Lean Six Sigma Logistics

There seem to be as many definitions of “Logistics” as there are logisticians. And this is not a bad thing!  Why? Because logistics is so far reaching, so integrated into our businesses that it is hard for one definition ever to meet the challenge of summing up what we do in a few short sentences.

Although logistics does involve internal operations and stretches to up- and downstream trading partners in the supply chain, it is fair to say that any definition of logistics will need to involve the management of inventory, whether it is in the form of hard goods (materials, people) or soft goods (information).  If there is no inventory to move around, there is no need for logistics.

Lean defined

Lean is about the elimination of waste and the increase of speed and flow.  Although this is a high-level oversimplification, the ultimate objective of Lean is to eliminate waste from all processes.  According to Lean theory, at the top of the list of known wastes is excess inventory.  More simply, we need to eliminate any inventory that is not required to support operations and the immediate need of the customer

Six Sigma defined

Six Sigma is a management methodology that attempts to understand and eliminate the negative effects of variation in our processes.  At the heart of Six Sigma is the principle of variation reduction: if we can understand and reduce variation in our processes, then we can implement improvement initiatives that will center the process and ensure accuracy and reliability of the process around customer expectations. For example, an average order-to-delivery cycle time of five days may reflect a variation between two and eight days.  It is this variation that leads to customer non-confidence and the resultant inventory buildup and/or loss of sales.

Lean Six Sigma and the Logistician

The concept of variance reduction is paramount to the logistician. As stated above, logistics is about managing inventory. And managing inventory is about managing variation. If we look at the basic types of inventory, we will plainly see why variation plays such a vital role in how we manage inventories at all levels.

For example, safety and buffer stock are inventories we need to hedge against unknowns that really represent variation. That is, we maintain safety stocks because of variation in supplier quality, transportation reliability, manufacturing process capability, and customer demand patterns. In other words, if we can understand and control variation in our processes from supplier to customer, then we will be able to reduce dramatically our reliance on safety or buffer stocks.

Lean Six Sigma Logistics

Now that we have explored the three elements of Lean Six Sigma Logistics, we need to put them together to appreciate fully how they dovetail and complement each other.  Summarizing from the above we recall that:

1. Logistics is about managing inventory
2. Lean is about speed, flow, and the elimination of waste
3. Six Sigma is about understanding and reducing variation.

Therefore, Lean Six Sigma Logistics can be defined as:

The elimination of corporate waste through disciplined efforts to understand and reduce variation, while increasing speed and flow in the supply chain.