Rather than making educated guesses shipping and supply chain organizations want to make informed decisions. Six Sigma in logistics is an exacting method based on data that analyzes defects and variations. It eliminates defects and variations by treating every action as a process. The aim is almost perfect performance with only 3.4 defects per million opportunities.
When logistics companies combine this with Lean methods and technology, they transform from simple cargo movers into highly reliable shipping partners. With the math on their side providers can guarantee their performance.
Uncertainty is the enemy
The uncertainty of shipping and delivery affects all organizations that rely on them. With potential delivery times swinging wildly between two and ten days no organization can plan on having adequate stock levels. By minimizing the standard deviation \sigma of delivery times, businesses can achieve perfect reliability.
Operating at industry averages of 3 Sigma means expecting roughly 66,807 defects per million opportunities. Compare that to an astonishingly low 3.4 defects per million with 6 Sigma performance.
The DMAIC methodology
Experienced freight forwarders utilize a five step method known as the DMAIC framework to diagnose difficult shipping challenges.
- Define: Identify a problem and goal.
- Measure: Record the current process to establish a baseline measurement.
- Analyze: Identify the root causes of defects in the process.
- Improve: Implement improvements to address issues within the process steps.
- Control: Implement measures to maintain the new standard while preventing a return to previous levels of poor performance.
For example international shipping companies utilize this exact method to reduce customs clearance processing times by days.
Lean Six Sigma and the eight wastes
Where Six Sigma removes defects and variations in processes Lean focuses on eliminating waste from operations. Together they form the powerful combination known as Lean Six Sigma. Lean Six Sigma targets the Eight Wastes which are easy to remember using the word DOWNTIME.
- Defects
- Overproduction
- Waiting
- Not utilizing talent
- Transportation
- Inventory
- Motion
- Extra Processing
By utilizing tools like Value Stream Mapping and Root Cause Analysis, logistics teams can eliminate all waste from processes. The largest and most influential electronic commerce platforms utilize similar mistake proofing systems in their warehouses to practically eliminate picking errors.
The cost of poor quality
The quality of processes is a huge source of cost savings. The Six Sigma method identifies hidden sources of poor quality. These usually relate to higher inventory levels and lost customer loyalty and wasted managerial time fixing sudden issues. Improvement projects designed to address the cost of poor quality, yield return on investment values that are often breathtakingly high. These returns typically reach ten to one.
Proving capability with math
The Six Sigma method utilizes statistics to prove that its processes work. Process Capability Indices prove that processes meet customer requirements. The main equation used to calculate the process capability index is this.
C_p = \frac{USL – LSL}{6\sigma}
In this formula USL is the Upper Specification Limit and LSL is the Lower Specification Limit.
When looking at the implications of different values experts find two main things.
- Values less than 1 always indicate defective products.
- Values greater than 1.33 suggest a very capable process that will meet all customer requirements.
Logistics 4.0 and future prospects
Real time data is the heart of the future of Six Sigma logistics. That means the industry has entered Logistics 4.0. AI smart tools empower companies to eliminate mistakes before they happen. An AI routing engine can automatically redirect delivery vehicles long before they reach congested ports. A Digital Twin can simulate changes to warehouse designs without risking anything precious in the actual physical warehouse.
Building a perfect supply chain
By utilizing the DMAIC method and identifying the Cost of Poor Quality, every logistics company can strive to eliminate waste from its operations. Effective implementation requires training all levels of employees in the method and its true value. This ensures that efficiency gains flow right into the growth of the business. When logistics companies measure their shipping operations and track performance metrics like First Pass Yield, they build a shipping operation their clients can trust.
Are you looking for a logistics provider that values perfect execution? Three Lines Shipping can help. Call us or request a quote today. We look forward to building the best supply chain for your business.