Process Analysis is the documentation and detailed understanding of how work in a company is performed and how it can redesigned. By looking at the business’ strategic issues you are able to identify opportunities for improvement. Process analysis begins with identifying and defining a new opportunity for improvement and following through with implementing and controlling the revised process.
L’Oreal is the world’s largest cosmetics company and had earned a winning title on the Gartner’s Top 25 Supply Chain, but not before a dramatic makeover of their supply chain. The company has a highly complex operation with over 34 brands, 150+ distribution centers and 8 distribution channels. These are challenges that require the supply chain leaders of L’Oreal to have a certain amount of adaptability to keep their global customers happy. This blog post will be dedicated to L’Oreal and how the brands strategic move to redesign their supply chain can be looked at through the perspective of the Six Sigma Improvement Model.
From what we learned in class, we know that the Six Sigma method is a methodology for improving the quality of operations management by eliminating errors, reducing costs, and creating more efficient operations. The Six Sigma Improvement Model can be applied to L’Oreal’s process improvement.
Define – the first step in this process is identifying the scope and boundaries of the process that must be analyzed. Once scope is established, it is crucial to determine the characteristics of the process’s output that are critical to customer satisfaction. L’Oreal’s previous approach was to segment each distribution channel. With over 7,000 employees working across brands, the company identified a need to centralize and regulate the processes that were individual to specific areas of each brand to make sure the same levels of quality and service were being provided. It
Measure – Metrics are performance measure for the process and the steps within it. For L’Oreal, the corporate head of supply chain measured improved sales forecast accuracy rates, lower costs of logistics, and increased shipments as their key metrics during the changing period of their supply chain.
Analyze – During this stage of the process, it is essential to identify the root causes of specific problems to understand what changes need to be made and the best tactics to achieve those goals. From the perspectives of experts on the team, the key to the efficiency improvements mentioned above was the closer involvement in supply chain executives in the sales forecasting activities that would otherwise be the responsibility of sales and marketing teams. The L’Oreal Team identified that the type of transformation they were looking for would only be possible if the supply chain was closer to the markets and customers from the starting point to the end.
Here is an interesting video from the VP of the US Market Supply Chain at L’Oreal. Here she talks about how specific internal changes related to the supply chain have led to improved performances. She goes in depth about the role of the consumer will be touched on in a later point.
Improve – This step entails using analytical and creative thinking to generate a list of improvements. It should be made clear how the revised process will work, the expected performance expected, and the various metrics that will be used. From there, changes are implemented. For L’Oreal, in each market the company now has supply chain teams dedicated to customers that report directly to the general manager of the market. This way there is a proximity and accountability of the supply chain within specific markets.
Control – After the improvement phase, the company must monitor the process to make sure that performance levels are maintained. There was a new set of IT visibility platforms put in place that allowed supply chain teams to see on an item level how sales were performing in customers’ facilities. This then gave insight into other factors like how price promotions were performing and what future sales forecasts would look like.
Why do you think a tool like the Six Sigma Method is beneficial to a large company like L’Oreal? How would it differ for a smaller company? A service based company?