Saturday, September 6, 2014

Using Lean Six Sigma Methodology to Solve Problems of Retailers

Retail businesses today face difficulties in developing and implementing a process that improves the product quality since there are so many vendors, manufacturers and international companies involved. They need to promulgate a set of standards that every company in the supply chain needs to follow by setting acceptable standards that must be met whether the company is a local business or a foreign company. The industry is consumer based which requires a high customer satisfaction level. The process that can be used to solve this problem is Lean Six Sigma.
Lean Six Sigma (LSS) is a continuous improvement method that combines Lean Thinking and Six Sigma. This method is not only applicable to the manufacturing industry but also to other types of industries like pharmaceutical industry, healthcare industry etc because the flexibility of LSS and DMAIC (Define, Measure, Analyze, Improve, Control) will help other companies including retailers to adjust to specific industry needs, enable them to better understand customer needs and increase profits.
Lean provides a means for reducing the lead times in any process whereas the Six Sigma methodology provides the retailers a means of reducing variation by establishing a foundation for data driven management. These tools and methods give the executives a way to establish and maintain strategy to execution links in their pursuit of becoming high performance businesses.

Benefits of LSS to retailers:
·         Enables retailers to better define the problem. Traditionally retailers list numerous problems ultimately loosing focus on the measures that are not performing at the desired level. LSS also enables the retailers to get to the process behind the problem by helping them to express what output measures will be different and help quantify the improvement in the output measure.
·         Helps retailers to measure the process. Retail companies generally overlook the process aspects and thus miss out on the non-value added aspects of the process. This will help them to highlight the waste in the process
·         Drives the retailers to use data analysis to replace experiential or reactionary methods. This helps them to identify the critical processes contribute most to the output. Addressing the critical factors and rectifying them will enable change performance that can be sustained.
·         Ensures change will be sustainable through a control plan which includes identifying the process, identifying the critical process factors that should be monitored, methods for monitoring, standard state for these factors and response plan when they are not performing to the standards.
This will allow corrections to be made earlier in the process before the product reaches the customer and saves the retailer from incurring an external failure cost which may result in loss of reputation and customer goodwill. The use of LSS allows a simultaneous top-down, middle-out and bottom-up approach to process improvement, creating a collaboration of activities that will satisfy customers, stakeholders and associates

However in light of today’s competitive markets and prospect of dull sales, leaders are looking for alternatives routes to growth. Unlike in the 1990’s when executives embraced six sigma with missionary zeal, today the executives are looking for a fast way to save money. Six Sigma requires organizational culture change and has its disadvantages. The feverous focus on measurements can kill innovation and the investments can take months or years to pay off.
 Therefor I feel that retailers and companies today are looking at techniques which will provide a quick return on investment.
However large retailers like Target claimed that these Six Sigma Programs have led to over $100 million in savings over the last 6 years whereas Best Buy implanted a Lean Six Sigma program to projects like streamlining appliance installations which saved them about $20 million. They have helped the companies to boost profits without putting more people on the payroll especially in the time of recovery from recession. With more and more retailers turning to Lean Six Sigma and other methodologies will the world face a jobless recovery?


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