Amazon — Leveraging Six Sigma for Business Success

Small businesses and multinational corporations all over the world use Six Sigma to turn their failing processes around. Companies like 3M and General Electric are, in fact, one of the world’s largest and most successful e-commerce companies using Six Sigma to great effect. A household name we’re all familiar with their trademark smile logo also started leveraging Six Sigma for its multitude of business benefits — Amazon

Since its inception as an online bookstore, Amazon has drastically expanded its product range, breaking into the technology market with its range of Kindle e-readers and tablets. They have even implemented innovative practices like same-day delivery, set to reach new heights for efficiency with automated drone delivery. Their steadily growing catalog of Amazon Originals rivals that of online giants like Netflix. But have you ever wondered how Amazon became one of the largest online retailers in the world? Today we will learn — How Amazon does it?

How Amazon Have Incorporated Six Sigma into Their Work?

Six Sigma has been a firm approach in Amazon’s business culture. With around 2000 items ordered every sixty seconds, Amazon can’t afford to let standards slip. As far back as 1999, the company began the Operational Excellence program aimed at improving company processes. Amazon defines Operational Excellence in two ways.

Firstly — to deliver continuous improvement for customer experience. 

Secondly — to drive productivity, margin, efficiency, and asset velocity across the entire corporation.

To make the Six Sigma process gel further, Amazon has adopted several Six Sigma concepts, including recruiting the finest thought leaders from exclusive top schools like MIT and Carnegie-Mellon. Since the methodology is as good as the one who is driving it, it is of utmost necessity the talent hired knows what they are doing.

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Keeping it Lean for Micro-Management

The Lean approach adds a bonus to the Six Sigma perspective. And, Amazon has tied its central focus on streamlining operations into everyday practices. The company devotes more manpower to its fulfillment and customer service centers than its engineering end to keep its level of service high!

Moreover, the transportation (shipping) method for packages (services) is based on the promised delivery date, and each job function is thoughtfully designed to achieve maximum efficiency. Considering this approach allowed Amazon to make the most of the available resources and trim costs. (It’s a smart move to protect a business against premature growth!)

Building Kaizen Blocks for Inventory Management

Since the goal of any business is better results, it’s obvious that the operations should be consistently improving. At Amazon, Kaizen governs the way the company runs. For example, in the warehouse process, more than 35 orders are placed within a second, making it a near-unprecedented service level in the retail space. For such, every distribution center has a manager assigned to ensure continuous improvement as far as workflow is concerned. Even if a company doesn’t have a high volume of orders, they might use a similar methodology to streamline the entire process in any of their department.

The Importance of Data and Metrics

Six Sigma is more than just a methodology for improving an organization’s quality. Most people don’t understand the nuances and complexities of Six Sigma beyond its well-known uses. Those who aren’t quite au fait on the subject may see Six Sigma as a simple improvement strategy. But they often don’t question how it improves businesses or what it needs to function. In truth, data drives Six Sigma’s success.

Without sufficient data, you simply cannot make decisions without data to support and justify them. Six Sigma’s data-driven nature derives from the six standard deviations practitioners use to keep defects in check. Like Six Sigma, data drives everything for Amazon. From the types of purchases, customers make online to how people use their technology. Moreover, Amazon uses various metrics to constantly harvest data that shed light on areas for improvement and opportunities for expansion. For Amazon, data isn’t just a means to improve customer experience. It’s a way of life.

Advance Business Management Practices

Amazon has always been researching, innovating, and implementing bold supply chains strategies. In 2004, Amazon’s annual revenue was just under $7 billion. According to Statista, by 2018, its annual revenue reached almost $233 billion.

Amazon is the fastest company to reach $100 billion in sales revenue, taking only 20 years. From its inception, Amazon has grown approximately 20% per year. It grew from 30% from 2018 to 2019. Currently, it enjoys more than 13% of gross global e-commerce sales.

The major contributor to this rapid business success for Amazon is none other than efficient supply chain management using advanced information technology, extensive warehouse network, multitier inventory management, and excellent transportation management and facilities.

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