The Crucial Role of Lean Six Sigma in Modern Manufacturing Supply Chains, by Kingston Yong - Senior Consultant
The Australian Manufacturing Sector
Before the effects of the global pandemic in 2020, the importance of the Australian manufacturing sector has been overlooked. The Australian manufacturing GDP has been steadily declining from the 1990s by a staggering 57% (World Bank and OECD), mostly due to the upsurge and focus on the mining industry in the last 2 decades. Furthermore, the recent growth of the technology sector which has contributed to a swing towards cheaper imports, coupled by a growing business preference towards offshore manufacturing which presents a cheaper alternative- these drivers have not only reduced the need for Australian manufacturing, but are also impacting the local employment market.
When Covid struck and the global economy was paralysed, the narrative above couldn't have been switched more quickly. We have seen supermarket shelves run empty, new car purchases are no longer accessible, and even timber is in short supply. All of a sudden, there is a resurgence of national focus and investments towards rebuilding stability of local manufacturing to a state of resilience.
In this fast-paced world of manufacturing where quality, efficiency and cost-effectiveness has reigned supreme, companies need to stay alert, resilient and competitive at all stages of the vertical supply chain. In order to sustain the potential bullwhip effects ranging from miscommunication, inaccurate forecasts, price fluctuations and suboptimal decision-making, one methodology has risen to the forefront as the beacon of excellence- Lean Six Sigma. It is a tool that transforms production lines into well-oiled machines, merging precision and innovation to orchestrate a symphony of productivity. From the shop floor to the boardroom, the importance of Lean Six Sigma cannot be overlooked. It has been adopted as the guiding principle by many large multinational corporations including Toyota, General Electric, Danaher Corp, Procter & Gamble and 3M to attain dominance in its respective markets.
Lean Six Sigma
Lean Six Sigma is a process improvement approach that uses a collaborative approach to improve performance by reducing waste and minimising variability. It combines Lean waste reduction and Six Sigma principles to accelerate value creation in business processes. First developed in the 1950s by Toyota and further enhanced in the 1980s by Motorola, the tool focuses on identifying improvement opportunities through the lens of waste reduction and consequently deploying the necessary framework to disaggregate and standardise problems, statistically analyse the size of the issue and deploying resources to fix the problems.
Lean Six Sigma takes a holistic approach over the end-to-end basis of a particular business process which includes a deep-dive of the inputs, processes and outputs. The heart of the methodology is DMAIC (which stands for Define, Measure, Analyse, Improve & Control) which resembles a scientific problem-solving approach, typical to that of a management consulting project, in structuring and fixing problems in manageable and organised subsets.
Delivered effectively, Lean Six Sigma can produce long-lasting benefits that include:-
The Six Sigma principle strives to achieve a level of quality that is defect-free at 3.4 defects per million outcomes. While this is an extremely ambitious goal, deploying the DMAIC approach and continuously striving for incremental improvements can lead to a level of performance where defects and variations can be reduced to a statistically insignificant level.
Lean principles focus on identifying and eliminating errors and waste. By recognising the 8 different types of waste (defects, overproduction, transportation, non-value adding processing, motion, waiting, unused talent and inventory), one can focus process improvement efforts with a targeted approach to eliminate such errors and mistakes in a business process.
By eliminating errors and waste, organisations in turn make their processes more efficient and leaner. This does not only improve processes at an operational level but also leads to more effective decision making that can lead to significant cost savings.
While initially created for the manufacturing environment, it has been proven that Lean Six Sigma can benefit every department- ranging from financial operations, customer service, human resources and so on. The principles of Lean Six Sigma focus on promoting transparency and improvement of performance indicators through an actionable and measurable data-driven approach, a universal toolkit that can be applied in wide range of business processes and industries.
A Culture of Continuous Improvement:
Lean Six Sigma is only effective if an organisation adopts a culture of continuous improvement. While there are specific deliverables and targets to be achieved in projects, the overall work of improvement never ends. The continuous improvement culture requires teamwork and support at all levels of the organisation, from those in Executive positions through to those in front-line positions.
Improved Customer Loyalty:
The advent of a strategic and effective Lean Six Sigma project starts with identifying the voice of the customer. By adopting a targeted focus on customer needs, any gains produced through Lean Six Sigma can result in higher levels of customer experience and satisfaction that can lead to building a loyal customer base.
Higher Talent Retention:
Lean Six Sigma manifests a culture of consistent value creation and continuous improvement that recognises and champions its incumbents. Employees who drive the value creation process will feel more engaged and empowered in their roles, resulting in higher overall employee satisfaction for the organisation.
Better Risk Management & Strategic Planning:
Organisations can more effectively identify potential risks and take the appropriate steps to mitigate those risks through Lean Six Sigma. As Lean Six Sigma shares the methodology of Plan-Do-Check-Act, a continuous improvement practice of ensuring a plan is performed under structured due diligence, organisations will have a better grasp of both short and long-term opportunities and can act strategically to improve the competitive position in the market.