Sunday, November 2, 2014

Amazon: A case in utilizing Lean Practices to Overcome Organization Issues

On the list of six sigma companies Amazon remains as one of the top contenders. 

A six-sigma company focuses on the reduction of variation within the organizational structure. This reduction is made by possible by utilizing a set of statistical tools to identify contributing factors to unsatisfactory outcomes and making the necessary changes[1]. I believe Amazon’s success and longevity can be attributed to their use of lean manufacturing.

Amazon has been labeled six-sigma due to its consumer-centric nature and the use of information technology. In an article published in the McKinsey Quarterly (2014), Marc Onetto, senior consultant at, explains that humans are able to perform at a three-sigma level. This means that humans at their most efficient level can perform tasks with 93% accuracy but with the help of machines humans become six-sigma with 100% accuracy[2]. With this understanding Amazon focused on using full autonomation, where machines helped employees with basic, repetitive, and low-value steps in the process. Although this system was predicted to cause 100% accuracy Amazon found that their reliance on technology caused a variety of technical and organizational issues.

The first issue experienced was the loss of engagement of front line workers on the continuous improvement process, as the systems became more technical. Attached to this issue was the problem of miscommunication of tasks. In an attempt to encourage critical thinking managers would leave employees to figure out how to complete the tasks assigned to them. However, this created a slow down in employee productivity (McKinsey 2014). The second issue was the automation of the receiving of packages within the packaging process. Amazon had great success with using a machine to packaging books, which cut down on time spent on the process. However, this packaging automation did not work as well with shoes. Onetto explains that the machine would send shoes flying out of their boxes. The third issue was the productivity of carts (orders). The difficulty was that these carts were unpredictable and stowing a book requires a different effort than stowing a computer screen.

To overcome these issues Amazon adopted the lean approach. The first was creating Kaizen teams. Kaizen is the practice of continuous improvement; the direct translation is good change team[3]. These teams allowed for front line workers and engineers to come together and discover the most optimal solutions. To reduce the opportunity for miscommunication, a standard process for communication was created.

The issue of an automated receiving packaging system was caused by Amazon’s process and by the merchants who sold through their site. To solve the portion of the issue was the fault of the merchants, a merchant Kaizen team created a three strike packing process. The first strike involved the merchant being given guidelines for the appropriate packing process, the second strike the merchant receives a warning, and the third strike Amazon ends its relationship with the merchant. To solve Amazon’s portion of responsibility a workstation Kaizen was formed. Their role was to define products for each stow type and time.

Onetto explained that overall, each Kaizen combined frontline workers, engineers, and a few executives. The problem solving process created by Amazon works by presenting each team with an issue. The selection of a solution is judged based on the results and longevity of the solution.

Obviously, Amazon is a company who is widely successful but they do not intend to stop their success. Onetto explains that their future plans include: Solving the issue of customers as beta testers for a product, and creating a process where 3-D printing can be accessed on demand; this Onetto says is the “ultimate just in time” system. As a consumer of Amazon goods I am excited to see how the company will flourish as a six-sigma organization. However, I question whether Amazon will be able to ensure that their employees will not go back to feeling disengaged from the creative process as the use of technology becomes more pervasive. Is there a way to streamline the process without loosing the human aspects, contributed by employees and consumers, of an organization?

[1] Nave, Dave. How To Compare Six Sigma, Lean and the Theory of Constraints (n.d.): n. pag. Mar. 2002. Web.

[2] Onetto, Marc. "When Toyota Met E-commerce: Lean at Amazon." McKinsey & Company. N.p., Feb. 2014. Web. 2014.

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