Lean Six Sigma Key Concepts Applied to Supply Chain Processes

BPG Regional Director J.B. Wilcox often shares this story with his Black Belt classes to illustrate key Six Sigma concepts including: project value proposition, Pareto analysis, and value stream mapping.

J.B. Wilcox and his team were working with a chemical plant to improve its supply chain processes.  This plant received hundreds of chemicals from dozens of suppliers that were used to produce the active ingredients that went into some of the company’s most important pharmaceutical products.  The project value proposition was to create a supply chain center of excellence focused on reliably satisfying its customers’ requirements while continuously looking to identify improvement opportunities.  Using a Pareto analysis of key raw materials and suppliers, several opportunities filtered to the top of the priority list.  The team began scheduling visits with some of these key suppliers so they could collectively explore opportunities for improvement.  During one visit, it was observed that one of the most common (and expensive) materials was being formulated as a liquid before being freeze-dried and packaged into bags for shipment and delivery.  No one could answer the question why this freeze-drying step was requested.  When the freeze-dried bags arrived at J.B.’s plant, they were immediately reconstituted back into a liquid.  The supplier confirmed that they sold this very same chemical to every other customer in its liquid form.  The team acknowledged that shipping the liquid chemical in drums was slightly more expensive; however, the overall savings from eliminating the drying/reconstituting steps saved significantly more time (and money) at both locations. By applying the Lean Six Sigma concepts of continuous improvement, partnering with vendors, and value stream mapping, J.B. and his team, working with their supplier, were able to create a true win-win solution.