The concept of variation reduction is dominant to the logistician. As stated above, logistics is almost dealing inventory, and managing inventory is about managing variance. If we appearance at the different types of inventory, we will simply see why variation shows such a vital part in how we accomplish inventories throughout the business and the supply chain.

For example, safety or “buffer” stocks are inventories that we need to hedge against unknowns (i.e., the variations from the norm). That is, we keep safety stocks because of variation in dealer quality, transportation reliability, manufacturing process capability, and customer demand designs. In other words, if we can recognise and control variation in our processes from supplier to Lean Six Sigma Logistics client, then we will be able to cut down our reliance on the buffers dramatically. In this regard, logisticians need to think of themselves as actuaries, like those who improve the rates for automobile insurance. Actuaries look at key variables — the age of drivers, gender of the drivers, types of vehicle driven, measures of past behaviour (e.g., speeding tickets and accidents) — and then they determine insurance rates that reproduce the variability in the data. This is specifically why the sixteen-year-old male who drives a sports car will have the highest insurance rates!

Logisticians are no different than the actuaries in this analogy. For demographics and sports cars, the logistician substitutes supplier capability, transportation consistency, and demand fluctuation. Then the logistician determines the “insurance rate,” using inventory as the unit of currency. The problem here, however, is that too many logisticians are treating their companies like teenage drivers when, in fact, the company presentation and performance are more like a middle-aged soccer parent who efforts a minivan. A down-to-earth example of this is when a manufacturer has leveled demand from a supplier who is an hour down the road from the plant, yet the manufacturer carries on to transfer twelve days’ worth of that supplier’s parts in inventory! Why? Most likely the answer is twofold.

The first motive is that the leveled flow (and therefore low variability of demand) is not understood; the second reason is more expressive. The expressive part of the equation is simply that industry is addicted to inventory. Make no error about it — the industry has a habit something that most companies cannot imagine living without.

WHAT IS LEAN SIX SIGMA LOGISTICS?

Both Lean and Six Sigma impart unique disciplines and tools to logistics.

Using these disciplines and tools will consent an organization to expose and deal with wastes and incompetence. Although Lean and Six Sigma tools are very dominating and powerful, we need to recall that for Lean and Six Sigma to work in logistics, an important mind change must occur.

Now that we have explored the three elements of Lean Six Sigma Logistics, we want to put them together to appreciate fully how they merge and complement each other. Summarizing from the above, recall that:

1. Logistics is almost managing inventory.

2. Lean is about speed, flow, and the elimination of waste.

3. Six Sigma is about understanding and reducing variation.

Therefore, Lean Six Sigma Logistics can be defined as:

The elimination of wastes from side to side disciplined hard work to understand and reduce the variation while increasing speed and flow in the supply chain