LSS For Supply Chian

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Enhancing Supply Chain Efﬁciency and Effectiveness With Lean

Six Sigma Approach
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International Journal of Project Management and Productivity Assessment
Volume 8 • Issue 1 • January-June 2020
Enhancing Supply Chain

Efficiency and Effectiveness With
Lean Six Sigma Approach
Pankaj M. Madhani, ICFAI Business School, Ahmedabad, India
https://orcid.org/0000-0002-8810-3201
ABSTRACT
Lean Six Sigma (LSS) enables supply chains to become more efficient and effective in sustaining
continuous improvement. The speed, service quality, and the cost of operations impact the supply
chain performance. One most popular approach for providing faster responses, improving quality
and reducing cost in SCM, is LSS as it combines strengths of both Lean and Six Sigma. LSS is not
just about doing things better, it is a way of doing better things. Research establishes complementary
relationship of Lean and Six Sigma; summarizes benefits of LSS in SCM and develops various
frameworks such as S-V framework and O-T-S framework to emphasize the role of LSS in enhancing
efficiency and effectiveness of SCM processes. As a strategic management tool, LSS deployment
in SCM is considered to be an important management philosophy, supporting organizations in
their efforts to enhance efficiency and effectiveness of operations, satisfy customers and enhance
competitive advantages.
Keywords
Competitive Advantages, Effectiveness, Efficiency, Lean, Lean Six Sigma, SCM, Six Sigma, Supply Chain,
Supply Chain Management
INTRODUCTION
There is a huge opportunity cost to any organization that continues to support inefficient and ineffective
business processes in a highly competitive world. To combat these inefficiencies, organizations have
begun to make investments in process improvement methodologies such as Total Quality Management
(TQM), reengineering, benchmarking, Lean, Six Sigma and Lean Six Sigma etc., to enhance service
quality. Competitive pressure forces companies to improve their core as well as support functions
for better performances. Supply chain as an integrated function is the lifeline of an organization as a
streamlined supply chain management (SCM) can enhance business performance by providing better
value to customers. SCM helps increasing organizational effectiveness and profitability by promoting
the integration between firms and their suppliers through the development of supplier partnerships
and strategic alliances. In present day business environment, supply chains that compete with each
other, not companies (Christopher & Towill, 2001), and the success or failure of supply chains is
ultimately determined in the marketplace by the consumer.
An effective SCM is crucial to business continuity (Cabral et al., 2012) as well as survival in a
market that is increasingly volatile, turbulent and competitive. SCM enhances competitiveness of a
firm if appropriate supply chain strategy is chosen (Soni & Kodali, 2012). In a globally competitive
DOI: 10.4018/IJPMPA.2020010103

Copyright © 2020, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited.

40
market, organizations face challenges to improve customer service while simultaneously reducing
costs and shortening product lifecycles. Dependable service leads to satisfied customers, which gives
organizations more pricing power, higher revenues and enhanced enterprise value. In response to
these challenges many organizations have adopted Lean Six Sigma (LSS) approach for efficient and
effective SCM practices.
Lean and Six Sigma are developments in continuous improvement (CI) methodology. Lean Six
Sigma (LSS) is an approach that combines Lean and Six Sigma tools and philosophies to focus on
improving quality, reducing process variation, and eliminating non-value added (NVA) activities. Its
goal is to improve quality by first identifying waste within the organization; systematically eliminate
this waste, and then reduce process variation. A quality programme for the entire organization is
created, by combining the two methodologies (i.e. Lean and Six Sigma), as each builds upon the
other’s strengths (Salah et al., 2010a). Deployment of LSS can help cut waste and make SCM
processes more effective.
This research is unique in that it sheds lights on the both dimensions of supply chain performance
i.e. efficiency and effectiveness of supply chain; focuses on LSS deployment in supply chain and
provides various frameworks for synthesizing and determining value creation processes. Research
also provides various successful illustrations of LSS implementation in SCM practices of various
organizations to emphasize business value creation.
LITERATURE REVIEW
SCM comprises the flow of goods from supplier through manufacturing and distribution chains until
the end user (Power, 2005). Logistics is a crucial part of the supply chain (Sachan & Datta, 2005).
The cost, speed, and service quality of logistics operations directly impact the performance of the
whole supply chain (Zhang et al., 2016). With customers simultaneously demanding shorter lead
times, lower prices, and excellent service (Salleh et al., 2009), logistics must improve its operations
to deliver superior customer value (Forslund, 2007). Thus, the delivery process within a supply
chain is of critical concern to supply chain managers since delivery performance directly impacts
customer satisfaction levels (Bushuev & Guiffrida, 2012). The focus of SCM practices must shift from
functional and independent to general and integrative initiatives (Frazzon et al., 2015; Theagarajan
& Manohar, 2015). In order to achieve the supply chain goal of fulfilling customer orders more
quickly and efficiently than competitors, a supply chain needs to engage in continuous improvement
(CI) processes and competitive strategies (Arif-Uz-Zaman & Nazmul Ahsan, 2014). The strategy of
continuous improvement (CI) is focused on building ability to run operations at the lowest cost, with
greater reliability and speed and a superior ability to change (Hayes & Pisano, 1996). An increasing
number of companies are adopting the quality improvement programs originated in manufacturing,
such as Total Quality Management (TQM), Six Sigma, reengineering, benchmarking etc., to enhance
service quality (Hoerl & Snee, 2012). Business process reengineering (BPR), one of the improvement
methods promises to achieve dramatic improvements in critical measures with fundamental rethinking
and radical process redesign (Hammer & Champy, 1993).
Another, evolutionary approaches of process improvement focus on incremental improvements
of existing business processes. They aim at more sustainable and continuous enhancements and thus
have to be seen as long-term initiatives (Heckl et al., 2010). Process improvement is defined as an
important aspect of organizational development, in which a series of activities are taken by a process
owner to identify, analyze and improve existing business processes within an organization to meet
the goals and objectives (Cook, 1996). Process improvements methodologies such as TQM, Lean,
Six Sigma, and Lean Six Sigma (LSS) have benefited both manufacturing and service organizations.
However, there are some limitations of TQM that, led to it not achieving the tangible results that
management expected to see (Snee & Hoerl, 2005). According to Antony et al. (2017), the major
limitations of TQM are:
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1. The belief that projects should focus primarily on customer satisfaction and culture change, as
opposed to bottom line improvements, either in cost savings or increased business;
2. There was no formal methodology associated with TQM. Therefore, an approach had to be
developed for each new project, which significantly limited progress in absence of proper process
design;
3. TQM implementations often lacked supporting infrastructure;
4. Measurements and metrics were often not emphasized, making TQM more of a cultural initiative
rather than a business improvement initiative. Unfortunately, without tangible metrics it is hard
to demonstrate and track its impact.
In this scenario of various limitations of TQM, this research explores concept of Lean, Six
Sigma and Lean Six Sigma (LSS) and extends its applications to SCM. For improving quality
excellence, SCM needs the underlying capabilities that enable it to progress consistently in terms
of better services at lower costs. These include process performance, complexity management, and
continuous improvement. Amongst these, process performance management is the most important
and critical element of the SCM and hence, measuring key performance indicators (KPI) become
even more important. KPIs are defined as quantitative and qualitative measures used to review an
organization’s progress against its goals (Sunder, 2016b). These are broken down in smaller parts and
set as targets for achievement by department as well as individual levels. The achievement of these
targets is reviewed at regular intervals (FinPa New Media, 2009).
Measuring data, process performance as well as KPI is an essential element for any organization.
In light of the crucial role of the SCM in organizational performance, it becomes essential to focus
on improving its KPI as it instils process improvement culture. The KPI measurement provides a
direction and highlights the areas for improvement as it helps in determining the process performance.
With intense market competition it becomes vital for organizations to develop new customer-oriented
processes and to re-design existing ones (Heckl & Moormann, 2007) to improve the KPI levels.
However, a KPI should not be too subjective, as that makes it difficult to measure and evaluate in
any meaningful way and hence does not generate usable data that to bring about substantial positive
change. Ideally, KPIs should be concrete, detailed and able to pass through the “SMART” test, which
assesses whether they are Specific, Measurable, Attainable, Realistic and Timely.
Upon establishing the KPIs, it then becomes important to improve the current process performance
to the desired level (Sunder, 2016b). Lean Six Sigma (LSS) helps organizations in creating a
measurement system for services (Sunder, 2016a). In light of the increasing competition and need
of differentiation, it becomes essential to focus on improving KPI as it instils process improvement
culture. LSS acts as an effective business and management strategy for improving the KPI (Kumar
et al., 2006; Chen & Lyu, 2009; Vijaya Sunder & Antony, 2015), increasing process performance,
enhancing customer satisfaction and raising bottom line results (Snee, 2010). LSS puts the Six Sigma
methods and tools in the service of a critical goal, and also uses Lean principles to reduce cycle times
in the processes, that chiefly drive customer satisfaction (Immelt, 2006).
Six Sigma
Six Sigma is a business improvement approach that seeks to find and eliminate causes of defects
or mistakes in business processes by focusing on process outputs which are criticalin the eyes of
customers. Six Sigma has often been presented as something different from TQM (Bengt et al., 2008).
Six Sigma is different from other quality initiatives because its main focus is to improve customer
value, and ultimately enhance bottom line of the organization (Pyzdek, 2003). Six Sigma is a business
strategy used to improve business profitability, by improving the effectiveness of operations to meet
or exceed customer’s needs and expectations (Kwak & Anbari, 2006). Six Sigma was envisioned to
be a quality improvement program that reduces process variation to the point where there are only
42
3.4 unacceptable defects per million process applications through the use of improvement strategies
(Kumar et al., 2008).
Six Sigma principles can be used to shift the process average, help create robust products and
processes and reduce excessive variation in processes which lead to poor quality (Shah et al., 2008).
Motorola saved $15 billion during initial eleven years of Six Sigma deployment. With Six Sigma,
AlliedSignal has had productivity gains of 6 percent in manufacturing in a two-year period, and General
Electric (GE) produced more than $2 billion as customer benefits (Lucas, 2002). The statistically
based problem-solving methodology of Six Sigma drives solutions and delivers dramatic bottom
line results (Snee & Hoerl, 2007). Six Sigma translates whole problem-solving process into a very
systematic and structured format and decrease variation in the process by identifying and improving
specific areas. Six Sigma improves a company’s operational efficiency, raises its productivity, and
lowers its costs (Welch & Welch, 2007).
Lean
Lean philosophy is one of many initiatives that major businesses around the world have been adopting
in order to remain competitive in the increasingly global market (Schonberger, 2007). Lean philosophy
believes that identifying many small opportunities leads to large overall change (Tapping and Shuker,
2003). Lean is thought of as a cost-reduction measure as it focuses on reducing cycle time and waste
in the processes (Pettersen, 2009). A Lean organization can make twice as much product with twice
the quality and half the time and space, at half the cost, with a fraction of the normal work-in-process
inventory (Sharma, 2014). “The goal of Lean is to accelerate the velocity of any process by reducing
waste in all its forms” (George, 2003). In part this is accomplished by separating “value-added (VA)”
from “non-value added (NVA)” activities and understanding of the root causes (George, 2003).
Lean focuses on efficiency, aiming to produce products and services at the lowest cost and as fast as
possible (Antony, 2011).
Lean strategy brings a set of proven tools and techniques to reduce lead times, inventories, set
up times, equipment downtime, scrap, rework and other wastes of the hidden factory (Sharma, 2003).
Lean is a systematic approach to identify and eliminate waste through continuous improvement;
flowing the product at the pull of the customer in pursuit of perfection (Jerry, 2003). Hence, Lean is
about operating with the most efficient way possible, with least cost and zero waste. Lean is both a
management philosophy and a practical operational perspective focused on systematically identifying
and eliminating waste in human effort, inventory, time and manufacturing space, while producing
excellent goods and remaining highly responsive to customers’ needs and desires (Scherrer-Rathje
et al., 2009). Lean approach encourages incremental improvement of an activity to eliminate waste,
overburden and helps to create more value (Ohno, 1988; Womack & Jones, 2003).
Lean Six Sigma (LSS)

The definitions of Lean and Six Sigma differ; however, the aim of these concepts seems to be similar
(Andersson et al., 2006). Lean focuses on speed, efficiency, sources of waste and improvement methods
to eliminate them, while Six Sigma help in identification of process variation and elimination of
defects in quality (Gibbons et al., 2012). Although, Six Sigma focused on data collection and use of
statistical methods to solve problems, Lean was generally used a more knowledge-based approach
to reduce waste and enhance productivity (Snee & Hoerl, 2007). Traditionally, Lean and Six Sigma
are deployed separately, however, they have been implemented together in some organizations; this
integrated approach is called “Lean Six Sigma” (Antony et al., 2003; Pojasek, 2003).
Because Lean and Six Sigma have different focuses and address different process issues,
implementing them together can enhance business performance to the extent not achievable through
the implementation of either one alone (Polk, 2011). The phrase “Lean Six Sigma” (LSS) is used
to describe the integration of Lean and Six Sigma philosophies (Sheridan, 2000). This integration
allows the organization to incorporate the problem-solving and analysis tools that make the most
43
sense within organization (Andersson et al., 2006). LSS uses tools from both toolboxes (i.e. Lean
and Six Sigma), in order to get the synergistic-best of the two methodologies, increasing speed while
also increasing accuracy (Mader, 2008). LSS can be described as an approach focused on improving
quality, reducing variation and eliminating waste in an organization (Furterer, 2009).
LSS can be defined as a methodology that strives to maximize shareholder value by achieving
a fast rate of improvement in speed, customer satisfaction and quality while also minimizing cost
and invested capital (Akkucuk, 2014). LSS aims to improve capability in an organization, reduce
production costs (Lee & Wei, 2009) and maximize the value for shareholders by improving quality
(Laureani & Antony, 2012). There has been a successful deployment of LSS in large organizations
such as Motorola, Honeywell, General Electric (GE) and many others and in some small- and medium-
sized enterprises (SMEs) (Timans et al., 2014). LSS has enabled many organizations, to solve more
problems quicker, and enhance the bottom line faster (Antony et al., 2017).
Competitive priorities provide a strategic emphasis on developing certain intended competitive
capabilities. Competitive priorities are used to describe the priority of operations selected from among
the key competitive capabilities of organizational functions and can be expressed in terms of four
basic components: cost, quality, speed (or delivery time) and flexibility (Peng et al., 2011). As the
business paradigm is shifting swiftly in the current competitive market, it is the right time to revisit
the critical dimensions of the competitive priorities. LSS deployment in supply chain attempts to
build on ‘competitive priorities’ in order to do really well along multiple outcomes. LSS combines
the two philosophies of Lean and Six Sigma, where Lean creates the standard while Six Sigma
investigates and resolves any variation from the standard (Breyfogle et al., 2001). The evolution of
LSS includes both the speed of Lean and the robustness of Six Sigma and focuses on both reduction
of defects and variation and also eliminating waste in the processes. With LSS, quality becomes the
responsibility of everybody as it introduces a formal organizational infrastructure for different quality
implementation roles (Sony et al., 2019).
Lean Deployment in SCM

SCM comprises the flow of goods from supplier through manufacturing and distribution chains
until the end user (Power, 2005). In the era of globalization, supply chains are being treated as
extended enterprises linking firms in different locations and enabling partners to gain competitive
advantage (Arif-Uz-Zaman & Ahsan, 2014). The focus of SCM practices must shift from functional
and independent to general and integrative initiatives (Theagarajan & Manohar, 2015). Successful
companies have linked their internal improvement processes with external customers and suppliers
(Frohlich & Westbrook, 2001). The supplier and customer integration emerge as an important element
to improve competitiveness beyond the organizational boundaries (Flynn et al., 2010; Frazzon et al.,
2015).
Lean Practices: An Overview

In 1987, a group of researchers from the International Motor Vehicle Program at MIT investigated
the production system at Toyota and came up with the term “Lean” to describe a system that needs
“less of everything” to design and produce products economically and with fewer errors (Womack,
2002). Hence, the word “Lean” was first used in the Future Car Investigation by MIT professors to
interpret Japan’s new production system that do away with mass production (Conti et al., 2006) since
it produces much waste. The term Lean thinking was coined by James P. Womack and Daniel T.
Jones to capture the essence of their in-depth study of Toyota production system (Womack & Jones,
2003). Lean thinking was born out of studying the rise of Toyota motor company from a bankrupt
Japanese automaker in the early 1950s to today’s dominant global player (Ndaita et al., 2015). Lean
thinking also called Lean manufacturing, Lean production, Lean principles, Lean practices or Lean
enterprise derive their names from a focus on reducing waste and minimizing costs thereby improving
efficiency in producing goods or services. Lean practices prioritize workflow efficiency by reducing
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waste and non-value-added (NVA) steps in a dynamic state of continuous process improvement. In this
context, waste is defined as anything that does not add value to the end product from the consumer
perspective (Meyers & Stewart, 2002).
Many service and manufacturing organisations have deployed Lean practices to improve their
performance (White et al., 1999; Shah & Ward, 2003; Liker & Morgan, 2006; Kajdan, 2008). Lean
is based on the absolute elimination of waste (Shingo, 1981; Zhang, 2014). By employing Lean,
organisations are able to save costs and increase the speed of operations (Sohal & Egglestone, 1994;
Claycomb et al., 1999; Motwani, 2003; Antony, 2011).
According to Lean approach, all activities can be grouped into three types (Nielsen, 2008):
1. Value-added (VA) activities: Activities which transform the inputs into the exact product or
service that the customer requires;
2. Non-value-added (NVA) activities: Activities which are not required for transforming the
materials into the product or service that the customer wants; and
3. Necessary non-value-added (NNVA) activities: Activities that do not add value from the
perspective of the customer but are necessary to deliver the product or service, unless the existing
supply or process is radically changed.
Lean strives to solve each problem by addressing the root-causes at their source, as soon as they
occur. Once the root-cause is identified, process is modified to prevent the problem from recurring.
Lean encourages incremental improvement of an activity to eliminate waste and helps to create more
value (Womack & Jones, 2003). Lean principles aim at reducing waste and variability in the processes,
adding more value to customers and providing operational performance improvement (Shah & Ward,
2003). Research shows a significant positive impact of Lean practices on operational efficiencies
(Iyer & Srinivasan, 2019). “Waste” is defined as anything that interferes with the smooth flow of
production (Macduffie & Helper, 1997). The eight types of waste (also called as ‘Muda’ in Japanese)
commonly referred in Lean process are given below (Rawabdeh, 2005):
1. Transportation
2. Inventory
3. Motion
4. Waiting
5. Over-production
6. Over-processing
7. Defects
8. Skills
Lean Supply Chain Practices

Lean practices can be applied right across the supply chain, from the procedure to place the order
with suppliers to product distribution and delivery to the customer, with the aim of optimising all the
activities as a whole from the final customer’s point-of-view. This is made possible by eliminating
wastage, improving quality, reducing costs and increasing flexibility at all stages of the supply chain
(Womack & Jones, 2003). Understanding waste types and Lean concepts typically enables operations
managers, procurement managers, and supply chain managers to effectively manage the waste at
different supply chain elements, reduce the operational cost, and improve the service level (Al-Aomar
& Hussain, 2018). Lean tools are used to reduce wasteful activities across the supply chain (Sezen
& Erdogan, 2009).
Lean supply is closely associated with enabling flow and the elimination of wasteful variation
within the supply chain (Stratton & Warburton, 2003). Lean practices strengthen the supply chain’s
45
competitiveness and sustainability (Marodin et al., 2016). Jakhar et al. (2018) explored the impact
of Lean on supply chain sustainability. According to researchers, Lean implementation positively
influences the implementation of sustainability practices for supplier selection and production but
negatively impacts sustainability practices for delivery and logistic services. Yadav et al. (2019) found
that the implementation of Lean practices is positively associated with the operational performance
of Small and medium‐sized enterprises (SMEs) in India. SMEs adopt Lean practices when they are
economy focused to reduce waste across their organizational value chain, which helps achieve supply
chain sustainability (Dey et al., 2019).
Lean SCM can be defined as a set of organizations directly linked by upstream and downstream
flows of products, services, information and funds that collaboratively work to reduce cost and
waste by efficiently pulling what is needed to meet the needs of individual customers (Vitasek et
al., 2005). As information sharing leads to substantial cost savings, it motivates trading partners
to share information in the supply chain and improve their performance (Zhao et al., 2001). The
adoption of Lean SCM entails a different business model, in which improved profits arise from the
cooperation rather than bargaining or imposing power over supply chain partners (Naim & Gosling,
2011; Chiromo et al., 2015).
A Lean supply chain aims to ensure that value is transferred downstream in the most efficient
way. A Lean supply chain means the identification of all types of waste in the value stream of a
supply chain and taking steps to eliminate them and minimize lead times (Abdulmaleka & Rajgopal,
2007). Lean supply chain creates a streamlined, and highly efficient system that produces finished
productsat the pace customers demand with little or no waste (Shah & Ward, 2003). A Lean supply
chain should allow a flow of goods, services and technology from suppliers to customers without
waste (Goldsby et al., 2006; Wee & Wu, 2009). The Lean approach in supply chain moves away
from the ‘transactional behavior’ to a supply chain strategy based on a long-term commitment to
supply chain partners. In ‘transactional behavior’ profit targets are short term and highly dependent
on market prices and the ability to negotiate strongly with suppliers or customers. While long term
approach involves cooperative and systematic waste elimination along the chain (Yusuf et al., 2004;
Agarwal et al., 2006).
With Lean, lead time are shortened in supply chain as wastes are continuously eliminated from the
supply chain process. The deployment of Lean practices in SCM improves supply chain performance
(Wu, 2002; Blanchard, 2010). Companies that have implemented Lean supply chain practices report
better variability management (variability decreased by 31%), reduce inventory by 35%, decrease cycle
time by 40% and enhance service level by 4.4% (Packowski, 2013). The main focus of Lean supply
chain resides in obtaining value and eliminating waste that occurs along the chain. An ideal Lean
supply chain will have zero defects in production, zero overproduction and unnecessary processing
capacities, no inventories, no unnecessary movement of people and goods, and employees will never
need to wait (Naylor et al., 1999; Goldsby et al., 2006). The implementation of Lean practices in
SCM is frequently associated with improvement on measures such as inventory levels (Bruce et al.,
2004), quality (Wee & Wu, 2009; Perez et al., 2010), supply lead time (Agarwal et al., 2006; Naim &
Gosling, 2011), delivery service level (Savino & Mazza, 2015) and cost (Stratton & Warburton, 2003).
Leanness in a supply chain refers to reduction of all kinds of waste in supply chain as it maximizes
profits through cost reduction (Naylor et al., 1999). Lean tools are used to reduce wasteful activities
across the supply chain (Sezen & Erdogan, 2009). Lean supply is closely associated with enabling
flow and the elimination of waste within the supply chain (Stratton & Warburton, 2003). Deployments
of Lean principles in SCM result in improved organizational outputs (Lewis, 2006; Cagliano et al.,
2006; Blanchard, 2010). Lean supply chain management can help healthcare organizations improve
the following domains: supply chain cost management, medication distribution systems, internal
interaction between employees, patient safety and instrument utilization (Khorasani et al., 2019).
Due to an increasing competitive pressure for shorter lead times, lower costs and better quality, the
principles of Lean manufacturing (LM) have been incorporated into the supply chain integrative
46
approaches (Cudney & Elrod, 2010). However, the adaptation of Lean practices from manufacturing
to SCM activities is not a simple process (Hines et al., 2004) due to several reasons, such as: (1) In
Lean Manufacturing, waste is easier to be identified and quantified; and (2) manufacturing processes
can be controlled through top management, while SCM requires attention for the entire chain, from
suppliers to customers (Anand & Kodali, 2008; Soni & Kodali, 2012).
Al-Aomar & Hussain (2019) have identified six main categories of Lean practices and 19 specific
Lean techniques as relevant to a hotel supply chain and found that JIT and Kaizen take the top priority
among the Lean practices while on-time service to customers, effective improvement system and
on-time delivery from suppliers were found to be the three most relevant Lean techniques. A Lean
implementation across multi-levels of a supply chain is extremely difficult to achieve (Bruce et al.,
2004; Taylor, 2006). Hence, at the level of the whole supply chain it may not be feasible to achieve
such ideal perfection (Tortorella et al., 2018).
Supply Chain Value Stream Mapping (SCVSM): A Lean Supply Chain Tool
Value stream mapping (VSM) identifies potential opportunities for continuous improvement to
eliminate waste in supply chain. Complex supply chain problem can be systematically analysed
and improved effectively by VSM. The VSM is a lean supply chain tool used by Toyota Production
System (TPS) to identify between wasteful and necessary value-adding activities. The Lean approach
in supply chain identifies all types of waste in the value stream chain and seeks to eliminate them
(Abdulmalek & Rajgopal, 2007). As Lean supply chain focus on continuous waste elimination,
VSM aims at no overproduction. VSM uses different but simple visual icons to express all activities,
which expose problems and wastes, and highlight improvements quickly. VSM begins by listing all
operations, and classifies them into value added (VA) and non-value added (NVA) (including waste).
The VA activities are those that customers are willing to pay money for tangible goods or intangible
functions. VSM had an effect on the plan stage by increasing productivity and reducing lead times
(Kuhlang et al., 2011).
Six Sigma Deployment in SCM

Six Sigma provided a problem-solving process for Motorola known as MAIC, which stood for
Measure, Analyze, Improve, and Control. As MAIC methodology effectively linked and integrated
the individual tools, employees could be trained in this one approach that was generic enough to be
applied to a wide variety of problems, eliminating the need to reinvent the wheel with each new project
(Antony et al., 2017). Apart from Motorola, GE also played a very significant role in the development
of Six Sigma as a methodology. As some projects of GE stalled because of a lack of clarity on the
specific problem being addressed, and on the overall objectives, GE decided to add a “Define” step
at the beginning of the MAIC process, created the process commonly known as DMAIC (Hoerl,
2001). The need for careful problem definition is critical as define step - a make or break step that
often-determined long-term success of the project.
Six Sigma is a quality improvement tool, employed in a systematic way through five steps of a
process lifecycle i.e. DMAIC (Define, Measure, Analyze, Improve, and Control) (Chase et al., 2004)
and incorporates the main steps of the PDCA (Plan, Do, Check, Act) cycle of KAIZEN (Conger, 2010).
DMAIC is used to improve an existing business process while DMADV is used to create new product
or process designs and it consists of the following five steps i.e., Define, Measure, Analyze, Design
and Verify (El-Haik & Roy, 2005). DMAIC and DMADV were inspired by Deming’s (Cheng, 2008).
Dasgupta (2003) examined the use of Six Sigma metrics to evaluate and improve supply chain
performance. Wang et al. (2004) studied Six Sigma concepts in supply chain supplier development.
Christopher and Lee (2004) explored the application of Six Sigma tools in reducing supply chain
risk. The role of Six Sigma in driving supply chain innovations has been investigated by Byrne et
al. (2007). Lin and Li (2010) demonstrated the importance of using Six Sigma metrics to evaluate
47
Figure 1. Lean versus Six Sigma: Selection criteria
supply chain performance. The application of Six Sigma in the hospitality supply chain has been
demonstrated by Kokkranikal et al. (2013). Six Sigma deployment in SCM positively influence an
organization’s overall business performance (Madhani, 2016).
Lean Six Sigma (LSS): Development of Conceptual Frameworks

Lean Versus Six Sigma
Lean is generally applied in a more knowledge-based approach, by applying time-tested principles, to
reduce waste and enhance productivity. Lean approach is not enough when problems are perplexing;
its causes are not known and hence there is no obvious way to address it using available knowledge
and experience. For such problems, a problem-solving approach making heavy use of data, such as
Six Sigma would logically be required (Figure 1).
Top-Down Versus Bottom-Up Approaches

Lean originated in Japan (within the Toyota Production System, TPS); and Six Sigma began life in
the US (within the Motorola Research Centre). Lean and Six Sigma have followed independent paths
since the 1980s, when the terms were first hard coded and defined. Lean approaches alone do not
take advantage of statistical tools and techniques present in Six Sigma and that Six Sigma alone does
not pay enough attention to increasing process speed and reduce capital investments (George, 2002).
Deployment of either Lean or Six Sigma alone results in various issues (Table 1).
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Table 1. Lean versus Six Sigma approach
Sr. No. Only Lean Approach Deployed Only Six Sigma Approach Deployed
(Bottom-Up Approach) (Top-Down Approach)
1 Processes are not under statistical control Unable to focus directly to increase the speed
of the process
2 Variations are not monitored Less attention to reduce the cost
3 Process improvements occur that are irrelevant to Unable to get quick return as data collection
the mathematical tools for quality control and analysis takes a long time.
(Source: Tabulated by author)
Lean is a bottom-up approach, where management plays a supportive role to form cross-functional
self-directed work teams and apply Lean tools. By contrast, Six Sigma is a top-down approach wherein
management plays a role in selecting projects, then championing and monitoring improvements (Vijaya
Sunder, 2013; Shah et al., 2008). However, Lean and Six Sigma when used together, the deficiencies
mentioned in Table 1, are corrected (Devane, 2004).
Why to Integrate Lean and Six Sigma?

Lean and Six Sigma are typically used to separate from each other. Many companies are only applying
one of the two methodologies (i.e. Lean or Six Sigma), without realizing that great benefits lie in what
the other methodology can bring. Such companies face troubles in prioritizing initiatives, allocating
resources, selecting the right methodology and proving financial gains. There is a drawback in applying
only one of these two methodologies alone (Salah et al., 2010).
According to Crawford (2004) Six Sigma can first beapplied to improve the processes effectiveness
followed by Lean to improve the system efficiency. Snee (2005) has suggested that Lean tools can be
very effective in the first stage of process improvement, where the aim is to eliminate waste as well
as unnecessary steps, and simplify processes, before starting to manage the more difficult problems
through Six Sigma. Thus, applying one methodology after another does not satisfy the idea of
integration where they should be used simultaneously to achieve the most benefit by leveraging their
synergy. The effective integration of these methodologies will provide a company with a competitive
advantage (Salah & Rahim, 2018). The integration of Lean and Six Sigma is the solution to overcome
the shortcomings of both, as they complete each other. The fusion of the Lean and Six Sigma is the
way for organizations to increase their potential improvement (Bhuiyan & Baghel, 2005).
Lean’s emphasis on process speed and Six Sigma’s focus on high quality are complementary
tools that have been combined into the Lean Six Sigma (LSS) methodology (Atmaca & Girenes,
2011). The integration of Lean and Six Sigma helps companies achieve zero defects and fast delivery
at low cost. LSS can be described as a methodology that focuses on the elimination of waste and
variation, to achieve customer satisfaction with regards to quality, delivery and cost (Byrne et al.,
2007). LSS addresses issues that are overlooked by Lean and Six Sigma when applied individually,
such as the process steps that should be tackled first and the order of what to apply first and to what
extent; it identifies the ways to achieve significant simultaneous cost, quality, variability and lead time
improvements (Lachica, 2007; Lean Sigma Institute, 2008). Lean approach is designed to improve
the speed and efficiency of an organization by eliminating waste while Six Sigma, is a continuous
improvement plan that is intended to reduce variability.
Lean and Six Sigma Phases Relationship

Although Six Sigma is adept at identifying and eliminating defects, it does not address how to optimize
the system by improving process flow. However, Six Sigma, focuses on quality rather than speed.
49
This lack of speed gained by Six Sigma is resolved by the Lean practices. Various phases of Lean
practices are explained below:
1. Identify: Define value from the standpoint of the customer by analyzing opportunity;
2. Map: Plan product delivery system as a continuous flow of processes that adds value to the
product;
3. Flow: The product should constantly be moving through the value stream map (VSM) toward
the customer at the rate of demand with the focus on improvement;
4. Pull: Products should be pulled through the value stream at the demand of the customer to deliver
performance rather than being pushed on the customer;
5. Perfect: The product should flow seamlessly through the value stream at the rate of demand to
improve performance.
Lean relies on observation and inquiry and starts improvements almost immediately. Lean
identifies where process improvements can be made to do things better, quicker, and cheaper. Lean’s
“5S” promote individual efficiency by ‘Sorting’ work in a prioritized fashion. ‘Simplifying’ access
so needed data are easily available. ‘Standardization’ of work process and bookmarks so anyone
can review another’s work. ‘Shining’ which is keeping work area clean, and the ‘Self-Discipline’ of
each employee to continually strive to do better. Tortorella et al., (2018) empirically investigated the
relationships among the implementation of 27 Lean supply chain practices within 113 manufacturing
companies from different sectors located in Southern Brazil and found that the relationship among
practices may not always be synergic. Lean approach is better for the improvement in the speed and
process flow rather than improvement in quality. Therefore, the best results are reached when Lean
practices and Six Sigma techniques are used together to support each other (Pojasek, 2003). This
approach has been used in Xerox, GE, Caterpillar, Johnson & Johnson and Dell (Brett & Queen,
2005). Six Sigma and Lean are very powerful continuous improvement (CI) methodologies that share
common goals and grounds in terms of striving to achieve customer satisfaction. Figure 2, shows,
the relationship between Lean and Six Sigma phases.
The define phase is where the understanding is formed to identify what is of value to the customer.
The Lean mapping of current state is a phase of measuring and analyzing. The Lean integration
forces measure and analyze phases to be closer to each other. The improve phase is where the process
flow is adjusted to make the value flow in a better way than what existed before by using the pulling
concept. Finally, the control phase is where the process is perfected by introducing controls. They
complement each other and can be integrated to form a superior methodology, i.e. Lean Six Sigma
(LSS), which overcomes the shortcomings of the individual methodologies.
Lean and Six Sigma: Complementary Relationship

The Six Sigma is a structured approach used to enhance process performance and achieve high levels
of quality and low levels of variability. As Lean approach helps organizations to achieve on time
delivery of the right quality and quantity to satisfy customers, Lean is used to eliminate waste and
work imbalance. Wastes include unnecessarily long cycle times, or waiting times between value-
added activities, and rework or scraps, which are often the result of excess variability, so there is an
obvious connection between Six Sigma and Lean (Salah et al., 2010a).
Lean focuses on waste elimination while Six Sigma focuses on continuous process improvement
to reduce variation. Lean and Six Sigma work together successfully (Atmaca & Girenes, 2011).
Lean concept focuses on reducing cycle time and waste in SCM processes while Six Sigma focuses
on reducing variation, measuring defects and improving the quality of products, processes and
services in SCM. Lean eliminates waste and NVA activities and with Six Sigma statistical tools and
techniques, it also increases the organization’s ability to use and to analyze data in business processes
and performance (Habidin et al., 2016).
50
Figure 2. Lean and Six Sigma phases relationship
The George group, A US-based consulting firm, first attempted to combine Lean and Six Sigma
concepts, known as the LSS (Sreedharan & Raju, 2016). Many companies have recognized that a
strong synergy is produced when these two initiatives are combined together in an effort to ensure the
successful implementation of quality initiatives in an organization (O’Rourke, 2005). Lean and Six
Sigma complement each other (Figure 3). LSS uses tools of both Lean and Six Sigma to obtain the
synergetic-best of the two concepts, builds up speed while also delivering quality output (Mader, 2008).
RESEARCH METHODOLOGY
As Lean Six Sigma (LSS) deployment in SCM practices is quite different from other industries or
services, this study proposes various frameworks to emphasize overall benefits as well as underlying
process of Lean Six Sigma (LSS) initiatives in SCM. A two stage methodological approach is adopted
in this research. In the first stage, research focuses on development of an S-V (Speed- Variability)
framework for highlighting transformation of traditional SCM practices with LSS deployment. The
second stage involves the design of an O-T-S (Operational- Tactical- Strategic) framework to identify
key benefits from operational, managerial and organizational perspectives. Hence, Stage I of the
research methodology focus on SCM transformation thorough LSS while Stage II of the research
methodology focus on Enterprise Excellence achieved by LSS deployment in supply chain.
Stage I: S-V (Speed- Variability) Framework for SCM Transformation

Six Sigma is all about defects and its key measure is defects reduction. Six Sigma is a data-driven
approach that focuses on precision and accuracy; systematically improving processes by eliminating
51
Figure 3. Lean Six Sigma (LSS) in SCM: Integration of Lean and Six Sigma
defects and minimizing variation to add value to the end customer. Lean ensures resources are working
on the right activities while Six Sigma ensures things are done right the first time. Lean is typically
driven by a need for quicker customer response times, a need for faster cycle times and a need to
eliminate wastes in all its form. Lean is all about speed and process cycle efficiency and focuses on
eliminating waste; and reducing time and costs with the objective of improving customer value. Hence,
focus of Lean is on process velocity. The core of Six Sigma methodology involves measurement and
evaluation as a way to quantify process outcomes, identify defects and make adjustments to improve
the process. In Six Sigma variation is enemy while in Lean waste is the enemy (Sahay, 2015).
Lean Six Sigma uses tools from both toolboxes, in order to get the better of the two methodologies,
increasing speed while also increasing accuracy. Lean is a process improvement methodology used
to deliver products and services better, faster and at a lower cost. Six Sigma is a data-driven process
improvement methodology used to achieve stable and predictable process results by reducing process
variations and defects (Laureani & Antony, 2019). Lean Six Sigma organization would capitalize on
the strengths of both Lean and Six Sigma (Arnheiter & Maleyeff, 2005).
LSS is the most popularly used improvement approaches (Pedersen & Huniche, 2011; Costa et
al., 2017). The main aim of LSS is to the maximize shareholder value by improving quality, speed,
customer satisfaction and costs (Laureani & Antony, 2019). Many large and world class organizations
have implemented LSS to continue to gain better performance improvement and later it becomes
as a competitive advantage (Antony et al., 2003; George et al., 2004). The integration of Lean and
Six Sigma aims to target every type of opportunity for performance improvement in organizations
52
(Snee, 2010). LSS is considered as one of the best strategies for business excellence (Sreedharan et
al., 2017). The combination of both Lean and Six Sigma leads to achieving continuous improvement
(Smith, 2003). Hendricks & Singhal (1996) studied the performances of 3,000 firms. Many of these
firms use LSS effectively. They found LSS firms were significantly stronger in terms of profitability,
return on assets (ROA) and stock performance compared to similar ompanies without formal LSS.
There is a direct relationship between continuous improvement (CI) and SCM (Salah et al.,
2010b). LSS aims to achieve total customer satisfaction and improved operational efficiency and
effectiveness by removing waste and non-value-added activities, decreasing defects, decreasing
cycle time and increasing first pass yields (Army Materiel Command, 2001). As shown in Figure
4, traditional SCM practices are characterized by issue of speed and variability. However, with
deployment of LSS methodology, traditional SCM practices are transformed to provide better, faster
and more cost-effective services, and improve customer satisfaction. Transformed SCM practices
are characterized by high speed and less variability.
Stage II: O-T-S (Operational- Tactical- Strategic)

Framework for Enterprise Excellence
The integration of Lean (the industrial engineering tool) with Six Sigma (the statistical tool) provides
an operational excellence methodology as they complement each other (Basu, 2004). LSS can help
achieve better system-level performance by focusing on cost reduction and quality enhancement
measures of products and processes. The goal of LSS initiatives is to transform the organizations from
separate reactive operations, which are functionally oriented, into cross-functional process focused
organizations. The result will be a customer focused, employee empowered and flexible organization
(Martin, 2007). The purpose of Lean Six Sigma (LSS) is twofold: (a) It transform the organization’s
overall business strategy from vision to reality by the execution of appropriate projects and (b) Creates
new operational capabilities that will expand the broad range of strategy choices going forward. LSS
is a key enabler of the corporate strategy, driven by the customer and business needs, to achieve
Figure 4. Stage I: S-V (Speed- Variability) framework for SCM transformation
53
competitive advantage (George, 2002). It can achieve faster improvements at less cost (Bogart, 2007).
An LSS model can be used to achieve measurable business improvement results for a company and its
customers. LSS is one of the best strategies for organizational excellence (Sreedharan & Raju, 2016).
The strategic, operational and tactical levels are the hierarchies in function, wherein policies and
trade-offs can be distinguished. Such a hierarchy is based on the time horizon for activities and the
relevance of decisions to and influence of different levels of management (Rushton & Oxley, 1989).
The strategic level deals with the top-level management decisions, reflecting broad based policies,
organizational goals and objectives, corporate plans and competitiveness. The tactical level focus on
resource allocation and measures performance against targets in order to achieve results specified at
the strategic level. Operational level measures include ability to deal with day to day operations and
require accurate data from bottom level managers.
Gunasekaran et al., (2004) developed supply chain measures at strategic, tactical and operational
levels of the framework. The concept of SCM, at the operational level, brings together diverse
functions such as seeking goods, buying them, storing them and distributing them. The operational
level schedules operations to assure in-time delivery to customers, and coordinates the logistics
network to be responsive to customer demands. Tactical decisions play a big role in controlling
costs and minimizing risks. At this level, the focus is on customer demands and achieving the best
end value. At the strategic level, SCM is a rapidly expanding discipline that is transforming the way
that supply chain operations meet the needs of their customers. At this level, management makes
high-level strategic supply chain decisions that are relevant to whole organizations. The strategy
level lays the groundwork for the entire supply chain process, from beginning to end. The strategic
level establishes the design of the logistics network and thereby provides the environment in which
tactical and operational levels must perform. As shown in Table 2, various levels of SCM processes
are divided in to three categories: operational; tactical and strategic.
SCM’s tasks in operational, tactical and strategic levels can be defined by the activities it performs
in each and how it links the operational, tactical and strategic levels in a closed-loop fashion (Figure 5).
A well-executed Lean Six Sigma (LSS) process improvement program can lead to significant
savings for supply chain in both time and effort expended; increase its efficiency and effectiveness
and ultimately enhances competitive advantage for firms (Figure 6).
Effectiveness is the extent to which a customer’s requirements are met in supply chain and
efficiency is a measure of how economically supply chain’s resources are utilized when providing a
pre-specified level of customer satisfaction. The application of LSS at operational level SCM practices
results in usual cost benefits (e.g. short-term benefits in routine transactional activities) whereas tactical
Table 2. SCM Processes: Various levels and activities
Level Activity
SCM Processes Operational Includes ability in day to day monitoring of logistics activity for contract and
order fulfillment, adherence to
developed schedule, daily and weekly forecasting to figure out and satisfy
demand and achievement of defect free deliveries
Tactical Includes procurement contracts for necessary materials and services, the
efficiency of purchase order cycle time,
transportation and warehousing solutions, production schedules and
guidelines, better inventory management and capacity flexibility
Strategic Includes industry norms and benchmarking, long-term improvements (cost
saving initiatives; lead time reduction etc.), creating a network of reliable
suppliers, transporters, and logistics handlers, better quality level, and
supplier pricing design
(Source: Tabulated by Author)
54
Figure 5. Lean Six Sigma (LSS) deployment in SCM: O-T-S linkages
level SCM practices focus on medium-term functional benefits of SCM process optimization. The
application of LSS at the strategic level SCM practices results in long-term organization wide benefits.
The operational level of SCM involves day-to-day processes, decision-making, and planning that
take place to keep the supply chain active. Effective operational level processes are the result of strong
strategical and tactical planning. The tactical level of SCM focuses on resource mobilization and
deployment with better functional investigation. Strategic level SCM practices drive the improvement
of processes through reduction of variability and waste elimination to achieve the strategic objectives
of the organization. Following illustrations explain successful deployment of LSS approach in SCM.
Caterpillar
The US-based Caterpillar Inc. is a global manufacturing company with presence in 180 countries
worldwide. Caterpillar was facing stagnant revenue growth which prompted the company to undertake
a massive transformation in January 2001. The company was one of the first companies to globally
launch Lean Six Sigma (LSS) program and deliver benefits that surpassed implementation costs in
the first year. Major operational changes were made in Caterpillar’s supply chain to systematically
de-bottleneck its order-to-delivery process. The production scheduling process at Caterpillar
manufacturing facilities were redesigned to cut lead times by more than 50 percent. Overall, the
results from Caterpillar’s LSS approach have been phenomenal (Byrne et al., 2007).
Cardinal Health
Cardinal Health, Inc. is an American multinational health care services company. The company
specializes in distribution of pharmaceuticals and medical products. Cardinal Health, found various
issues in its health care supply chain such as redundant warehouse assets, excess inventories leading
to losses and write-offs, and mismatched demand/supply locations. Hence, Cardinal Health deployed
Lean Six Sigma (LSS) approach in 2007, as a part of an initiative to drive collaboration in the health
care supply chain, with the goal of achieving zero errors, zero waste and zero lost revenue. As LSS is
data-driven, it also adds an element of trust to establish collaborative relationships. Cardinal focused
on product availability as well as visibility and responsiveness of supply chain by using predictive
55
Figure 6. Stage II: O-T-S (Operational- Tactical- Strategic) framework for enterprise excellence
analytics, to increase the speed of communication from the manufacturer to the end customer, LSS
initiatives led to improvement in supply chain performance as the order error rate dropped by 30%
over a three-year span (Blanchard, 2012).
MANAGERIAL IMPLICATIONS
LSS deployment in supply chain is increasing at a faster pace because it provides various benefits
leading to boost in top and bottom line of the organization. Various illustrations of LSS deployment
in SCM explained in this research emphasize that the focus of LSS is on reducing costs, working
smarter and doing things right the first time. LSS for SCM is a business improvement methodology
to reduce cost and enhance quality, process speed, customer satisfaction, return on investment
(ROI) and ultimately business performance. LSS is a method that can help organizations to improve
operational efficiency and effectiveness, by combining the strengths of Lean and Six Sigma. With
LSS implementation, organizations can achieve the three goals namely meeting customer demands
faster, working effectively on the level of Six-Sigma and working efficiently by achieving the low-
cost levels. Since Lean does not possess the tools to reduce variation and provide statistical control
and Six Sigma does not attempt to develop a link between quality and speed, the application of the
combined tool i.e. Lean Six Sigma (LSS) offers valuable answers that can lead to greater efficiency
and better service delivery in the SCM processes.
56
CONCLUSION
The speed, service quality and the cost of operations impact the supply chain performance. One most
popular approach for providing faster responses, improving quality and reducing cost in SCM, is Lean
Six Sigma (LSS). As LSS enables supply chains to become more efficient and effective in sustaining
continuous improvement, it is becoming a competitive tool. Lean focus on reducing cost through
process optimization while Six Sigma is about improving quality by measuring and eliminating
defects. LSS is not just about doing things better, it is a way of doing better things. LSS deployment
in SCM practices is highly beneficial as it enhances efficiency as well as effectiveness of operations
by positively influencing its operational, tactical and strategic levels and related activities.
LSS results into various operational, tactical and strategic benefits and builds competitive
advantages. As a strategic management tool, LSS deployment in SCM is considered to be an important
management philosophy, supporting organizations in their efforts to streamline operations, satisfy
customers and create differentiation advantages. Research develops various frameworks to emphasize
the role of LSS in enhancing efficiency and effectiveness of SCM processes. The study is unique
as it provides a structured approach that can help organizations in adoption of LSS across the SCM
processes to reduce wastes, create value, increase efficiency, enhance effectiveness and improve the
service level for sustainable performance.
57
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Pankaj M. Madhani earned bachelor’s degrees in chemical engineering and law, a master’s degree in business
administration from Northern Illinois University, a master’s degree in computer science from Illinois Institute of
Technology in Chicago, and a PhD in strategic management from CEPT University. He has more than 32 years of
corporate and academic experience in India and the United States. During his tenure in the corporate sector, he
was recognized with the Outstanding Young Managers Award. He is now working as associate dean and professor
at ICFAI Business School (IBS). He has received the Best Research Paper Award at the IMCON-2016 International
Management Convention. He has published various management books and more than 300 book chapters and
research articles in several refereed journals. He is also conferred as the ‘Best Professor in Strategy and Finance’
by ‘AMP Academic Excellence Award 2019’ for his academic and research contributions. He also serves as editor
of The IUP Journal of Corporate Governance.
65
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Enhancing Supply Chain Efﬁciency and Effectiveness With Lean

Article · September 2021

Dr. Pankaj M. Madhani

The user has requested enhancement of the downloaded file.

Enhancing Supply Chain

Lean Six Sigma (LSS)

Lean Deployment in SCM

Lean Practices: An Overview

Lean Supply Chain Practices

Six Sigma Deployment in SCM

Figure 1. Lean versus Six Sigma: Selection criteria

Lean Six Sigma (LSS): Development of Conceptual Frameworks

Top-Down Versus Bottom-Up Approaches

Table 1. Lean versus Six Sigma approach

Why to Integrate Lean and Six Sigma?

Lean and Six Sigma Phases Relationship

Lean and Six Sigma: Complementary Relationship

Figure 2. Lean and Six Sigma phases relationship

Stage I: S-V (Speed- Variability) Framework for SCM Transformation

Stage II: O-T-S (Operational- Tactical- Strategic)

Figure 4. Stage I: S-V (Speed- Variability) framework for SCM transformation

Table 2. SCM Processes: Various levels and activities

Figure 5. Lean Six Sigma (LSS) deployment in SCM: O-T-S linkages

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