How lean is your supply chain?
28 January 2016
By applying Six Sigma techniques and lean processes, we can help retail businesses identify areas of waste and improve supply chain efficiencies, says Jim Hardisty MD of Goplasticpallets.com.
Following a year of continued growth in sales, our plastic pallet business has gone from strength to strength allowing us to double our sales team in the last six months. Our success in part is due to the intensive sales training and individual coaching we offer our staff – both office and field based teams.
One particular area we’ve been investing in more recently is using a Six Sigma approach to identify potential wastes in customers’ supply chains to help them save time and eliminate unnecessary expenditure.
Where most large businesses hire a team of Six Sigma trained personnel to conduct a full supply chain analysis, our Six Sigma trained sales staff offer free consultations to businesses nationwide.
To demonstrate how your company can benefit from applying Six Sigma methods, firstly I’ll explain a bit more about what Six Sigma means and then I’ll share a few examples where we’ve helped retail businesses make huge time and cost savings.
What is Six Sigma?
The term ‘Six Sigma’ was introduced in 1986 by engineer Bill Smith whilst working at Motorola, as a set of techniques and tools for process improvement. Today, these techniques are used by many industrial sectors as a means to remove any defects or wastes in their products and services and improve the quality of business processes from manufacturing to transactional.
Each Six Sigma project carried out within an organisation follows a defined sequence of steps and has specific value targets, for example: reduce labour, improve lead times, and increase profits.
When we’re approached by a new business looking to improve their business processes, in our first consultation we discuss what Six Sigma refers to as the ‘8 Wastes of Lean’:
• Transport – moving people, products and information
• Inventory – storing parts and documentation ahead of requirements
• Motion – bending, turning, reaching and lifting
• Waiting – for parts, instructions and equipment
• Over production – making more than immediately required
• Over processing – using tighter tolerances or higher grade materials than necessary
• Defects – damage, scrap and incorrect documentation, and
• Skills – under-utilising capabilities and delegating tasks with inadequate training.
Reportedly, Six Sigma reduced Motorola’s manufacturing costs by just shy of £1bn between 1987 and 1994 and saved the company £10b over the last 11 years.
By using a Six Sigma approach we can utilise skills that most businesses pay significantly for as a consultancy service to identify areas of waste in their supply chain.
Six Sigma successes
Types of waste we commonly identify in retail businesses’ supply chains include the use of throw away packaging e.g. shrink wrap, surplus labour, damaged products, inefficient vehicle fill, and the use of one-trip wooden pallets rather than returnable plastic ones.
In fact, we’ve already helped several large retail businesses improve supply chain efficiencies by switching from one-trip packaging to returnable transit packaging. Here are just two examples.
A leading UK bathroom retailer was using wooden A-frame pallets to transport goods from being picked in the warehouse through to delivery. These pallets were used up to five times before being recycled, but required frequent repairs by two personnel to keep them serviceable. During our initial consultation with the client and their transport company, we identified that they were using only 45% vehicle space and that the wooden A-frames were costing them over £1m per year.
We recommended replacing their wooden A-frame pallets with plastic pool pallets and our plastic pallet collar to give them the flexibility of packing different sized orders and increase the number of orders per trailer from an average 28 to 52. By implementing this change we saved the company £1m annually for the wooden A-frames, significantly reduced labour costs for pallet repairs and improved vehicle fill as well as their order picking process.
We calculated conservatively without damages that the savings over five years would be in excess of £8m, which included the cost of replacing 10% lost pallets and 10% damaged pallets per annum.
Another client of ours – a manufacturer of bulky furniture – were shipping unpalletised goods from their supplier in China to their UK warehouse in 30 sea containers per day, which required two shifts of 30 personnel to unload and palletise goods to be stored in their 50,000 location racking system.
To demonstrate the savings that the company could make in labour and time, we trialled sending plastic rackable pallets to China where the goods were palletised ready to be shipped and racked in the UK. Although there was the added cost to ship pallets to China and a slight reduction in container fill, introducing plastic pallets allowed the company to cut back to just 5 warehouse operatives – making them a far greater cost saving overall.
Barriers to success
The biggest hurdle when implementing Six Sigma is the fact that change is required. Many retail organisations show reluctance to introducing new processes, particularly in fast moving environments where they require full team support and collaboration. In many business scenarios, however, it’s often a company’s false perceptions that prevent them from instigating change.
We’ve come across businesses that think if you add in a back haul rate to return plastic pallets and boxes for reuse then it can’t possibly save them money; but they don’t appreciate the cost of their current system.
Most Six Sigma projects normally pay back within a 12-18 month period; some ultimately pay back a lot quicker.