply chain that is both robust and resilient.
According to a statistic, in almost 33% of the six sigma projects, the main root cause of the
problem lies outside the company, so it is very important for a company to extend the lean six
sigma principles to its other stakeholders like the suppliers. A solution to creating a robust and
a resilient supply chain lies in reinvesting the money saved from the concept in risk
management and mitigation solutions. These plans include having multiple suppliers, multiple
machines to reduce the workload on one, train all the departments together to reduce the friction
and promote an inter-departmental growth.
Another issue that is quite persistent and must be sorted by the companies is the problem of
internal logistics. In the papers that I have reviewed, the companies have used the DMAIC
methodology to identify, analyze and solve the problem. In one of the cases, the problem was
related to the delivery route being used for the delivery of the raw materials and parts from the
warehouse to the point of use. Using DMAIC, the company was able to identify the issue as
the scheduling of different parts, loading time in the warehouse and also the number of boxes
that in every trip the trolley carried. Company found alternative solutions, tested them on 15-
day trail periods and finally was able to achieve the targeted reduction in the delivery time.
The other case was of an automotive manufacturer which produces multimedia products and
the issue here was the extremely high ratio of defective products. The company again used
DMAIC methodology to identify the issue. They categorized the issue into three categories:
Supply delays, Supply errors, and Supply failures. Supply delays and supply errors caused a
relatively less number of issues as compared to the Supply failures. Due to the supply failures,
the parts delivered were wrongly delivered and this error was undetectable until the end user
used the product. Thus the level of error was very high. Thus in an effort to improve the
situation, the company undertook a series of Lean Six Sigma projects.
Thus in all the papers we have seen that the companies have turned to Lean Six Sigma as a
solution to all the logistical problems and also to ensure that the complexities of the supply
chain are controlled and the supply chain is reactive towards any sudden change in the market.
Paper 1: Lean Six Sigma –a way to make the supply chain resilient and robust
Publication (Date): 11th QMOD Conference. Quality Management and Organizational
Development (2008)
Paper 3: Using Project Six Sigma and Lean Concepts in Internal Logistics
Publication (Date): Proceedings of the World Congress on Engineering 2013 Vol I (2013)
Lean Practices at UPS
United Parcel Service, Inc. (UPS) is the world's second largest package delivery company
and a provider of supply chain management solutions. The company has its headquarters in
Sandy Springs, Georgia. UPS delivers more than 15 million packages per day to more than
7.9 million customers in more than 220 countries and territories around the world. UPS is
known for its brown delivery trucks and uniforms, hence the company nickname "Brown".
UPS also operates its own airline and air cargo delivery service based in Louisville, Kentucky.
The company was founded on August 28, 1907, by James Casey, as the American Messenger
Company with his friend Claude Ryan in Seattle, Washington. In 1913, company bought its
first delivery car, which was a Model T Ford. The company later merged with one of their
competitor, Evert McCabe, and formed Merchants Parcel Delivery. A consolidated delivery
was introduced by the company, wherein the packages addressed to a certain neighborhood
were combined onto one delivery vehicle. In 1930, company started a consolidated service in
New York City, and soon after the service was started in other major cities of the East and the
Midwest USA. It was in 1937, that company was finally named United Parcel Service and the
logo was redesigned to reflect the company's new name. After this all the UPS vehicles were
painted Pullman brown.
The period 1940 to 1959, saw the company acquire the "common carrier" rights, which allowed
the company to deliver packages between all addresses, any customer, both private and
commercial. UPS moved its headquarters to Greenwich, Connecticut in the year 1975 and
began their services in all of the 48 contiguous states of USA and they also established their
Canadian operations in the same year on Feb. 28. UPS Canada's head office is located in
Burlington, Ontario. In 1976, UPS established a domestic operation in West Germany and in
1982, UPS started the Next-Day Air Service in US and Blue Label Air became UPS 2nd Day
Air Service. In 1988, UPS launched its own Airlines and in 1991, moved its headquarters to
Sandy Springs, Georgia, a suburb of Atlanta.
In 1992, UPS acquired two supply chain service providers, Haulfast and Carry fast and
rebranded them as UPS Supply Chain Solutions and in 1995, UPS acquired Sonic Air to offer
service parts logistics and compete with Choice Logistics. UPS also acquired Challenge Air in
the year 1999 to expand its operations in Latin America. Finally, on November 10, 1999, UPS
became a public company.
Freight business
In the year 2004, UPS entered the heavy freight business with the purchase of Menlo
Worldwide Forwarding, a subsidiary of Menlo Worldwide. UPS rebranded the company as
UPS Supply Chain Solutions. The purchase price was US$150 million and the assumption of
US$110 million in long-term debt. On August 5, 2005, UPS also announced that it has
completed its acquisition of less-than-truckload (LTL) trucking company Overnite
Transportation for US$1.25 billion and on April 28, 2006, Overnite officially became UPS
Freight. In the year 2005, UPS purchased LYNX Express Ltd, which was one of the largest
independent parcel carriers in the United Kingdom, at a cost of £55.5 million
(US$97.1 million).
United Parcel Service celebrated its 100th anniversary on August 28, 2007. Later in the year
2012, UPS announced that it intended to acquire TNT Express for $6.8 billion, in a move to
help expand its presence in European and Asian markets. However, the deal fell through in
January 2013 after it was announced that UPS had failed to obtain permission from the
European Commission and as such had been blocked on competition grounds.
Lean Six Sigma practices at UPS
As one of the world’s largest logistics and couriers Delivery Company UPS knows the value
of operational excellence and efficiency, dependable compliance procedures and proven
reliability at every link in the supply chain. UPS expertise in global transportation and contract
logistics provides value through enhanced process controls, regulatory knowledge and end-to-
end visibility, allowing you to perform at your best. UPS’s solutions can streamline distribution
and delivery so you can fuel your supply chain for global growth.
Distribution network
When it comes to maintaining services, nothing is more important than speed and quality.
Every minute aircraft are on the ground (AOG) means lost revenue in the air. For both operators
and maintenance repair organizations (MROs), UPS has the delivery speed and service quality
to keep delivery paced up and revenue flowing by:
• Global logistics network — More than 900 facilities worldwide put you closer to customers
for critical order fulfillment.
• Delivery planning — Optimized package placement, inventory and visibility ensure the right
package is always at the ready in the right quantity at the right location.
More visibility, more efficiency
To minimize gaps in supply chain and reduce operating costs, UPS provides ready access to
information to keep customers informed and enable operational flexibility. UPS visibility, both
in the warehouse and in transit, keeps customers up to date so production stays on schedule and
planes keep flying. Shipments are proactively monitored 24/7 using our global control tower.
If necessary, email alerts notify recipients of events and exceptions for complete transparency.
From workflow to package tracking and storage, UPS also coordinate with warehouse
operations for seamless processing and accurate, cost-effective inventory management, putting
the right part in the right place at the right time. And with Enterprise Resource Planning (ERP)
integration capabilities, UPS captures a holistic view of business and its productivity.
• UPS Import Control — Create and complete commercial invoices to ensure accuracy and
compliance
• UPS Paperless Invoice — File commercial invoices online to speed clearance and reduce
customs holds by up to 56 percent.
Conclusion
Lean manufacturing and Lean transportation are still in their infancy. Lean awareness is
certainly reaching mature stages yet actual execution is lagging behind. The way in which
transportation management will compliment Lean is still uncertain in the minds of many
logistics practitioners. However it is certain that significant waste and unnecessary cost does
exist in most transportation networks. The key to eliminating waste resides in understanding
key Lean principles and the laws of lean transportation. Most importantly, transportation must
support customer and inventory strategies, as opposed to transportation driving inventory and
customer strategies. Also, a superficial understanding of Just in Time must be expanded to
enable a paradigm shift away from an unwarranted belief that Lean cannot be implemented
while reducing transportation costs. Lastly, comprehensive and frequent reviews of
transportation network stability are essential for effective Lean transportation execution. The
future holds many challenges for the transportation professional. Applying the principles of
Lean Transportation are a means to meet these challenges. Lean principles, techniques and
tools will facilitate the development of faster, more flexible and more effective transportation
networks. To realize this opportunity, logistics professionals need to challenge the current
transportation paradigms. This will require tenacity and perseverance while navigating through
organizational hierarchies. These required changes may be optional today, but tomorrow will
be essential for survival.
References
https://www.isixsigma.com/topic/does-fedex-or-ups-use-six-sigma-if-so-how
www.shmula.com › Posts › Operations Management
wwwtest.fedex.com/us/autodistrib/LeanTransportationFinal101606.pdf
www.wikinvest.com/stock/United_Parcel_Service_(UPS)
www.theschoolofci.org/images/docs/265-812-1-PB.pdf
www.intechopen.com/books/six-sigma-projects-and-personal.../lean-six-sigma
https://www.ups.com/media/en/UPS-Supply-Chain-Management-Whitepaper-
2014.pdf
https://www.ups-scs.com/solutions/white_papers/wp_supply_chain.pdf
http://ups-scs.com/solutions/white_papers/wp_JIT.pdf
https://www.ups-scs.com/solutions/white_papers/wp_supply_chain_value.pdf
Annexure 1: Company Info