People talk about Six Sigma in Retail as a big opportunity

In fact, six sigma is one of the big buzz words in project management overall. But it’s often an unrealistic goal that can waste money – so why are people talking about Six Sigma in retail, still?

Six sigma is a term to describe process output quality – and it demands near perfection.

Literally speaking, it’s a statistical and mathematical term. Sigma is a term for standard deviation, the spread of data.
“Six sigma” originates from a manufacturing environment where accuracy is important to cut costs and prevent further issues and customer dissatisfaction.

So “Six sigma” looks at the spread of your data and aims to have almost every point within plus 3 “sigmas” or minus 3 “sigmas” of your mean or average. You’ll need to achieve an accuracy of 99.9997%.

Imagine throwing a few darts at a dartboard. How did you do? Were they close together or were they far apart? A close, tight grouping means you have low variation, a low standard deviation or sigma. All over the place – that’s a big spread, a large standard deviation or spread.

Now throw a MILLION darts. Six sigma will mean that you miss your target 3 times only. Or 3.4 to be precise.
Six sigma means that you’ll only have 3.4 defects per million opportunities (often referred to as DPMO). Think of that for a moment and apply six sigma to the retail world:

• Depot picking for store orders – 3.4 mis-picks per million picks
• On shelf availability – only 3.4 out of stocks across a range of a million lines
• Customer service – 3.4 customers out of a million served within your agreed target

I’m sure you would be delighted if you managed to achieve these types of targets – am I right? But do your customers really demand that of you?

This all leads to the fact that six sigma in retail is often a quality requirement well over the top of what’s required, particularly within a retail operations perspective. In turn, striving to achieve these levels of quality can often cost a lot to be able to achieve and would far outweigh the benefit that they would drive.

So Why Is Everyone Still Talking About Six Sigma in Retail

Six sigma is now also known as a methodology where data collection and analysis plays a large role to be able to reduce defect and errors. This is what is exciting people.

Heavy use of data can make it easier to measure performance and quantify benefits. It is a concept based upon confirming a standard baseline performance and then applying changes to show improvements in that performance.

If we think of a retail environment again, you could find best application of six sigma principles by applying to aspects such as stock record accuracy, delivery on time %, getting your distribution or online order picking right or making sure there are no pricing errors. These are all accuracy based metrics.

And this is where Six Sigma principles are best used – to reduce variation so that you can eliminate errors and inaccuracies in a drive towards perfection.

How Can I Learn More About Six Sigma In Retail?

Six Sigma is often tied to another principle called “Lean” (you can read more about lean in retail project management here) – in a term inventively called Lean Six Sigma.

You can get qualifications in Lean Six Sigma in the form of “belts”. Like judo or karate, you start with a white belt, through yellow, green and finally onto your black belt.

Each level gives you greater statistical awareness and drives you to analyse your data set and think carefully about your results and how to best make changes.

I recall when I first started on my Lean Six Sigma journey. It was back in 2004 and it was presented as a way of jumping across the “burning platform” that faced the business I was working for at the time. It was a very exciting proposition – the opportunity to focus on what’s important to customers and ensure that we delivered that every time, without fail.

Over the course of the next few years, I proceeded to pick up the full range of belts and a large set of “tools” along the way.

Lean Six Sigma has been invaluable to me as I shaped the last 10 years in particular and was a part or my move from Engineering into Supply Chain and then into Retail.

I’ve worked out the best ways to bring the Lean Six Sigma methods and toolkit into the retail industry and when and how to best apply them.

Whilst they are a great set of tools, you will find that not all tools or techniques are applicable to the retail industry. So if you do decide to pursue a classic lean six sigma belt, please consider this and work out which elements are going to be most relevant to your ongoing work.

Different elements of Lean Six Sigma will be relevant for you depending on the different divisions of retail that you focus on – be it product design or customer insight, manufacturing (own brand labels and products) or store operations.

The Six Sigma methodology is more useful for retail

As you now know, Six Sigma is a statistical term to drive towards quality which in turn can lower costs and will increase customer satisfaction. It is the methodology and concept, not the literal six sigma target, that is likely to be more relevant, useful and beneficial to your interest in a retail environment. You must consider which elements, tools and techniques will be most important to focus on.

If Six Sigma in retail interests you, please comment below or if you have a specific question, please reach out by filling in the contact form below.

About the Author

Oliver Banks is an expert project and programme manager. He first engaged with the Six Sigma toolkit whilst at Xerox in 2004. He then certified in the Lean Six Sigma Green Belt and then Black Belt. Oliver has run projects focused on driving efficiency in specific parts of an operation as well as designing lean operating models.