Why Lean Six Sigma
Staying competitive is sometimes the reason to avoid a long-term solution to eliminate the root cause of excess and obsolete inventory. Another reason may be the inability to unravel the complex factors involved. Lean Six Sigma methods have been shown to be very effective in finding and eliminating root causes and therefore preventing arbitrary year-end reductions in inventory investment.
Factors responsible for excess and obsolete inventory
The main culprits for excess and obsolete inventory are inaccurate forecasts, long lead times, obsolescence of design or poor quality. However, these higher-level causes can be divided into lower-level causes.
From an inventory investment perspective, one of the reasons for a long lead time can be partly attributed to very large batches. This means that if the lot size for purchase is a ninety-day supply versus a thirty-day order cycle, it automatically means a much higher inventory level. There may also be other issues, which can be responsible for long lead times, such as scheduling problems, late deliveries, complicated processes with numerous rework cycles, etc. The Lean Six Sigma research team would have to thoroughly investigate the real causes of long lead times.
Another important reason that leads to excessive and obsolete inventory is poor or inappropriate practices in managing demand. At the lower level, some of the root causes may be inadequate forecasting modeling methodology, inaccurate historical demand data, or unrealistic sales projections. There have been dramatic improvements in quality levels by reducing waste and rework within a process workflow through the use of Lean Six Sigma.
Identify and address root causes
For Lean Six Sigma teams, the DMAIC troubleshooting methodology can be used in conjunction with Lean tools and process workflow models to get to the root causes of excess and obsolete inventory. There is a generalized Six Sigma root cause philosophy: Y = f (X) that is followed by inventory models.
Inventory models are also reliable means that reflect all supply chain functions such as manufacturing, marketing and sales, and also show the effect of lead time and demand management practices on inventory. obsolete and in excess.
Benefits of Lean Six Sigma improvement projects
The benefits of defining and implementing these improvement projects are multiple. For starters, they lead to the reduction and elimination of obsolete and excess inventory and provide greater system accuracy. They create quantified inventory models that describe the relationships between lead time, variation in demand and inventory investment, location accuracy and highest inventory valuation, and most importantly, permanent reductions in inventory investment excess and obsolete and higher cycle counting accuracy.
The hardest part of Six Sigma is convincingly presenting the myriad benefits to the overall company workforce. Having seen the fate of many improvement projects, most people can be skeptical about adopting any other similar moves initiated by management.
By being aware of how Lean Six Sigma can be used to reduce and eliminate waste in the inventory area, companies can successfully optimize their operations and make them much more efficient.
