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Inventory reduction project

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  • #39803

    Vetri
    Member

    I have just started a 6 sigma project on Inventory reduction
    Is there anyone who can share their experience on the subject
    My email is : [email protected]
    Thanx

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    #121970

    Mikel
    Member

    Yes – it is a Lean project – your ability to use 6 sigma tools will be limited and if you try to force the use of 6 sigma tools, your results will be irrationally delayed.

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    #121972

    Dr. Scott
    Participant

    Vetri,
    It may or may not be a more Lean-like project as Stan says. The first thing you need to determine is WHY your inventory is too high. Perhaps it is because your process waste is too high (you break too much stuff when putting it together). In such a case, Six Sigma tools would be of MUCH more benefit than Lean.
    Dr. Scott

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    #121974

    Mike Carnell
    Participant

    vetri,
    I agree with Stan – this is more of a Lean project but it really shouldn’t matter what you call it as much as Stan’s other point if you try to use a lot of SS tools you will waste your time.
    Inventory is a symptom of some other problem. Typically you will find an inverse relationship between process capability and inventory. If the process isn’t very capable the buyer buys more stuff to compensate. Those can be good projects as Doc said but you need to run those as separate projects with separate teams otherwise the management of the inventory reduction becomes more complex than it needs to be.
    Just my opinion.
    Good luck

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    #121976

    OLD
    Participant

    Vetri:
    Β 
    Stan is correct. I would however offer this additional advise for what it’s worthΒ….. When we tackled inventory reduction, we found that it was actually two distinct projects:
    Β 
    The first, to identify why we had excess/old inventory and make the necessary changes to correct the problem(s) from occurring/reoccurring.
    Β 
    The second, to identify theΒ process to eliminate/reduce the accumulated inventory (some was scrapped, some was returned to suppliers, some sold at a reduced priced, some used in production, etc.).
    Β 
    Two completely different outcomes that were tied to same, original problem(s). The teams too, were slightly different due to the differences in objectives.
    Β Good Luck! OLD

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    #121978

    Dr. Scott
    Participant

    Vetri,
    vetri,
    I agree with Stan – this is more of a Lean project but it really shouldn’t matter what you call it as much as Stan’s other point if you try to use a lot of SS tools you will waste your time.
    Stan and Mike are both correct. Especially that it doesn’t matter what you call the solution (Mike’s point). The real thing to do is to figure out why you hold more inventory than is “absolutely” required. If waste in downstreamΒ areas due to poor processes are the cause of the excess inventory is the cause (as I tried to state), then Six Sigma on these areas might be the way to go. If you try to use lean to fix a defective processes downstream, you will waste as much time as trying to fix a common inventory process with Six Sigma.
    The point is, choose the right set of tools (names aside) to answer your questions and fix your problems.
    Mike’s points in his last paragraph is dead on mark.
    Regards,
    Dr. Scott

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    #121979

    Adam L Bowden
    Participant

    Mike – consistent, and correct, in your answers – do you copy them from previous posts ?
    Inventory issues are most effectively tackled by utilizing Lean principles.Β  However – applying statistics when calculating appropriate inventory levels is very usefull indeed.Β  Analysis of common cause and special cause are very usefull ways of looking at the line item usage/demand and will help you formulate plans/processes to handle inventory that fall into specific categories such as: new, fast moving, slow moving, sunset & obsolete.
    As Mike alluded – inventory is a symptom – if you use lean you can rapidly impact the inventory levels – it is the use of SS tools that will further reduce levels without compromizing stock availability.
    Regards,
    Adam
    Β 

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    #121981

    Mike Carnell
    Participant

    Adam,
    I don’t copy them. I just haven’t had any new data to change my opinion yet.
    Thanks for the heads up on London. It was a little on the cool side.
    Regards

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    #121983

    Habib
    Participant

    Why do you keep repeating that you agree with Stan?

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    #121984

    Dr. Scott
    Participant

    Habib,
    My apologies. I always copy and paste a post to insure I am responding to the correct inquiry of the poster. The following portion was not intended to be in my post:
    “vetri,
    I agree with Stan – this is more of a Lean project but it really shouldn’t matter what you call it as much as Stan’s other point if you try to use a lot of SS tools you will waste your time.”
    So if you ignore that section, you will see the complete (I think) of my intended response.
    I am agreeing with both Stan and Mike in much of what they have to say. I am just not willing to say it is a Lean project or to say it is a Six Sigma project. Indeed, it depends on what needs to be accomplished, and on what seems to be the general cause of the problem.
    My apologies again and thanks for correcting me,
    Dr. Scott

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    #121987

    Adam Bowden
    Participant

    habibΒ  “Why do you keep repeating that you agree with Stan?”
    Β 
    Just because …………….Β  :-)

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    #121989

    Mikel
    Member

    Doesn’t everyone agree with Stan?

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    #121994

    Tony Wang
    Member

    I agree with OLD. I think first you need to do is to define current inventory level and expected inventory level. And need revise delivery principles whatever your suppliers and yourself. Try to return nonconforming materials to your suppliers and forecast required material need at production more accurately. I think you can integrate these different things to this project by building a cross function team. The team should include SQE, Planner, Buyer ,Manufacturing and Logistic people. The project benifite is not the project team’s result, but also those department’s success. In another hand, you need pay attention to consequency metrics such as freight. Maybe that will cause the increase of other cost.
    Best Regards
    Tony Wang

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    #122040

    OLD
    Participant

    vetri:
    Β 
    AΒ couple more thoughts on inventory reductionΒ…. Many of the responses you receive from the forum come from a manufacturing perspective. Not all SS inventory projects are related to manufacturing as some come from the sales/service industries. Though similar in some aspects, the projects can be very different in others.
    Β 
    In sale/service industries, inventory is not necessarily badΒ…. Especially if your company uses Β“stockΒ” and immediate delivery as a differentiator from your competition. To focus only on inventory dollars would be a mistake. There are a group of measures that have more importance and they should be looked at as a package:
    Β 
    1). Sales Dollars Β– The higher the better. Inventory $Β’s could go down (not as a result of project improvements) due to a decline in sales. You think youΒ’re getting better but youΒ’re notΒ…Β  Sub measurements by product, by region, by salesperson, etc.
    Β 
    2). Turns Β– The higher the better. TURNS is KEY! Higher inventory may be OK if it is turning at a high rate. The trick is to balance turns with availability across all your products. Sub measurements by product, by region, by season, by promotion, etc. Other, related measurements: by length of time in inventory over dollar value (low dollar items may turn at different rates than high dollar items)
    Β 
    3). Backlog DollarsΒ– The higher the better. Backlog is an indication of the flow of your pipeline. Again, Inventory $Β’s could go down (not as a result of project improvements) due to a decline in orders. You think youΒ’re getting better but youΒ’re not. Sub measurements by product, by region, by salesperson, etc.
    Β 
    4). Availability Β– The higher the better (but within reason). Segregate your products logically as they pertain to your business. Segregate by $ value and/or demand. There may be some products that you can NEVER be out of. Others are less critical as they can be replenished within the customer requirements. This measurement can be very closely tied to lost sales reporting. Focus on those products that suffered lost sales due to not being available (or the opposite – what sales did you get because availibilty was the differentiator?). As previously mentioned, it can be difficult to balance with turns (utopia = 100% availability at a high turn rate).
    Β 
    5). WIP is important but maybe not quite as important as in manufacturing? Some products are Β“preppedΒ” before selling and/or have 3rd party add-ons incorporated. WIP should be measured and should be constantly worked on to lower $Β’s and increase throughput.
    Β 
    6). Inventory Dollars Β– It is what it is (but always trying to lower). If you have focused on the first five measurements and have a good handle on where they are and how to get to where they need to be, Inventory Dollars fall into place.
    Good Luck! OLD

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    #122042

    Black Belt Steve
    Participant

    Verti –
    Having done projects to minimize inventory in the past I can tell you Lean is the way to go.Β 
    The toolΒ I have found to be most beneficial is the pull system calculator.Β  You will need to review your distribution path to determine if you need a 1 or 2 bin system.Β  This should become evident in your detailed process mapping.Β  From there measure the time from request to receipt,Β (You will need to do this for every SKU or item); determine the order interval (how frequently orders are placed); the average daily consumption of each item; and the standard deviation of usageΒ of each item in inventory.
    Once you have your odering system in lineΒ you can allow the existing inventory to diminish to the optimal levels determind by the calculator.
    If you need a good calculator let me know and I can send you one.
    BB Steve

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    #141942

    Maricel
    Participant

    Hi Steve,
    Im interested to see the sample of that Pull System Calculator, can you send me a free demo?
    thanks & best regards,
    Maricel
    Β 
    Β 

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    #141947

    Mombass
    Participant

    OLD:
    I am a new BB (under training)Β from Sale/Service industry. My project isΒ to Reduce Net Landed Cost of InventoryΒ from ordering to overseas supplier to receiving in our warehouses. The project is a DMAIC.
    When I read ur reply with great detail I thought to ask you for more valuable tips and dos and donts. I know its an old thread but…..
    Anyone who has some more information please reply.

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    #155627

    Whitehurst
    Participant

    Would you please send me a pull system calculator?Β  Thanks.
    Joe

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    #169112

    Sultan
    Member

    Hi Steve,
    Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β Β  I am working on inventory reduction project. I would be interested in the calculator. I will appreciate if you can forward the calculator to my email address: [email protected] . Thanks.

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    #173399

    Gonnie
    Participant

    Hi Steve,
    Β I am alsoΒ developing a project plan on inventory reduction . I would be interested in the calculator. I will appreciate if you can forward the Pull calculator to my email address: [email protected] . Thanks and regards.

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    #173612

    Swaggerty
    Participant

    Hi BB Steve,
    I am currently involved in Inventory Reducton execrice. I was searhing through these forums and I came across your post. Is it possible to have this Pull System Calculator please?
    Thanks

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    #173614

    boggled BB
    Participant

    Hello BB Steve,
    Any possibibilty of adding myself to the ever growing list of those wanting the pull calculator. Thanks
    Boggled BB
    [email protected]

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