International Journal of Scientific & Engineering Research, Volume 5, Issue 8,August-2014

ISSN 2229-5518
519

Implementation of Lean six sigma For Improving Supply Chain processes

in a Pharmaceutical Industry
M. F. Elbermawy, Abbott Laboratories Egypt affiliate
Arab Academy for Science and Technology & Maritime Transport
-Institute of Productivity and Quality
Prof. Dr. / A. A. Al Manhawy
Arab Academy for Science and Technology & Maritime Transport
-Institute of Productivity and Quality
Prof. Dr. / H.E.A. Ibrahim
Department of Electrical and Computer Control Eng.,
Arab Academy for Science, Technology and Maritime Transport, Cairo, Egypt.
E- mail: [email protected]
Abstract
Lean and Six Sigma are recent developments in continuous improvement methodology that have been
popularized by several high-profile companies. The success and complementary nature of these methodologies
has led to their combination into a single methodology, commonly called Lean Six Sigma or Lean Sigma. Al-
though there is considerable literature available and many consultants involved with Lean Six Sigma, very little
published research addresses the practical experiences of companies that have implemented Lean Six Sigma.
The research questions for this research are what extent applying the lean six sigma concept in supply chain
process will improve the physical and information flow of the raw materials and finished goods. And what ex-
tent improving of the supply chain process by applying the lean six sigma concept will affect Delivery and
speed, Quality, Flexibility, and Cost.
Index Terms—Lean; Six Sigma; Healthcare; Pharmaceutical products

1 INTRODUCTION
This research’s purpose is to assist the supply chain 1.1 Pharmaceutical Supply Chain
process in pharmaceutical industry in the term of The pharmaceutical supply chain will consist of
continuous improvement program that abates or eli- one or more of the following nodes: supplier, phar-
minates the negative effects caused by deployment maceutical manufacturer, distributor, pharmacy, and
barriers and implementation challenges, and to elim- consumer or patient [1] A typical structure of these
inate the processes waste by using the combination supply chain [2] is shown in Figure 1.
of lean and six sigma in one methodology of
DMAIC
Supply Chain is the movement of materials as
they flow from their source to the end customer.
Supply Chain includes purchasing, manufacturing,
warehousing, transportation, customer service; de-
mand planning, supply planning and Supply Chain
Figure 1 Supply Chain Process
management
In this research Lean and Six Sigma (DMAIC Me- In the past, pharmaceutical industry did not adopt
thodology) has been applied to improve the physical supply chain management concepts [3]. However,
and information flow for both raw materials and fi- now several factors are pressing each component of
nished goods and in what extent implementation of the pharmaceutical supply chain to change their tra-
this integrated approach will improve the supply ditional manners of conduction business [4], [5].
chain processes in the terms of Quality, Delivery and According to Healthcare & Life Sciences Supply
speed, Flexibility, and Cost. Chain Report 2010, controlling cost, globalizing
supply chain and improving visibility or tracking are
the biggest supply chain priorities, as well as, visibil-
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International Journal of Scientific & Engineering Research, Volume 5, Issue 8,August-2014
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ity or tracking issues are the biggest obstacles to glo- 2.2 Six Sigma Methodology
balizing pharmaceutical supply chain. Six Sigma is a methodology to reduce the number
of product defects and to reach organizational excel-
2. REVIEW OF METHODOLOGY lence. It helps the organization to achieve a competi-
2.1 Lean Methodology tive advantage [10]. This is a structured methodolo-
The companies’ need for constant improvement gy with systematic statistical-based techniques,
and evolution leads to the search of management which is used to improve the performance of
tools and methods to foster the development of cus- processes / products or quality of a service by reduc-
tomer service and to reduce the costs for all asso- ing process variation [11].
ciated processes. Accepting this perspective of man-
agement, where the achievement of excellence Table 1: The Lean Principle [8]
through continuous improvement of procedures and
processes and the search for new management con- Principle Description
cepts are emphasized, led several companies to en-
gage in management strategies where the assump- Value Define value from the standpoint of the
tions of the “lean” philosophy are key. Customer
The Value View your product delivery system as a
The basic concepts of the Lean philosophy arose Stream continuous flow of processes that add
initially from the 50s in Japanese companies and value to the product
have been developing it up to today. These concepts Flow The product should constantly be mov-
are centered on just- in-time, where the only goal is ing through the value stream toward the
the production of products only at the time they are customer at the rate of demand.
requested [6]. The term "lean" is emerging as a new Pull Products should be pulled through the
designation for production / management “philoso- value stream at the demand of the
phy” that opposes the concept of “mass production” customer rather than being pushed on
[7]. the customer
Perfection The never-ending pursuit of eliminating
In 1996, they published a second book Lean waste in the system such that products
Thinking, and defined Lean thinking as “a way to can flow seamlessly through the value
specify value, lineup value-creating actions in the stream at the rate of demand.
best sequence, conduct those activities without inter-
ruption whenever someone requests them, and per- In addition to statistical techniques, the methodology
form them more and more effectively. also incorporates other concepts such as financial
In short, lean thinking is lean because it provides a analysis and project planning [12]. To systematize
way to do more and more with less and less – less the application of this methodology in process im-
human effort, less human equipment, less time, and provement is often used a formal method called
less space – while coming closer and closer to pro- DMAIC (Define, Measure, Analyze, Improve and
viding customers with exactly what they want”. This Control) [13].
book provides the conceptual framework for catego-
rizing all of the tools and practices of Lean produc- This method is a closed loop that allows for the eli-
tion into five basic areas, the principle of Lean pro- mination of certain phases of a process (those with
duction can be show in Table 1. no added value to the product or service) and allows
Although Lean production is focused on effective- concentration on new metrics and application of dif-
ness in the production process, Lean thinking is more ferent technologies for continuous improvement. The
focused on the efficiency in the company as a whole, use of DMAIC steps causes the realization of actions
including nonmanufacturing: administration, and in a sequential and logical way, and in accordance
service [9]. with the scope of the project [14].
Many of the tools and techniques may be applied in
more than one stage of the methodology, since their
purpose may coincide with the objectives of the

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International Journal of Scientific & Engineering Research, Volume 5, Issue 8,August-2014
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tasks of each phase [14]. The Six Sigma is a philoso- Lean Six sigma
phy that has evolved gradually with the results ob-
tained in various organizations (industry and servic- Identify Define
es) [15].
One of the main factors when selecting a Six Sigma
project involving services is positive financial im- Map Measure
pact and increased customer satisfaction [16].
Like any quality improvement methodology, there Flow Analyze
are limitations in its implementation. Moreover, the
service sector exhibits an increased difficulty, since
this sector has highly dynamic processes [10, 17]. Pull Improve
There are many possibilities of implementing Six
Sigma projects in the service sector. But it is impor-
tant to strictly define the characteristic of the process Perfect Control
that will be measured, to ensure that it is critical for Figure 2: The relationship of Lean and Six Sig ma
customer satisfaction and for the level of service Modified Approach for Lean and Six Sigma
quality. Implementation
2.3The Integration of Lean and Six Sigma In this section, we combine Lean principles and Six
Methodologies Sigma methodologies within a modified approach
Lean and Six Sigma are the two best continuous based on the main concept of DMAIC structure that
improvement methodologies widely used by various successfully used to improve several processes in the
industries [1]. Lean is used to deliver products and previous literature.
services better, faster and at a lower cost, meanwhile, The problem-solving approach for Lean and Six
Six Sigma is used to achieve stable and predictable Sigma implementation is shown in Figure 3.
process results, reducing process variation and de-
fects. Lean is developed within the Toyota Produc- Define a key problem, or a critical area for improvement
tion System in the 1970s based on the teachings of
Ford, Japanese experts and others, while Six Sigma
originally introduced within the Motorola Research Understand and document the current process,
Centre in mid-1980s [1], [18]. Identify value and waste of the process

Lean and Six Sigma methodologies are different but

Choose the appropriate methods to solve the problem,
complementary, both attempt to improve the process: or improve the process
Lean assumes that waste removal will speed up the
process by which improving business performance,
Six Sigma assumes that process variations result in Lean Six Sigma
process problems and the reducing process variation Reduce delays Reduce defects, devia-
will improve business performance [1], [19].
Create the future state and action plans
LSS can be described as a methodology that focuses for implementation of improvements
on the elimination of waste and variation using
DMAIC structure to accomplish customer satisfac- Develop a quality control plan
tion with regards to quality, delivery, and cost. The
relationship between the five Lean principle and Six
Validate the improved process
Sigma DMAIC is shown in Figure 2.

Hand over to the process owner for continuous im-

provement
Figure 3: Modified Approach of Lean and Six Sig ma
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Case Study - Create Project Charter.

Research Problem - Create Value Stream Mapping.
As a result of monitoring the efficiency working Project Charter
circle of supply chain process of the raw materials Table 2 Project Charter
and finished goods, there are some of Current prob-
Project Name: of Implementation of Lean six sig-
lems:
ma in Supply Chain of the Pharma-
1- Raw Materials flow: ceutical Industry
Stock out of some of raw materials, which affect Business Case: Opportunity Statement (High
efficiency of the production plan. Level
Problem Statement):
Over inventory of other materials, that has the im-
improve the performance
pact on the cash Flow, return rate, inventory risk, of the physical and infor-
and inventory capacity. mation flow for both raw Reducing preparation lead (cycle)
Data error and duplication, differential between the material and finished time,
actual and theoretical stock. goods supplying process, Establish Safety Stock calculation,
that avoiding shortage and Enhance the monitoring system
Over transportation, over motion, Inappropriate By applying Lean six sigma in this
non-availability of many
Processing, poor manual recording system. items process
Dissatisfaction of the production peoples due to low Which have some of expected
performance of the Raw materials Store. business impacts in the terms of:
- Delivery and speed, Quality, Cost,
Flexibility, Moral.
2- Finished goods flow:
Delaying in the implementations of sales orders.
over inventory of some products. Defect Definition: Time waste and
Shortage in the availability of some other products. Variation
Dissatisfaction of the distributors and the sales Goal Statement: Project Scope:

teams, Data error and duplication, differential be- 1- Establish safety stock Process Start Point:
tween the actual and theoretical stock. calculations in both fi- Begin from receiving the annual
nished goods and raw ma- sales plan which is translated into
Over transportation, over motion.
terials stores. production plan
Complexity and Inappropriate Processing in Docu- 2-Enhance the documenta- Process End Point:
mentation Cycle, Poor manual recording system tion system, and improve The distributors receive the fi-
the monitoring system of nished goods as the end of sales
Research KPI’S stock. orders.
Raw Materials flow 3- Eliminate the non-Value
- Lead Time Variation availability of Raw Materials. added to improve the cycle
- Preparation time of raw material of the sampled time of the preparation
time of production and
product Safety stock value. sales orders.
Finished goods flow 4- eliminate the Non Value
- Preparation time of sales order. added in the distribution
- Safety stock Value. process flow
Expected Savings/Benefits: In Scope: the information and
- Working man hours.
physical flow of raw materials and
Define finished goods
The purpose of the first phase of the DMAIC process Out of Scope:
is to identify and refine a process in order to meet or All the production stages
exceed the customer’s expectations. The Define Project Plan:
phase includes developing the team charter as shown Task Phase Start Date End Date Actual End
in table 2, critical to quality characteristics, problem
Define phase 1-7 -2011 31-7-2011 31-7-2011
statement, communication plan, project scope, and
Measure phase 1-8-2011 31-8-2011 31-8-2011
goal statements.
Analyze phase 1-9-2011 30-9-2011 30-9-2011
In this stage the following points will be addressed:
Improve phase 1-10-2011 23-1-2012 23-1-2012
- Define & Scope Problem.
Control phase 23-1- 2012 3-3-2012 3-3-2012
- Determine Project Objectives & Benefits.
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Defining the Process with SIPOC:

The Scope of the Project has two Loops as shown in
It’s important to get a high- level understanding of figure 4
the scope of the process first. A SIPOC Process defi-
nition helps the Process Owner and those working on - List of Hot Spots loop 1
the process to agree the boundaries of what they will 1- Non accurate Bill of materials; which cause many
be working on. It provides a structured way to dis- defects and data errors in requirements plan, the ac-
cuss the process and get consensus on what it in- tual stock often is different from the theoretical
volves before rushing off and drawing process maps, Stock.
as shown in table 3 2- Bad Communications between planning and pur-
Table 3 SIPOC Di agram chasing
Department about the implementation of purchasing
Process: Supply chain
plan; which cause many defect, waiting, shortage
Suppliers Input Outputs Customers
and over inventory.
Sales Forecast Pro- Planning 3- Non accurate following up the implementation of
(Abbott) Plan duction TPM Dep.
purchasing process of raw materials which cause
plan
many shortages and stock out. High Variation of pur-
TPM Pur-
(Abbott) chasing
chasing orders lead time which causes shortages in
Plan availability of raw materials.
Planning Produc- Raw Produc- 4- There are three different stores due to bad layout;
TPM tion mate- tion De- which cause over motions and waiting through sto-
Dep. Order rials partments rage process and data errors. No effective coding
system of the raw materials; which cause many de-
Produc- Produc- Fi-
tion TPM tion nished fects.
Dep. order Goods 5- Preparing production orders; there are over mo-
tions due to many stores, non-effective storage sys-
Store of Prepa- Product Dispens- tem, there are many shortage in availability of many
R.M ration R.M ing Center raw materials items due to non- available safety
R..M Order stock. There are data errors due to non-effective cod-
Order ing system
Store of Prepa- F.G Distribu-
6- There are data errors due to non-effective coding
F.G ration receipt tors system, and main store have no feedback about the
F.G bill of materials of each product.
Order 7- There is data duplication in operation orders; due
Distrib- Finance(A
to Problems in coding system, which causes many
utors bbott)
Sales
defects, waiting, over process.
Sheets 8- Non effective following up for the implementation
of production Plan, which cause, waiting, delay in
implementation of production plan, Missing data,
Measure errors, delaying in decision making.
In this phase, it will be focused on how to reach 9- Not accurate and non-updated stocks; cause many
the main (Non-Value Added) How long it takes for defects, wrong decisions
any work item to make it through the process from
- List of Hot Spots loop 2
beginning to end in the Supply Chain process in both 1- Abbott TPM receives sales orders from Abbott
Loops Raw materials and finished goods Distribution as daily separated Excel sheet; which
In this stage the following points will be addressed: may cause data duplication.
Measure performance standards. 2- Finished goods stores receive sales orders from
Measure system analysis. Abbott TPM by mobile or telephone; which may
cause miscommunications, data errors and duplica-
Measure process cycle efficiency. tions.
Time value analysis. 3- Non accurate data due to Manual documentation

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Figure 4 Current stream maps

system. - Identify Variation source

4- There are three Different stores; Many Deferent
records, over motions. Loop 1 (Raw materials flow):
5- Preparation from three different Stores, Many De-
ferent records, over motions. - Lead Time Variation
6- Collects the distribution receipts from three stores; There is a high Variation in lead time availability of
data missing, over motions.
the sampled raw material as shown in figure 5 and
7- Limited deliveries times (one deliveries/ day) by
the average lead time is 105 days
TPM vehicles, there are many breakdowns in Kahira
Transport vehicles.
8- Every week TPM Manager Take Copy of the
shipping receipts from the store and record the all
sales for all branches of the distributors in first sheet;
it take about one day man work from him.
Three times in the month TPM Manger collects sales
for every Distributors and making the Second Sheet.
9- Then he Collect the total sales for all Distributors
to make the sales wave in the third sheet to send it to
Abbott finance team, that is happening tree times in
the month
Analyze Figure 5 Lead Ti me Variati on of raw material
The purpose of the Analyze phase is to develop and
test hypotheses about the causes of process defects. - Preparation time of production orders
Therefore, Hypothesis Testing is a common tool in The Average time of Preparation production order
this phase. In the Analyze stage, there are three main is 268 Mins, in addition to high variation as shown in
Points: figure 6
- Estimate Process Capability
- Non-Value added Analysis
- Process Performance

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- Actual stock of finished products

Days of healthy stock of the sampled product is be-
low the required target as shown in figure 9

Figure 6 Preparati on ti me of production orders

- Actual Safety stock calculation of sampled

raw mate rial: Figure 9 Days of healthy stock
The reorder quantity is 20,000 kg and the order
quantity is 30,000 kg as shown in figure 7 - Working man hours of TPM manager:
The total working man hours for final distributors
invoice through three waves per month are 39 hours,
as shown in figure 10

Figure 7 Actual Safety stock calculations

Loop 2 (Finished goods flow):

- Preparation time of sales orders
There is a high variation of preparation sales orders, Figure 10 Working Man Hours
the average time of sales order is 206 Mins. As
shown in figure 8 - Identify Variation source
Identify the potential root causes of the variation
source for poor flow of raw materials and finished
goods flow as shown in figure 11

Improve
The Improve phase focuses on formulating and
implementing process improvement ideas. Tools in
this stage include Multiple Regression and Design of
Experiments. In the Improve phase the following
points are addressed:
- Creating Ideas.
- Rating of ideas.
- Improvement Recommendation.
Figure 8 Preparation time of sales orders

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Table 4 Safety Stock Calcul ati ons 4- Reorder point based on the lead time.
5- Plan small deliveries.
Or- Replenish- Reple- Aver- Stdv. Consump-
6- Payment Terms.
der ment /days nish- age Rep Rep. tion/ton/
No. ment month
- Finished goods Flow
/month
1- Establish One Store for Abbott Finished Products.
1 90 3.00 3.03 0.11 6000 2- Establish new layout for the store, arranging the mate-
2 89 2.97 rials according to:
3 89 2.97 - The more exit.
4 90 3.00 - FIFO; Making three color card; Red card the most prior-
5 91 3.03 ity for exit; (near expired), Yellow Card the 2nd priority,
6 10 3.33 Green Card the 3rd one.
7 90 3.00 3- Supply the store with Fax machine to receive accurate
8 91 3.03 documented sales orders.
9 89 2.97 4- Supply the store with computer; convert the manual
10 90 3.00 documentation to computerized system.
Consumption - Safety Stock = Consump- 5- Establish computerized system to manage inventory
Rate/Month 6,000 tion*Stdv.Rep*Service Lev- and distribution system; which manage:
Stdv.Rep. 0.11 el - Daily batches movement.
Service Level 1.64 - Receipts the distributors.
- Reorder quantity= Safety
Safety Stock 1,076 Stock * Average Rep.
- Making invoices.
Average Rep. 3.03 - Products Store cards.
- For 95% Service Level ,Z - Campaign invoices.
Reorder Point 19,256 =1.65 - More than seven kinds of reports
Order Quantity 20,332 Safety Stock Calculations
- (Loop1) Raw mate rials
- Safety Stock based on the lead time variation.
- Reorder point based on the lead time, as shown
in table 4
Table 4 Safety Stock Determination (Raw Materia ls)
- Plan small deliveries.
The order quantity becomes 20,332 kg instead of
30,000 kg before improvement as shown in figure 12
Table 4 Safety Stock Determination (Raw Materia ls)

Figure 11 Identify Potenti al Root Causes

- Raw Material Flow
1- Establish One Store for Abbott contains:
- Specified Abbott raw materials.
- Separated Stock from Materials which Abbott and
TPM participate in it, these quantity for Abbott only
and entered the store by Abbott specific code2- Es-
tablish new layout for the store, arranging the mate-
rials according to:
- Product Family.
- The more exit. Figure 12 Reorder Point (Loop 1 )
- FIFO; Making three color cards; Red card the most
priority for exit, Yellow Card the 2nd priority; Green
Card the 3rd one.
3- Safety Stock based on the lead time variation.
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Quantity
Safety Stock Calculation
- (Loop2) Finished goods Order Quantity
1,200,264
Safety Stock calculations based on the forecast and
the deviation in the last sales, as shown in tables 5,
according safety stock rules as shown in table 6 Reorder Point
645,382

Table 5 Safety Stock Determination (Finished

Goods)
safety Stock
Sales 90,500

Month Quantity Lead time (months): 3

Time
Oct-10 219,344 Service level: 0.90
Nov-10 300,930
Dec-10 121,000 Lead time demand: 554,882 Figure 13 Reorder Point (Loop 2 )
Jan-11 100,554 Standard Deviation: 58,056
Feb-11 152,850 Service factor: 0.90 Control:
Mar-11 143,042 Lead time factor: 2 Improvement actions need to be monitored to as-
Apr-11 160,325 Safety stock: 90,500 sess the effectiveness of actions, to maintain benefits
Ma y-11 239,221 Reorder point: 645,382 over time and to ensure the stabilization of the
Jun-11 170,815 processes .
Jul-11 183,978 Order Quantity 1,200, 264 In order to verify the effectiveness of the improve-
Aug-11 259,184 ments, there is a Comparison between the perfor-
Sep-11 221,109 mance of before and after improvement.
Oct-11 270,709
Nov-11 228,169 Results:
Dec-11 163,232 - Eliminating the variation of lead time of sampled
Jan-12 140,000 raw materials as illustrated in figure 14
Feb-12 180,000 - Decrease the cycle time and the variation of prepa-
Mar-12 234,882 ration time of production orders, and sales orders as
Table 6 Safety Stock Rules shown in figures 15, 16, 17.
By Lokad.com, Copyright 2007
- Eliminate the over motion for physical flow of
Formul as Comments
Lead time demand: Summing the forecasts
both raw materials and finished goods
Standard Deviation: Deviation in the past sales - Implement safety stock calculation for the sampled
NORMSINV Inverse of the normal distribution raw material, and finished good.
Lead time factor: Square root of lead-t ime to forecast ratio - Eliminate the non-value added processes as shown
Safety stock: Co mbin ing factors in figure 19.
Reorder point: Lead time demand + safety stock - Implementing Lean Six Sigma in Supply Chain
Processes, large or small, must be a company-wide
- Define reorder quantity for finished goods initiative. That we can improve the performance of
The reorder point is 645,382 units, and the order supply chain by reducing the causes of defects and
quantity is approximately 1,200,000 units as shown Eliminate non value added processes and improving
in figure 13 Service and sales causing greater customer satisfac-
tion.

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Figure 17 sales order Preparation ti me Loop 2

Figure 14 Lead Ti me Variation of Ibuprofen 38
(After improvement)
(After improvement)

Figure 15 Order Preparation ti me (After improvement)

Figure 18 Sales orders Lead Ti me Loop 2

Figure 16 Order Preparation ti me (After improvement)

Figure 19 working man hours Loop 2

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Conclusion [13] S. Reynard, “Motorola celebrates 20 Years of Six Sig ma,”

The research case study is improving the perfor- iSixSigma Magazine, pp.20-27, 2007.
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