The document discusses the improvement of customer satisfaction and operational efficiency through Lean Six Sigma and business analytics in third-party logistics (3PL) environments. It outlines a range of hard and soft savings achieved from various initiatives, addresses challenges faced by 3PL providers, and emphasizes the importance of data management and employee performance in achieving organizational goals. Additionally, it offers insights into performance measurement, logistics economics, and technologies that enhance processes within the industry.

1. LEAN 3PL VALUATION
(USING LEAN SIX SIGMA& BUSINESSANALYTICS TOOLS)
RF SCANNER SOLUTION
ASIF RAZA
SENIOR LEVEL BUSINESS ANALYST & LEAN SIX SIGMA MASTER BLACK BELT
GLS6SOLUTIONS, AN IPS3LLC COMPANY
WWW.GLS6SOLUTIONS.COM

2. Six Sigma Lean T.O.C SMED
A3 Report 8D Analysis MSA
Customer satisfaction improves not
because goods are more reliable and
have fewer defects but because
the entire process that the customer
experiences from start to finish, from
the sales office all the way through
delivery and post-sale servicing and
technical support, is improved.
Know your data, know
your techniques, and
know your problems…
then tackle them!
Functional Business
Analysis

3. Customer satisfaction improves not because goods are more reliable and have fewer
defects but because the entire process that the customer experiences from start to finish,
from the sales office all the way through delivery and post-sale servicing and technical
support, is improved.
Over 1200 projects and over $9million later…

4. Hard Savings
1. Permanently remove labor, wages, benefits, etc.
2. Sell a building, or end lease/rent real estate.
3. Eliminate direct material costs or reduce to lower cost level.
4. Running product to the lower end of a specification to save on material.
5. Reduction in insurance premiums
6. Reduce indirect materials cost or eliminate the use.
7. Reduced inventory levels of product or material, or reduce cost of carrying the same level, often at the WACC.
8. Overtime reduction.
9. Eliminated sorting by instituting Lean Six Sigma to prevent defects.
10.Utility or natural resource reduction or elimination.
11.Scrap dollars reduced or eliminated.
12.Taking advantage of a payment term discount when the savings exceeds your company's weighted average cost of capital
(WACC) or also known as the hurdle rate.( impacts cash flow and working capital so this should be negotiated with
approval of Finance)
SOFT Savings
1. Improving 5S score of an area.
2. Reduce RPN on PFMEA for particular failure mode Improved customer/employee satisfaction.
3. Reduced insurance plan due to reduced hazards, exposure, or frequency.
4. Shift work task of employees but overall hours worked are not reduced.
5. Improve service level (unless it can be documented that it directly related to new sales or profit).
6. Improved ergonomics or environmental, health, and safety conformance (may be hard savings if it directly avoids a fine that
has been accrued for).
7. Reduced walking distance of an operator unless direct savings can be tied to this.
8. Alleviated floor space or machinery but it is not sold or used to produce new income.
9. Avoiding the purchase of additional planned equipment or material.
10.Future manpower need reductions.
11.Improves morale of workforce or customers.
12.Reduce projected warranty costs.

5. Study Conducted by Supply Chain Engineers and Business Analyst, in Conjunction with Northern Illinois University,
Purdue, Dept., of Business Analytics and Advance Lean Tools, & APICS. Nov: 2011 Thru March 2013.
Hard Logistics
Solutions
Economics &
Financials
Technology
& Integration
Soft Future Value Add Service
Delivery
6 Main Evaluation Criteria For Selecting 3PL
55% complain about 3PLs IT systems as the information is not available and visible when required.
46% of shippers complain about unrealized service level in terms of timeliness (Lansonne and Raza,
2012) where timeliness is defined as “the ability to keep promises regarding timeframes”.
As 3PL’s customers increasingly rely on external partners located worldwide, the number of locations
and actors involved is growing calling for 3PLs to manage them through control towers, (Ty, Raza,
2013) “a central repository for all event data”.
3PLs face the challenge of handling increasingly complex information flows and making them visible
to shippers.
Logistics (Raza, Capenni, 2012) providers have seen their internal
processes increased in complexity while the quality problems that 3PL’s customers
face today, are still numerous.

6. Operations Data
% Total Customers each plant =
common suppliers each plant (Cost of doing biz, meet demand, turn around time, DOE,
etc.)
# Suppliers paying transportation (prepaid)
# truck load carriers
#LTL===
Total Outside warehouse space
Total space used for FG=
Total space used for raw Mat'l storage
Average cubic meters per trailer=
Financial Data
Sales
COGS
Raw Mat’l spend
Avg. Finished goods Inv.
Avg. raw Mat'l inventory.
Logistics Cost Component
Ordering
Supplier mgmt.
Transportation spend
(inbound + Outbound)
Outside warehousing
Yard control
Receiving mgmt.
Inv. Carrying cost
Admin Ohd
Cost of capitol
Damages (total)
Insurance
Plant shuttles
Forklifts systems
Obsolescence
Shrinkage
Space
Taxes
Salaried workers + Hourly Workers + Temporary (seasonal) workers=
Work Load Analysis, Performance Analysis.
Cost of shipment/shipment load $405/1440 = $.28/ib
Variances will come from freight class, carriers, pick up & delivery points.
VoC, Quality, Cycle time, Takt Time, 5S, 5m+e,VSM.

7. Damage= Creases, Tightly
Wrapped or Loosely, loose
pieces. Note: Trend
Analysis including which
supplier, route, products,
anomaly/commonality.
L+Girth=L+{2W+2H}
Bursting + Edge Crush Test, all about
Packaging.
http://www.fedex.com/ca_english/shippingg
uide/preparepackage/packagingbrochure.pd
Order Transmission sets the
course for the day. Clear
communication with the client,
and call center, orders sitting in
the system creates failures
and all sorts of costs.
Order Entry
• Min, max, average time for order handling
• Percentage of orders handled within target time
• Perfect Order Rate
• Back Order Rate
Order Documentation Accuracy
• Percentage of order documents with errors

8. Any process along a value stream that sets the pace for the entire
stream. (The pacemaker process should not be confused with a
bottleneck process, which necessarily constrains downstream
processes due to a lack of capacity.)
The pacemaker process usually is near the customer end of the
value stream, often the final assembly cell.
The Pacemaker

9. Some key concerns are reflected below:
1. Transportation costs – skyrocketing oil prices affect
all modes. Unless some of these costs are hedged,
they can fluctuate wildly from quarter to quarter
2. Security threats – this can include anything from
Japan’s earthquake and tsunami to Somali pirates.
Even closer to home, Mexico’s drug cartels can
disrupt supply chains
3. Inventory policy changes – anything from
companies being acquired to loss of client business
or ownership changes
4. Infrastructure concerns – congested sea ports, air
freight delays, etc. all affect the 3PL industry at one
time or another. Tracking is critical in this issue.
“You will not find it difficult
to prove that battles,
campaigns, and even
wars have been won or
lost primarily because of
logistics.” - General
Dwight D. Eisenhower
Learning points from Military Logistics

10. MOST (mission, objective, strategy,
tactics)
Mission: A very big and dynamic word. CEO has a mission for his/her company. It is the ‘what’ and
the ‘how’ follows it.
Objective: Many smaller objectives/goals make a mission, it is the ‘what’. Goals/Objectives are
met only when the activities arrive to the desired results, hence the mission is completed.
Strategy: is the ‘how’ that follows the ‘what’. That’s what we do, develop strategies to
enhance business efficiencies.
Tactics: smaller, carefully planned moves to achieve strategy, it is the ‘what’ and not the ‘how’.
The military achieves its logistics efficiency through process and process, that have been defined in the
world of lean six sigma. From 2.4Sigma in 1990s to 4.4Sigma in 2011, savings of over $32billion.
Are your employees all trained in their areas of work?
Are they all aware of their objectives/goals?
Do they feel ownership of their mission success or failure?
Have you given them the resources and training to accomplish their mission?
Does your team struggle with UPC labels, packing instructions or shipping locations.
How about them Supervisors, Managers and them HR personnel? (Communication and not posters)

11. Organizational Objectives
Organizational Performance
Measures and Targets
Organizational Improvement
Actions
WHY DO WE EXIST?
WHERE ARE WE GOING TOGETHER?
WHAT RESULTS DO WE WANT?
HOW DO WE WANT TO ACHIEVE THE RESULTS?
HOW CAN WE MEASURE THE RESULTS?
Organizational Critical
Success Factors
WHICH FACTORS MAKE US UNIQUE?
Organizational Mission
WHICH VALUES ARE MEANINGFUL?
Organizational Core Values
Organizational Vision

12. March 2012-
March 2013
Further investigation of the slack and surplus
variables for W1 and W8 indicates that both
warehouses were penalized by the DEA model.
W1 was penalized for the high cost of technology and low throughput volume,
W8 was penalized for the high cost of technology and excess labor hours.
From the standpoint of efficiency, it seems reasonable that a firm should be penalized for
investing in technology but failing to reap the benefits.
Employees Productivity and Focus broke down in mid afternoon and mid evening, while call
centers dropped calls spiked in those times.
Further investigation showed that warehouses that performed lean operation worked at 74%
efficiency while the ones that had three shifts performed at or below 52%.

13. Improving
Developing
Learning
Project Alignment

14. Alignment takes time, patience, strategies and unique
tools that have dimensions and are cognitive.
Core Job
Dimensions
Critical Psychological
States
Personal & Work
Outcomes
Skill
Variety
Task Identify
Task
Significance
Experienced
Meaningfulness of
the Work
Autonomy
Feedback
Experienced
Responsibility for
Outcomes of the
work
Knowledge of the actual
results of the work activities
Low Absenteeism at work
Employee Growth Need & Strength
Mps= (sv+ti+ts)/(3)*(a*f)
mps Fail X<45
mps non contributor 45 - 55
mps passing 55 - 65
mps Contributor 65-75
mps Exceptional X>75
Motivating Potential Score
High Internal
Work Motivation
High Quality Work
Performance
High satisfaction with
work
Employee Analysis

15. Four factors affect an employee’s level of
performance:
skill — talent and proficiency
technique — efficiency and effectiveness of
methods
activity — time spent staying on task
rate — level of effort expended
What about them employees, Huh?
Employee(VALUE) = Productivity + Promote ability + Transfer ability + Retain ability
Absenteeism is a cost to the company. Turnover is very costly. Cost includes
termination-vacancy-replacement & Learning Curve Productivity Loss=6
months nonexempt person’s pay and benefits=1 year of a professional
manager pay and benefits.
Human Capitol
Pay & Benefits
Contingents Pay
Cost of Absenteeism
Cost of Turnover
This is what I call Human Capitol
Valuation…next Seminar.
I need the
money..$$
$..yeah…
uh
uh…must
work
overtime
Performance Analysis:
1. Task done by an employee with desired statistical
results, which can easily be calculated to project the
future results based on current performance.
2. UPH, Units per Hour.

16. How do you arrive at Productivity Measure in your plant?
Take into account multiple variables rather than a single measure of
UPH. Though the variables were similar in definition from
operation to operation, the pickers earned varying time credits
for each.
I know three common variables that can be effectively used to
measure productivity:
1. Number of units picked
2. Active locations visited
3. Shipping cartons filled.
We set rigorous schedule to ensure that all DC workers took part in a
one-on-one coaching and feedback session.
The result: The picking operations improved productivity more than
60%.
Improving Employee Work Output
To improve you 3PL picking, try “with/to/from” analysis:
1. With what are you picking: forklift, guided vehicle, on-foot worker?
2. To what are you placing the picked item: carton, pallet, tote?
3. From what are you picking: pallet, bin, carousel, static rack, flow rack?

17. The following areas components of measurement error needs to be
studied and quantified before establishing capability of a process
making decisions from the data.
1. ACCURACY / BIAS
2. RESOLUTION / DISCRIMINATION
3. LINEARITY
4. STABILITY
5. REPEATABILITY & REPRODUCIBILITY (Gage R&R)
Accuracy / Bias
The difference from the true value and the value from the
measurement system. Accuracy represents the closeness to a defined
target. For best accuracy of the data:
1) Accept all data as it is collected. Assigning special cause and
scrutinizing the data can come later.
2) Record the data at the time it occurs.
3) Avoid rounding off the data, record it as it is.
4) On the data collection plan, record as many details around the data
such as the exact source, machine, operator, conditions, collector’s
name, material, gage, and time. Record legibly and carefully.
The data should be screened for misplaced decimal points, duplicate
data entries by mistake or improper recording procedure, missing date
points if frequency is important, and other obvious non-representative
data.

18. Lets Talk Efficiency…
Cycle Time
Lean Takt Time & NVA
“Cycle time” is the total manual work
involved in a process, or part of a
process.
Lead time is the time it takes to process the order from Status
Order Processing to Status Arrived at Customer Location.
Cycle time starts when the work order is Status WIP to status
RTS. Lead time is what customer sees. Cycle time is
essential part of in-house Process Improvements.
Available Minutes for Production / Required Units of Production = Takt Time
Let’s assume a single 8 hour shift on a 5 day work week. There is a 1/2 hour unpaid lunch break in the middle of the day, so the
workers are actually in the plant “at work” for 8 1/2 hours. (this is typical in the USA, if you are in another country, it might be
different for you)
So we start with 8 hours:
8 hours x 60 minutes = 480 total minutes
But there is a 10 minute start-up process in the morning, two 10 minute breaks during the day, and 15 minutes shut-down and
clean up at the end of the shift for a total of 45 minutes. This time is not production time, so it is subtracted from “available
minutes”:
480 – 45 = 435
A very common mistake at this point would be to subtract the 30 minute lunch break. Subtracting it again would count it twice.
So Takt time, use 435 minutes as the baseline. If leveled customer demand was 50 units / day, then the Takt time would be:
435 available minutes / 50 required units of production = 8.7 minutes (or 522 seconds)
Note that you can just as easily do this for a week, rather than a day.
435 minutes x 5 days = 2175 total available minutes
2175 available minutes / 250 required units of production still equals 8.7 minutes (or 522 seconds)
Lead Time

19. RFScanner…
GLS6Solutions.com
Most times, workers have to sign on to a new session if their barcode
scanning gun failed, which took time and would loose most
performance based information, also could mean doing some things
over. But with the new Advanced Terminal Session Management
(ATSM) capability which is Windows-based management application.
You can swap the user's previous session to a new device. What's
more, the replacement device can be the same type, a different type,
or even a legacy device, which can now be used as a spare.
We support Secure Shell (SSH) emulation, which
enables users to completely eliminate intranet from
their emulation environment. There is a high level
of security implications and complying with the
Sarbanes-Oxley Act that allows us to configure the
guns live session environment.
Broken Screen
Damaged Casing
Keyboard not working
Communications
Issues
Log in Issues
Lack of RF Scanners
Scanners not charged
ETC

20. Email your questions to Asif (Ace) Raza
araza@gls6solutions.com