Industry: Procurement and Six Sigma
How can you not know about Six Sigma? These days, the smallest businesses and largest corporations are using Six Sigma to improve processes and maximize quality. It may have only been around for a few decades, but it has left its mark on the business world. In recent years, however, it has developed a more widespread reputation. Six Sigma is an essential methodology to know for those working in manufacturing, as well as any number of other industries. Six Sigma is also a useful asset for procurement managers, enabling them to improve the quality and efficiency of their key suppliers. But how do procurement managers do this? And does is Six Sigma work in a purchasing and supply management environment? Today, we explore all these questions and more.
What is Six Sigma and How Does It Work?
Did you know that the term Six Sigma comes from the statistical measure for six standard deviations? Additionally, the Sigma portion of the term comes from the Greek letter sigma, which, in statistics, represents a single standard deviation. We all know how rigorous Six Sigma is as a process improvement discipline. It drives process improvements, increases customer satisfaction rates as well as profitability, and aims to achieve a gold standard of quality.
Six Sigma practitioners measure quality using a ratio of defects per million opportunities. Each level of quality has its own corresponding Sigma level, such as Four Sigma, Five Sigma, Six Sigma, and so on. For Six Sigma, the goal of all process improvement reduced variation, and project work is to minimize defects. The aim is for defects to occur only 3.4 times out of every million potential opportunities.
One of the most important and effective Six Sigma tools is DMAIC. This acronym stands for a series of process improvement actions that define a process, and measure its current performance. Additionally, DMAIC also analyzes the causes of defects, and solutions to improve it. Finally, it develops means of control with which to sustain improvements. The DMAIC stages, plus the additional tools mentioned, all help us understand how processes work. This enables us to evaluate the quantified effects of processes with statistical measurements called metrics.
How Does Six Sigma Relate to Purchasing and Procurement?
Six Sigma is highly relevant to procurement in the business world. Purchasers can apply Six Sigma ideas to their work in several different ways. Firstly, you may use a Six Sigma approach to working alongside a supplier. Doing so will allow you to make justified decisions by which to improve the quality of parts your supplier sends you.
Using a Six Sigma approach will reduce the number of invoice discrepancies with which you have to deal. You can also minimize variation and defect, and increase efficiency while ensuring greater customer satisfaction rates for future product batches. Your company will likely have a lot to deal with on a daily basis, which is why Six Sigma is a great tool for purchasers. You may even use Six Sigma to improve just about any purchasing process. Process inefficiencies should not be allowed to fester as they will only lose your organization revenue.
Purchasing Strategies Compatible with Six Sigma
Businesses often employ purchasing strategies to promote their procurement best practices. These best practices may include cost reductions, maximizing quality, and prompt delivery of quality products. Purchasers and managers working in the procurement sector utilize several different approaches to their work. Below are several such approaches used by procurement managers, all of which, one way or another, are compatible with Six Sigma ideas.
Total Quality Methods
Total Quality Methods (TQM) requires your suppliers to provide an ever-improving quality service. It’s also important that they avoid errors completely. You should encourage your supplier to maintain purchasing best practices. They can do so using various Six Sigma tools, such as DMAIC, DMADOV, and Root Cause Analysis. You should do the same. That way, your products will be free from defect, as the parts you receive will also be quality parts.
Remember, the more you practice you practice TQM, the greater your products or services will become. Similarly, by operating high-level Total Quality Methods in your supply chain, you can actively avoid defective parts or products. This will help you filter out the bad and receive only the good. Furthermore, by alerting your suppliers to these discrepancies as you find them, you can also ensure the same issues do not keep popping up.
Optimizing Your Suppliers
Six Sigma aim to improve efficiency through eliminating variation and maximizing quality. In the procurement sector, your company will select an optimum range of suppliers. These vendors will provide you with the best prices and terms. This benefits you as your company can then produce products at low cost and high quality. Just as in Six Sigma, you are taking an existing entity, and optimizing it through targeted improvements.
Like any process, this usually means that you should eliminate any insufficient or none-value-adding processes. In this case, suppliers who are less able than others tend to compromise the integrity of your business operations. As such, you should discard those vendors who cannot provide quality parts or services at optimum terms and prices. This is a common purchasing practice in the procurement sector, just as in Six Sigma, one removes process stages without value.
Many companies tend to believe they maintain a symbiotic relationship with their suppliers. In these cases, both companies should benefit from the other, you and your suppliers working together to ensure each other’s success. As such, you may spend a great deal of time developing processes that assist your suppliers. In some cases, certain companies become dependent on single suppliers for specific products.
Certain suppliers may also become dependent on single companies to whom they deliver these products. If your supplier cannot operate according to required standards, you the procurement manager can support your vendors. You can do this by helping to improve the efficiency and quality of their services through Six Sigma-based process improvements. By supporting suppliers and implementing process changes to improve their procurement cycle, you will both benefit from the outcome.
Green Purchasing and Global Sourcing
This is a common and highly effective purchasing strategy that has risen to prominence in recent years. Governments and local councils often employ green purchasing to champion the importance of recycling. These days, purchasing products which have a negative impact on the environment is a poor business practice. Like all businesses, yours has a responsibility to purchase sustainable, environmentally-friendly products and parts. This means the sustained success of good, Green suppliers, ensuring they deliver quality products so that you can do the same. You can even use Green Six Sigma techniques to help you in your environmental endeavors.
Similarly, global sourcing is also important, as multinational corporations tend to view the world a single large market. These companies will source from multiple different vendors, regardless of their country of origin. Just the same as with any vendor, without quality control best practices in place, this strategy can lead to poor products.
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