One of the most common reasons that lead to piling up of outdated and excessive inventory is the wrong forecasting of requirements. The other important factors are bad quality and extended lead time. On ordering large-sized lots, there is an increase in lead time also. It can also go up when the schedules are not met with. If there is a mismatch of demand and supply due to inaccurate sales projections, the inventory is bound to go up.
Lean Six Sigma is useful for reducing the waste or redoing the job, continued processing for reducing inventory and piling up of outdated stock. It is also possible to use this for improving the quality of production, which eventually leads to a reduction of rejections, and thus wastage.
How Lean Six Sigma can be applied at root levels
On making use of the DMAIC method, teams using Lean Six Sigma can know the basic reasons responsible for causing the pile-up of extra and outdated inventory. Taking a cue from an Excel-based inventory model, the team should not find it difficult to assess the main causes on following the Six Sigma root cause philosophy of Y=f (x) to scrutinize and recognize the fields having problems. These may also be employed to indicate marketing, sales, manufacturing and such functions in the supply line that can cause high lead-time, and therefore develop demand management practices.
When looking to improve projects, the team starts by studying the stocks and defining the goals of that project. The team uses the defined goal as a guideline for system operations. Input data is derived from the questions, and IT systems are employed to fabricate an inventory model for locating the main reason for piling inventory.
Data collection and measurement
The subsequent phase involves the designing of plans for data collection and a measurement system. It also involves taking a physical counting off on the spot inventory and making an analytic report for the management to find out the correctness of supply chain metrics, like lot size and lead time. The significant input variables, which could affect the management of inventory, are identified during the Analyze phase.
A usual inventory balance can also be employed to work out lead time, service levels and demand variation. This proves helpful in identifying the items and locations that have too large or too small inventory. This kind of input helps to establish the main causes of trouble.
In the Improve phase, the steps needed for overcoming such difficulties are recognized and used to introduce modifications in the system. During the course of identifying and executing such projects, others problems too get identified. Tools like 5S are found helpful during the Control phase for the continued development over a phase of time.
Inventory models may also be exploited to reveal the function of the supply chain and illustrate the effect of demand management practices on the surplus and out-of-date stocks.
Companies can utilize Lean Six Sigma to decrease and remove waste in inventory and reorganize their entire operations.