Six Sigma is a methodology whose origins can be traced to manufacturing and uses metrics to determine the quality of the processes. What is its objective? To fine-tune processes to perfection. This is done by identifying faults and reducing deviations within the system. Six Sigma has been found to boost the motivation of staff, quality and overall efficiency.

Applying Six Sigma to procurement processes involves the use of analytical tools provided by the methodology, and using these tools to improve human resources for higher productivity. Six Sigma provides techniques that are efficient in discerning errors in the organization’s procurement processes.

Application of Continuous Improvement in Procurement

With Six Sigma’s continuous improvement process, you can tackle any type of procurement processes within your organization. As you begin the process, you need to remember that the first step in Six Sigma’s DMAIC is Define. The first step demands that the targeted process be clearly outlined and that it should be determined whether the process can be completed within a reasonable time frame and produce a significant return on the process invested in it. The following are some of the procurement processes where Six Sigma has been successfully executed:

Reduction of Cycle Time

Six Sigma seeks to reduce waste by using quality metrics to identify errors. Using CTQs as a benchmark, those procedures that are Critical To Quality are given a higher priority. These techniques can be applied to many different processes including invoice approval, contract development, supplier on-boarding, requisition to order, amongst others.

Transaction Quality

Besides determining purchase orders that do not require corrections, other projects to be considered are:

• First-pass invoice match rates
• Requisitions that are correctly coded and classified
• Electronic orders
• Line item visibility spend

While Six Sigma is a methodology and not a standard that is not most ideal to use here, attaining more than a 90% score across these measures is a sure sign of high performance.

Adoption of Technology

Six Sigma may also be used to track the key variables that indicate adoption after implementing a new system. The methodology suggests that both the adoption rates of internal users and vendors be tracked as the part of the best practices that will guarantee an ROI for the technology investments made by the organization. Some examples include:

• Six Sigma can be used to track the percentage of internal users adopting new tools. It is important to note that adoption rates for applications that are tailored specifically for procurement yield higher adoption rates than enterprise-wide applications. In enterprise-wide applications users will often use other methods of completing the transaction as long as these methods are available to them.
• The percentage of vendors with electronic transaction systems. Here the 80-20 rule should be applied. Focus on the 20% of the suppliers responsible for 80% of the spend and prioritize them over the 80% responsible for 20% of the spend.
• The fraction of indirect RfQs that are from e-sourcing. A score of 85% for indirect RfQs is excellent while for direct a good score is about 50% and over.

Compliance

The application of Six Sigma comes from the recognition that every process has a designed output. Therefore Six Sigma can be used to pinpoint those errors that may result in non-compliance. This is important for profitability and as well as reducing the regulatory risks associated with the process. Some areas that could be tracked include:

• Contracts created, purchase orders issued, invoices paid, and suppliers on-boarded, without following the right procedures
• Pinpointing suppliers who are not ideal for the business or those that have been blacklisted in the past
• Identify RFQs that do not meet standards such as competitive bidding or includes a broader list of suppliers
• Identify vendor certificate and contracts that are about to expire, are expired, or in the process of auto renewal

Conclusion

Six Sigma can be of great benefit to an organization looking to enhance its human resources. Staff can be released from processes that contribute to waste and errors, as they focus on core tasks that are of more value to the organization.

As a tool for continuous improvement, Six Sigma encourages a paradigm shift in the way the organization handles and implements procurement processes. A leaner chain is created as the variations that lead to wastage, whether with processes, equipment and human resources, are eliminated. This learner chain yields better results for both internal and external clients.

The post How Does Continuous Improvement Help Procurement? appeared first on 6sigma.

Six Sigma is a set of techniques and tools used for process improvement that was developed by Motorola and promoted by General Electric. These set of tools and techniques have a wide range of applications beyond manufacturing. The application of the Six Sigma methodologies in sourcing and procurement processes can lead to exceptional results in terms of business process improvement.

Six Sigma can be applied to a wide range of procurement projects, in spite of the level of process quality goals that have been set. The application of these set of tools requires that the process in question be clearly defined in order to be addressed within a reasonable period of time. It also requires that the process should produce significant returns to warrant the diversion of organizational resources into the task of process improvement.

The following are some of the instances where Six Sigma has been applied to achieve better procurement processes:

Reduction of Cycle Time

Lengthy procurement cycles can have an adverse impact on the budget. Also, long cycles tend to erode the commitment of the managers to the project. Using reliable data, a clear definition of the process, amongst other techniques, you can cut down procurement cycle time.

Six Sigma can be applied to the most fundamental aspects of your procurement process, be it invoice receipt and approval, drafting contracts, or sourcing process cycle times. Six Sigma seeks to minimize errors and perfect processes, while at the same time eliminating processes that do not adhere to the CTQ (Critical To Quality) benchmark.

Transaction Quality

Besides perfecting processes and identifying those that are not Critical To Quality, other projects that should be considered are:

• First-Pass Invoice Rates: Six Sigma methodologies can enhance the purchase order, invoice and receipt details to minimize data errors.
• Electronic Orders and Deliveries: Six Sigma enhances the process and allows you to make the most of electronic systems with minimal errors.
• Coding and Classification Codes: Requisitions need to be correctly matched with their corresponding classification codes.
• Spend with Line Item Visibility: Get more value from your SRM (Supplier Relationship Management) system by using visibility and analysis tools more effectively.

Six Sigma is a discipline and it may not be the standard to use to gauge some of these processes. However, getting over 90% results for these processes would mean that you are operating within world-class standards.

Adoption of Technology

From time to time, organizations find that they need to deploy new technology to gauge procurement performance and tweak it further. Six Sigma has been found to be an enabler in the adoption of new applications, IT infrastructure, and digital systems needed in these organizations.

One way the deployment and adoption of new technology can be enhanced is by tracking metrics such as the adoption rates of users, vendors, and external contacts. Some of the processes that can be tracked include:

• Tracking the Supplier Management Tools for User Adoption Rate: Supply management tools used in procurement such as AMD can achieve a 100% adoption rate compared to other organizational wide systems that are not tailored for specific end users.
• Tracking Percentage of Enabled Suppliers: Six Sigma proposes the use of the Pareto Principle. Focus on the suppliers contributing 80% of the spend, more than those contributing 20%.
• Tracking Indirect RFQs through E-Sourcing: Find out the total percentage of indirect RFQs. An 85% score is impressive, but an exceptional score for direct RFQs would be around 50%.

An ERP (Enterprise Resource Planning) software is the basic setup for the system required to generate transactional data. However, other applications may be integrated if the quality of the transactional data is found to be unreliable.

Compliance

We must acknowledge the fact that every process exists to generate a desired output. The output of these processes must adhere not only to customer’s expectations, but also to local codes and government regulations. The acknowledgement of this fact will help businesses avoid legal risks and costs associated with non-compliance.

Six Sigma based processes may need to be initiated to track some of the following issues:

• Data and information on contracts drafted, vendors on-boarded, issuance of purchase orders and receipt of invoices
• Renewals of expiring contracts, certificates and accounts
• Costs incurred through engagement with unwanted or blacklisted vendors
• Monitor Call For Bids by tracking uncompetitive bids or ignore bids from a list of vendors

Conclusion

Looking at the big picture, it is clear that the tools and techniques outlined by Six Sigma and the strategic sourcing process have the same objective; enhance, improve and adopt a more cost-effective approach to business. These methodologies improve processes by ensuring decisions are derived from reliable metrics.

Six Sigma is often associated with the improvement of the supply chain and manufacturing processes, but the methodology can be applied to a wide range of applications. By following the five phases DMAIC (Define, Measure, Analyze, Improve, Control), you will not only transform the critical business processes, but you’ll also provide clients with a reliable service and be in a better position to adhere to standards and regulations.

The post 3 Tips for Incorporating Six Sigma into Your Sourcing Process appeared first on 6sigma.

Master Black Belt Curriculum

We believe Master Black Belt training should build upon already existing Black Belt training, expanding on the concepts delivered in their previous education. Master Black Belts will typically require two or more years of Black Belt experience (plus training), and five or more years of business experience. MBB’s previous work and expertise should inform their MBB training, building on their existing skills and knowledge base. Some areas of responsibility for Master Black Belts are as follows:

• Leadership and people skills. MBBs will typically manage and coach Black Belts, Green Belts, Yellow Belts, and entire Six Sigma teams, while on the project floor. Furthermore, leadership and people skills are essential to building strong teams and professional relationships. Additionally, MBBs teach team members to deploy improvement tools and solutions, as well as identify areas that require attention.
• Developing and implementing organizational metrics. Classical Six Sigma metrics include timeliness, accuracy, efficiency, workability of business and cost, as well as other measures of quality. Moreover, Master Black Belts should know how to select and implement appropriate metrics.
• Creating, maintaining, and reviewing Six Sigma curriculums in classroom-based training. As Master Black Belts, you will be required to assess and deliver Six Sigma training programs, providing coaching and support for other Belts.
• Networking is an essential skill for Master Black Belts to master, as it can open many doors for you when it comes to finding employment. Master Black Belts often work as consultants, an independent role that requires seeking out opportunities. Networking with other MBBs and Six Sigma practitioners will enable you to get the lay of the land. Likewise, MBB training should teach critical networking skills to build your network from the ground up. Maintaining strong professional relationships is important as an MBB, and training should support this.

Essential Master Black Belt Skills

• DMAIC. MBBs should be able to use and teach DMAIC in the classroom and on projects.

• Non-Parametric Analysis. When there are fewer assumptions to deal with, NPA enables MBBs to get a handle on their data.

• Multi-Vari and Practical Experiments. MBBs will be expected to address multiple parameters and sources of process variation at any one time. Similarly, experience with practical experimentation is just as important.

• Handling Attribute Responses and Optimization Experiments. Our MBB curriculum covers how to use Minitab to handle attribute responses and create optimization experiments.

• Advanced Regression and SPC Methods. Regression alone is a difficult tool to use, and SPC can be just as tricky, but advanced methods are often required. Our MBB curriculum teaches several different ARMs and ASPCs.

• Handling Multi-Response Experiments. We believe in going above and beyond Freeman-Tukey when it comes to MREs.

• Distributional Analysis. We teach our MBBs to understand the far-reaching effects of policy programs and funding decisions.

• SIPOC Diagrams. SIPOC diagrams identify key factors of process improvement projects before commencement.

• Identifying CTQ (critical-to-quality) factors. Quality MBB training teaches how to draw CTQ trees. This enables MBBs to measure and display improvement efforts and align them with customer demands.

• Statistical software training. Reliable, statistical data underpins all Six Sigma work. Our trainers teach MBBs how to use statistical software like Statgraphics, SigmaXL, and SPC XL.

• Poka-Yoke. Mistake-proofing improvement measures will ensure the same problems don’t arise in the future. Our course teaches MBBs to recognize opportunities and devise solutions to reoccurring issues.

Contact us if you have additional questions.

The post What Should be in a Six Sigma Master Black Belt Curriculum? appeared first on 6sigma.