It was only a matter of time before the ever-popular Six Sigma would reach the college classroom. I was reading an article about how York College in Southeastern Pennsylvania has begun to offer a course in Six Sigma in its MBA program. This is one of many MBA programs now offering Six Sigma courses. The York College program is designed to give students an understanding of Six Sigma, but not get them certified. The college plans to add several more classes to create a Six Sigma concentration so that students will be able to sit for the certification exam. Whether or not the students do become certified, I do think it’s a good idea to teach the Six Sigma tools. However, I sure hope that the MBA program will place sufficient emphasis on the strategic end of Six Sigma, not just the tools. As business schools hopefully teach about business strategy and policy, Six Sigma will be taught as a methodology linked to strategy and not just as another haven for tool heads, a subject about which I ranted on Spend Matters last August. Hopefully the head of the business school, who referred to Six Sigma as “lean operations practices” sits in on a few of the classes himself to gain a better understanding of what Six Sigma actually is.

While York College and others may thinks they are in the forefront of teaching continuous improvement practices and tools to students, there’s a high school in Massachusetts that in the 1990’s adopted TQM both as an internal process and as part of the high school curriculum – Minuteman Tech in Lexington, MA. The superintendent was ahead of his time with this approach. I have two sons who graduated from this school. What was good about teaching TQM and its problem solving techniques was that the students not only learned about the principles and practices in the classroom, but they saw the school implementing what it was teaching them. Minuteman was ahead of its time. And sadly, with the retirement of that superintendent, the school no longer espouses continuous improvement as part of its curriculum or operations.

In the case of York College, it appears that Six Sigma will simply be part of the curriculum, but not be adopted outside of the classroom to improve the performance of the whole college. While the students will have the knowledge gained in the classroom, they will not get the opportunity to experience Six Sigma in action in the college, which would give them far more understanding than just pursuing it as a course of study.

-Sherry Gordon

Companies have typically viewed suppliers as a source of cost that needs to be reduced, as supplier costs directly impact the bottom line. And it’s a given that procurement is always under pressure to fulfill the cost reduction mission. But in the process of viewing suppliers as big dollar signs that need to be squeezed, firms neglect some significant opportunities to derive value from suppliers in addition to reducing costs. Here are 6 ways that suppliers can add value.

• Contribute to product and process innovation. Using suppliers as a source of new technology in areas that complement a customer firm’s own competencies is a way derive value from suppliers. Working jointly with suppliers to develop new technologies expands the capabilities of internal new product development functions. Because IP is at stake, this type of collaboration is based on a good customer-supplier relationship and requires both trust and legal agreements. At Boeing, for example, working with product development suppliers is considered critical to its future.

• Help customer firms enter new markets. Because of their location or type of product or service, suppliers can help provide an entrée to new markets and new customers for a customer firm.

• Provide incremental revenue and profits. Suppliers can help their customers enhance products and product features that will generate additional revenue.

• Help improve end-customer satisfaction. As suppliers’ order-to-delivery velocity increases, their customer will benefit in several ways. Since purchasing lead time depends on supplier cycle time, improved velocity at suppliers provides competitive advantage in a customer firm’s own market responsiveness.

• Free up inventory dollars and improve cash flow. Improving supplier cycle time velocity exposes many other issues such as excess inventory and quality problems. As purchased part lead times and quality problems decrease, the customer firm will need to keep less inventory as safety stock. Cycle time reduction may require supplier development projects with key suppliers. At first the supplier may reap more benefits, but ultimately the customer will benefit from improved supplier performance and faster supplier cycle times and responsiveness.

• Contribute to business process and practice innovations. Jointly solve problems with suppliers and share ideas and best practices. Suppliers may provide solutions to problems that a customer firm has no capability to solve alone. Some customer firms are so entrenched in the mindset of managing suppliers as a one-way flow of information and expertise that they forget that suppliers may have valuable practices or processes worth adopting.

When trying to prove to senior management that supplier relationship management is more than just goodness or the right thing to do, companies should play the value card. The opportunities for making money through additional supplier value can be greater than focusing only on cost reduction. Saving money is essential. But as the saying goes, you can’t save your way to success.

I was reading the recent blog post at the Spendmatters:   Beyond Shedding the Deadweight in Procurement and Operations. Instead of just cutting headcount, particularly in procurement, Jason Busch suggests other ways to approach cost reduction. Among the suggestions are: driving better efficiency by fully using software solutions in the Procure-to-Pay cycle; using third parties to help you outsource and cut spend; and last, cutting inventory as much as possible and working with critical suppliers to help them reduce their cost structures.  I’d like to add lean to list, both as a continuous improvement toolset and as a way of thinking. Companies should be deploying lean thinking and lean enterprise practices to help remove waste in the entire company. Waste is defined as creating no value and as something that a customer would not want to pay for.

OK, so you’ve heard a lot about lean and maybe your company has a lean initiative going on. Many people still think lean something you do only on the factory floor and it doesn’t pertain to them if they work in an office. No, it’s not just for manufacturing wonks. Or else I hear, “Yeah, we’re lean. We’ve cut everything to the bone.”  That’s lean and mean or lean anorexic, not the real meaning of Lean Enterprise.  Lean and mean is a cost-cutting exercise and is not real Lean, which is a systematic elimination of non-value added activities (i.e., that do not add value to the customer or that the customer would not want to pay for). Cutting 10% across the company is a desperation mentality, value-add and customers be damned, like amputating your own limb. Desperate measure for desperate times.

So what about lean in relation to all things procurement and suppliers? Lean thinking, tools and culture afford the opportunity to reduce and eliminate the sources and causes of waste and cost that come from doing things the way they’ve always been done. It means not just helping suppliers improve their operations and cost structures, but also addressing one’s own internal process inefficiencies that often adversely impact suppliers’ ability to meet customer requirements.

Traditional procurement maintains a big supply base, a short-term focus and is internally driven. Lean procurement is system-oriented with a focus on total cost and internal and external customers. The traditional mentality is to get a better price (’cause that’s what we’re measured on), but potentially pay later in quality, delivery and service issues. Now is the time to look at the supply base and decide based on best value, including performance, which suppliers to focus precious resources on and whom to disengage. Procurement can adopt lean practices such as value stream mapping to identify non-value added activities. It can look at internal workflows and at those involving suppliers. Visual systems (5S) in the office can be used to improve the procurement and supply management work environment so that people don’t waste time looking for things or even waste space. Procurement can identify not only the problems, the root causes of the problems. It can uncover:  Where are the bottlenecks? How much do people have to wait for the next step in the process or for resources due to work imbalances and bottlenecks? And who manages the waiting, which is in itself only additional waste? Procurement should work in concert with other functions to expose and eliminate hidden cost drivers such as: customer complaints, long lead times, systems issues, quotation errors, incoming inspection, expediting, excessive paperwork, poor controls, poor communications, poor supplier quality, etc. Or, eliminate the extra steps and waste in what can be called the inter- and intra-company circle of waste – that is, the waste that occurs in the business processes pertaining to and between customers and suppliers or in the white spaces.

But most importantly, in addition to working on important supplier performance improvement and development projects, procurement can adopt a continuous improvement/lean mentality and culture within its own function both as a model to its suppliers and as an important step to do its part to help restore the entire company to financial health.