Over the past 10 years a great number of businesses ranging from SME's to Blue Chips have been rolling out or updating their Enterprise Resource Planning (ERP), Distribution Requirements Planning (DRP) and Advanced Supply Chain Planning solutions (APS). There are a variety of reasons for this intense activity, ranging from the need to consolidate IT following an acquisition, through to the desire to improve the IT capability in order to implement a particular supply chain strategy. When the dust settles after the implementation many businesses, having spent a lot of time and money, are left with a very inflexible IT solution whose core planning principles are routed in the thinking of the late 60's, and not compatible with the agile, flexible, supply chain processes required to be competitive today. It seems that our understanding of what is required to build a competitive supply chain has evolved considerably over the past 40 years, however the range of IT solutions available to support our ambitions has not.
This white paper examines the key elements required to build a successful and low cost supply chain, how the majority of IT offerings fail to support these key principles and how a new approach to planning can enable the benefits of Lean Manufacturing without throwing away your IT investment.
The problem with Forecasts
Fundamentally, most ERP/DRP systems provide a very robust operational platform, on which the majority of a business processes are supported, from Finance to HR. Where they are weak however, is in the provision of planning tools. Most come equipped with a basic MRP (Material Requirements Planning) engine, and the more advanced ones may supplement this with predictive safety stock planning or re-order point logic, usually under the guise of an Advanced Planning Systems (APS) module. Or to put it another way, your multi-million dollar IT super-car has a tractor engine lurking under the bonnet. The fundamental flaw with all of these MRP variants is that the starting point for all calculations is a Forecast.
Most planners know that the best Forecasts are 70% accurate at best. APS systems may buy a few percentage points of improvement in exchange for a hugely disproportionate monetary investment, but have categorically failed to deliver the advertised benefits. The real problem is that MRP then compounds the situation by using this imperfect forecast to precisely raise planned orders and set predictive levels of safety stock. What this does is push wildly unplanned and unpredictable levels of inventory, effort and cost into our supply chain.
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To start with, you need to know that Six Sigma basically signifies near-perfect business processes that do not generate more than 3.4 defects per million defect-free units of a manufactured product or delivered service.
When such near-perfect business processes are achieved, it automatically results in substantial cost savings and improved efficiencies. This is the reason why Six Sigma has now become the preferred choice of businesses worldwide.
The Tools and Techniques Used
Six Sigma relies heavily on factual data and information for taking critical process improvement decisions. This automatically eliminates the probability of errors and inaccuracies, thereby paving the way for successful process improvements.
For collecting, categorizing, processing and analyzing data and information in the most accurate and efficient manner, Six Sigma makes use of a wide range of statistical tools and techniques that include everything from Fishbone Diagrams to Ishikawa Diagrams, Design of experiments (DOE), Failure Mode and Effects Analysis (FMEA), Process Flow Diagrams and Gage Repeatability and Reproducibility (R&R) studies.
Other tools and techniques that are commonly utilized include Control Charts, Defect Measurement Matrices, Pareto Diagram, Process Mapping, Root-Cause Analysis, and Statistical Process Control.
Concepts and Methodologies
The above tools and techniques just aid the Six Sigma implementations - and as such, they cannot be classified as complete business solutions. What they do stand for are the nuts and bolts of commonly used Six Sigma concepts and methodologies such as DMAIC and DMADV.
The first thing you need to know about two of these most commonly used Six Sigma methodologies is that DMAIC is short for Define, Measure, Analyze, Improve and Control whereas DMAIC is short for Define, Measure, Analyze, Design and Verify. They may appear to be the same, but you will be surprised to know that they are, in fact, a world apart.
The most basic difference is that whereas DMAIC is used exclusively for making improvements in existing business processes, DMADV is used exclusively for designing and developing completely new products or services from scratch.
The other prominent difference is that whereas DMAIC does not have variations, DMADV has quite a lot of them, such as DMADOV (define, measure, analyze, design, optimize, verify), DCCDI (Define, Customer Concept, Design and Implement), IDOV (Identify, Design, Optimize and Validate), and DMEDI (design, measure, explore, develop, and implement).
All these tools, techniques, concepts and methodologies have their own specific use and importance - but when it comes to ensuring the success of Six Sigma implementation projects, it becomes necessary for businesses to make the right choice from all available options.
Businesses that fail to do so will not be able to conclude their Six Sigma implementations; and as such, they may be deprived of the wide ranging benefits associated with successful Six Sigma implementations.
Both Stuart & Tony Jacowski are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Stuart has sinced written about articles on various topics from computers and the internet, Web Development and College Education. Mark Robinson has 20 years experience working in the field of Supply Chain Management. Past employers include Lucas Engineering and Systems, Computer Sciences Corporation and World Class International. Mark co-wrote the winning submission for the 2002 Sup. Stuart's top article generates over 1600 views. to your Favourites.
Tony Jacowski has sinced written about articles on various topics from University, Six Sigma and Information Technology. Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution's Six Sigma Online offers online and certification classes for six sigma pro. Tony Jacowski's top article generates over 90500 views. to your Favourites.