Industry research on lean and six sigma implementation in logistics industry - preview

LASSIB INDUSTRY RESEARCH ON LEAN AND SIX SIGMA
SOCIETY IMPLEMENTATION IN LOGISTICS INDUSTRY

Table of Contents

1 .0 ABSTRACT ...............................................................................................................................3

2 .0 PRESEN T DAY CHALL EN GES FACED BY LOGISTIC S IN DUSTRY .....................................................3

3 .0 STRATEGIC CHAL L EN GES BEIN G FACED BY L OGIS TICS IN DUSTRY ..............................................4

4 .0 OPERATION AL CHALL EN GES BEIN G FACED BY LO GISTICS IN DUSTRY .........................................4

5 .0 ROL E OF L EAN SIX SIGMA TO OVERCOME THESE CHALL EN GES .................................................5

5 .1 STRATEGIC BEN EFITS ...........................................................................................................6

5 .2 OPERATION AL BEN EFITS......................................................................................................7

6 .0 SAMPL E ORGAN IZATION S IMPL EMEN TIN G SIX SIGMA IN THE FRIEGHT FO RWARDIN G
IN DUSTRY ..............................................................................................................................8

7 .0 CASE STUDIES OF L EAN SIX SIGMA IMPL EMEN TA TION IN L OGISTICS IN DUSTRY ........................9

7 .1 CATERPIL LAR ......................................................................................................................9

7 .2 L EADIN G GL OBAL CON SUMER PRODUCTS MAN UFAC TURER .................................................9

7 .3 DEFEN CE LOGISTICS FO R UN ITED STATES DEFEN CE FORCES................................................1 0

7 .4 L OGISTICS ARM OF SAUDI ARAMCO IN KIN GDOM OF SAUDI ARABIA..................................1 0

7 .5 L ARGE PACKAGIN G FIRMS IN UN ITED STATES ....................................................................1 1

7 .6 ON E OF THE LARGEST A IRL IN E PARTS MAN UFAC TURER IN UN ITED STATES ........................1 1

7 .7 SIX SIGMA IMPL EMEN TA TION IN PRIMER PACKA GIN G .......................................................1 2

7 .8 DEPARTMEN T OF DEFEN S E, UN ITED STATES OF AMERICA ..................................................1 2

8 .0 WHAT IS L EAN ? .....................................................................................................................1 3

9 .0 WHAT IS SIX SIGMA? .............................................................................................................1 5

1 0 .0 CON CL USION ........................................................................................................................1 6

1 1 .0 WORKS CITED .......................................................................................................................1 6

1 2 .0 ABOUT L ASSIB.......................................................................................................................1 7

1 3 .0 ABOUT L ASSIB RESEARCH REPORTS .......................................................................................1 7

1 4 .0 CON TRIBUTORS TO THE RESEARCH REPORT ...........................................................................1 8

1 5 .0 HOW YOU CAN L EVERAGE AN D SUPPORT L ASSIB S OCIETY .....................................................1 8

LASSIB Society | Industry Research on Lean and Six Sigma Implementation in Logistics Industry
Page |2

1.0 ABSTRACT

The purpose behind creating this research report is to showcase the Return on Investments
(ROI) and benefits of using Lean Six Sigma techniques in Logistics Industries.

The challenges currently being faced in this industry can be largely broken into two
categories –

Strategic Challenges
Operational Challenges

Organizations need to focus initiatives at both these levels in order to sustain and grow. This
report looks at tools and techniques of Lean and Six Sigma, and how these can help
organizations address these requirements. The report includes overview of both Lean and
Six Sigma coupled with case studies on how these techniques have helped Logistics
companies manage and grow their business.

The report draws in experience of Logistics experts, primary as well as secondary research
sources. Please refer to the list of references at the end of the report for a complete list of
sources used to build this report.

2.0 PRESENT DAY CHALLENG ES FACED BY LOGISTICS INDUSTRY

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3.0 STRATEGIC CHALLENGES BEING FACED BY LOGISTICS INDUSTRY

4.0 OPERATIONAL CHALLENG ES BEING FACED BY LOGISTICS INDUSTRY

Page |4

5.0 ROLE OF LEAN SIX SIGMA TO OVERCOME T HESE CHAL LENGES

Page |5

5.1 STRATEGIC BENEFITS

Page |6

5.2 OPERATIONAL BENEFITS

Page |7

6.0 SAMPLE ORGANIZATIONS IMPLEMENTING SIX SIGMA IN THE FRIEGHT
FORWARDING INDUSTRY

NOTE: All logos are trademarks of respective companies

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7.0 CASE STUDIES OF LEAN SIX SIGMA IMPLEMENTATION IN LOGISTICS INDUSTRY

7.1 CATERPILLAR

7.2 LEADING GLOBAL CONSUMER PRODUCTS MANUFAC TURER

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7.3 DEFENCE LOGISTICS FO R UNITED STATES DEFENCE FORCES

7.4 LOGISTICS ARM OF SAUDI ARAMCO IN KINGDOM OF SAUDI ARABIA

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7.5 LARGE PACKAGING FIRMS IN UNITED STATES

7.6 ONE OF THE LARGEST AIRLINE PARTS MANUFACTURER IN UNITED STATES

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7.7 SIX SIGMA IMPLEMENTA TION IN PRIMER PACKAGING

7.8 DEPARTMENT OF DEFENS E, UNITED STATES OF A MERICA

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8.0 WHAT IS LEAN?

Lean is a philosophy and a set of management techniques focused on continuous
“eliminating waste” so that every process, task or work action is made “value adding” (the
real output customer pays for!!) as viewed from customer perspective. Lean “waste
elimination” targets the “Eight Wastes” namely:

• Overproduction – Making more than what is needed by customer / market demand

• Over-processing - Doing more to a
product / service (but not perceived
as value by customer or business)

• Waiting – For material, information,
people, equipment, procedures,
approvals and more

• Transportation – Movement of
products / items during or after
production

• Defects – Errors, mistakes, non-
complying products, services,
documents, transactions

• Rework and Scrap – Products, transactions or outputs not meeting specifications and
have to be fixed, redone, rectified, marked down or scrapped / unusable

• Motion – Mainly people, document movement, searching etc.

• Inventory – Buffer stocks or resources (Raw, Work in process, Finished Goods, Bench
staff etc.,)

• Unused Creativity – People knowledge and skills that are not utilized by the company

Wastes make the organization slow, inefficient and uncompetitive. Lean methods help to
remove / reduce waste and contributes to driving “business agility” (velocity) through
smooth work flow across the organization resulting in rapid fulfillment of customer needs in
an optimum manner. (ExampleCG)

Lean tools and techniques are designed to eliminate waste, and every organization is
subject to generating waste.

Waste in the supply chain
Waste in the technical specifications
Waste in the staff support functions

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Waste in the office processing
Waste in the manufacturing processes

Waste equates to dollars lost, opportunities lost, and loss of human motivation. Each of
these three criteria can have a positive and / or negative impact on the organization's
bottom line. And the bottom line can be the difference between profit and loss to an
organization, or the difference between just barely making a marginal profit and becoming a
“cash cow” enterprise.

Waste equates to dollars lost
Every organization has an intrinsic proclivity to generate waste in the way they run their
business. Waste is the difference between the way things are now and the way things could
be if everything were perfect - no errors, troubles, problems or complexities.

The Lean Enterprise process can be simplified by first, “find the waste;” secondly, to “get rid
of the waste;” and thirdly, “prevent its return-forever." The Lean process looks everywhere
for waste and reviews every activity to evaluate whether it adds value from the external
customer’s viewpoint.

Waste equates to opportunities lost
Implementing lean tools and techniques will enable your organization, no matter how large
or small, to meet your customers’ demand for a quality product or service, at the time they
need it, and for a price that is competitive.

A lean system also creates a business and manufacturing process that is agile and efficient,
and that will help your company manage its total costs and provide a fair ROI.

Waste equates to loss of human motivation
For cost management to be successful, everyone in your organization must contribute to
the effort. They must feel a part of the improvement process, and be empowered to commit
time and intellectual resources to the effort.

And because lean systems are customer focused and driven, a lean enterprise’s products
and services are created and delivered in the right amounts, to the right location, at the
right time, and in the right condition.

Did you know that in American offices, an average of 6 weeks per year or 13% of a workday
are wasted simply by searching for items? Taking a workday of 7 hours per day and 232
working days a year, would result in wastage of 211 hours per person per year. Ultimately,
assuming an average hourly rate of $60 per hour per person would result in a total of
$12,600 per year in wasted time per person!

These figures are immense and show that many companies can not only increase their
productivity by optimizing their business processes but often also have a high potential of
improving performance in their sites and offices.

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Most people excuse their messy sites and offices by saying they don’t have time to clean.
But dealing with the consequences of a chaotic workspace takes far more time than simply
cleaning. If a clean office increases your productivity by only 20%, that can convert into
approximately $40,000 to $50,000 in value over the next 10 years. A clean site and office
also pays off in reduced stress and anguish, not to forget about improved safety.

9.0 WHAT IS SIX SIGMA?

1995: Jack 2000: GE Saves
1986: Motorola
Welch Initiates ~>$2 Billion
Starts Six Sigma Six Sigma in GE Annually
Initiative

1986: Motorola 1998: Allied
Saves ~$16 Signal Starts
Billion Saveing ~$1.2
Cumulatively Billion per Year

Six Sigma is a business management strategy, originally developed by Motorola in 1986. Six
Sigma became well known after Jack Welch made it a central focus of his business strategy
at General Electric in 1995, and today it is widely used in many sectors of industry.

Six Sigma seeks to help prioritize and define business strategies that help achieve:
Sustained Competitive Advantage
Improved Cash Flows
Improved Profitability
Improve Revenue Growth
Growth in Market Share

Six Sigma also helps improve the quality of Business Process outputs by identifying and
removing the causes of defects (errors) and minimizing variability in
manufacturing and business processes.

It uses a set of Business Management methods, and creates a special infrastructure of
people within the organization ("Black Belts", "Green Belts", etc.) who are experts in these
methods. Each Six Sigma project carried out within an organization follows a defined
sequence of steps and has quantified financial targets (e.g. cost reduction and / or profit
increase).

In the late-1980's following the success of the initiative, Motorola extended the Six Sigma
methods to its critical business processes, and significantly Six Sigma became a formalised

Page | 15

in-house 'branded' name for a Business Improvement Methodology, ie., beyond purely
'defect reduction', in Motorola Inc.

In a little over ten years, Six Sigma quickly became not only a hugely popular methodology
used by many corporations for quality and process improvement. Six Sigma also became the
subject of many and various training and consultancy products and services around which
developed very many Six Sigma support organizations.

The tools, techniques and framework of Six Sigma have helped organizations like GE,
Honeywell, Allied Signal save more than $2 Billion dollars annually. In addition to cost
reduction, organizations have used Six Sigma to define their strategy, identify and meet
customer requirements and overall achieve Organization excellence.

10.0 CONCLUSION

Lean Six Sigma has been at the forefront of the quality movement in recent years. On the
way to get more and more importance, Lean Six Sigma has conquered many areas by
improving the performance of several processes. Lean Six Sigma thinking gives the
potential to refine current approaches to Logistics improvement. In addition to elimination
of waste, it offers benefits by delivering reduced variation. However, in order for this
approach to be successful, it needs strong linkages to strategy, a clear collaborative
framework and a combination of tools for addressing the twin goals of waste and variation
reduction.

The benefits for a company by application of Lean Six Sigma can be manifold. These
benefits, for example, can be increase in customer satisfaction, increase in revenues,
reduction in cycle times and higher flexibility to capitalize on present-day market
demands.

11.0 WORKS CITED

By Frank J. Esposto. (n.d.). Less Overfill Can Mean Mo re Proofit. USC Consulting Group.

Department Of Defense. (2011). Lean Six Sigma Project - Defense Logistics Agency/Hon eywell. United States:
Department Of Defense.

Department of Defense. (2011). Lean Six Sigma Project - One-Pass Pricing for Sole-Source Spare Pa rts . United
States: Department of Defense.

ExampleCG. (n.d.). Lean Six Sigma an Overview. Lean Six Sigma an Overview, 5.

Freight Transport Association in association with PwC. (2011). The Logistics Repo rt 2011. United Kingdom:
Freight Transport Association in association with PwC.

Freight Transport Association in association with PwC. (2011). The Logistics Repo rt 2011. United Kingdom:
Freight Transport Association in association with PwC.

James D. Tarr. (n.d.). Seven ways to reduce your inventory. Seven Ways To Reduce Your Invento ry, pp. 1-2.

Page | 16

John Gillett, Ross Fink, Nick Bevington. (2010). How Caterpilla r Uses Six Sigma to execute strategy. United
States: Caterpillar.

kjn. (lkj). j. ikj.

Menlo. (2008-2012). About Menlo: Lean Logistics. About Menlo: Lean Logistics .

Mohammed Al-Zain. (2007). Transforming Saudi Aramco Supply Chain. Kingdom of Saudi Arabia: Saudi
Aramco.

Prima Ditahardiyani, Ratnayani, M. Angwar. (2008). THE QUALITY IMPROVEMENT OF PRIMER PACKAGING
PROCESS. Indonesian Institute of Sciences.

Ranawat, M. (2007). Six Sigma in Logistics. Munich: GRIN Publishing GmbH.

Steven Bonacorsi. (n.d.). Six Sigma in Action: Shipping Cost Reduction . United States: GE Capital.

Vikram Dahiya. (2012). Shipping Logistics. United States.

12.0 ABOUT LASSIB

LASSIB Society is a not-for-profit organization pioneering and spreading the knowledge of Organizational
Excellence to the worldwide community. Based on the principles on Gandhian Engineering, we deliver cutting
edge industry research and enhanced value. LASSIB's vision is to create and provide the world 's most useful
Organizational Excellence resource centre and certification programs, available for the users at the lowest
cost.

LASSIB Society organizes multiple events both through physical locations and virtual mediums to promote its
vision.

13.0 ABOUT LASSIB RESEARCH REPORTS

In conjunction with the Knowledge Base LASSIB Society publishes , LASSIB Society also releases a host of
research reports through primary and secondary research. These research reports get wide audience across
the industry and are sought after by International Journals as well.

Some of the research reports published by LASSIB Society around the world include:

Framework for Implementation of Lean Tools in Indian MSME Sector
Lean Six Sigma for Graduates and Post Graduates
Return on Investment after Implementation of 5S

These Research Reports are a valuable resource for the industry at large, and serve to provide key insights that
can be used by industry leaders to shape the strategy for their organizations.

Please refer to http://www.lassib.org/ for details of all events of LASSIB Society.

Page | 17

14.0 CONTRIBUTORS TO THE RESEARC H REPOR T

Role Full Name Designation Organization
Author Mr. Varun Khare Coordinator LASSIB Society
Co - Author Mr. Vinay Kumar Maurya Intern, M. Tech in Industrial Indian School of Mines
Engineering and Management
Co - Author Ms. Shilpa Roy Kota Secretary LASSIB Society
Reviewer Mr. Pavan Kota Executive President LASSIB Society

15.0 HOW YOU CAN LEVERAGE AND SUPPORT LASSIB SOCIETY

Although LASSIB is a not for profit organization, it does not believe in raising funds through charitable means,
without providing direct value to the contributor. There are many different ways in which organizations,
institutions, governments and individuals across the globe are working with LASSIB to deliver value to
themselves and their customers. LASSIB is proud to be associated with all of them in developing and delivering
cutting edge solutions that have not only delivered quantified business value to them but also added thought
leadership to the industry at large. Below are some ways in which you can leverage and support LASSIB.

Leverage LASSIB for Benefits to you Support to LASSIB
your initiatives
Become an Access complete knowledge base including Funds collected through
Individual or training materials, best practices, case studies, membership fees are used to
Organization videos and webinars from LASSIB Society maintain and grow LASSIB
Member of LASSIB. Network, learn and contribute to the fastest knowledge base.
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Leverage Training Get trained from the leading experts from the Training and certification fees
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Organization ensure these key components are
Acquire not only knowledge but skills to
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Attain internationally respected certifications The fees charged helps cover the
thereby adding value to your organization and cost incurred by LASSIB Society for
yourself hiring trainers and issuing
Join the growing panel of Accredited Training certificates.
Providers (ATP) and Accredited Test Centers
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Consult with LASSIB Solve organization problems, create strategy, Consulting fees derived by LASSIB
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business and techniques of Lean and Six Sigma research, host events and provide
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Participate in LASSIB Network, brainstorm, and learn from industry Sponsorship costs and delegate
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Participate and Understand the trends in the industry By participating in building these
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