Successful Lean/Six Sigma project in a manufacturing company.

1. Project Charter
Project Title:
Pharmex 1-1-1 Inventory Allocations Project
Project Team Stakeholders
Role Name Role Name
Proje ct Sponsor Rod Stone Six Sigma Champion?
Proje ct Le a de r Craig Laski Dav Sparks
e Rod Stone
Te a m Me mbe rs Shipping clerks Craig Laski
Scott Citrowski Craig Laski Inventory control Mike Casale
Rod Stone Picking clerks Chris Oberdick
Mike Casale Order entry clerks Mel Jackson
Chris Oberdick Customer serv ice reps. Scott Citrowski
Mel Jackson Inside / outside sales reps. POK customers
Problem Statement Goal Statement
If the quantity of labels on the
order line is more that what is
in stock in one physical
Inv entory of large quantities of
primary warehouse location
labels are stored in different The primary goal of the Pharmex 1-1-1 project is to create
causes multiple locations to
non-adjacent locations in the one customer order, one shipment and one inv oice per each
be printed on the pick ticket.
warehouse. This causes extra POK customer order. A second goal is to reduce the picking
These locations may or may
forklift travel time. It also lends errors and forklift travel times. The third goal is to reduce
not hav e the inventory.
itself to creating back orders back orders and increase order line fill rates to 98.5%.
Usually, what is in the primary
or partial order shipments.
location is picked and shipped
causing either a back order or
partial shipment.
COPQ Summary VOC - key customers
The contributors to cost of
poor quality is excess forklift
DOD - US Department of Defense. Pharmacy opening kits,
travel (labor and time), over
(POK) customers in any of the 48 main land states. CVS
manufacturing, increased
pharmacy. W algreen's pharmacy. Shopko pharmacy.
inv entory, customer
Caremark pharmacy. RiteAid pharmacy.
dissatisfaction, reprocessing
order lines (B/O).
Scope Project Plan Pla n Actua l
Initiate the project Start of project 1/2/2008 1/15/2008
Define the business rules End of Define 1/20/2008 1/20/2008
Measure B/O and fill rates End of Measure 2/5/2008 2/5/2008
Present current order statistics End of Analyze 2/12/2008 2/12/2008
Results of improvements %'s End of Improve 3/12/2008 3/12/2008
Close the project in production End of Control/Project 4/1/2008 3/15/2008

2. SI POC Process Map for Pharmex 1-1-1 I nventory Allocations Project
Su pplier s I n put s Pr ocess Ou t put s Cu st om er s
Stock equipment En t er t he
Pharmacy equipment in warehouse or d er l i n es
process the PO Pr i n t t h e Printed order
Vendors receipt p i ck t i ck et acknowledgment US DOD
Pharmex order Ver i f y q t y
an d l ocat i on Updated order
entry Order pick ticket Go t o pick ticket CVS POK
Warehouse l ocat i on t o Create order
location of p i ck t h e q t y BOL and packing
Pharmex manufacturing product St age or d er list Walgreen’s POK
Quantity f or sh i p p i n g
allocated to the Gen er at e t h e Create the
order line i nvoi ce invoice RiteAid POK
PO receipt Customer order Print pick ticket Pick order Ship and invoice
© OPEX Resources Ltd. 2010

3. Fishbone Diagram for Pharmex 1-1-1 I nventory Allocations Project
People
Measurement Machine/Equipment
Waste time
Forklifts
% order fill rates
To much travel time Can’t locate inventory
Tied up with other orders
Qty of Back orders
Increase
in Back
Streamline the B/ O processing Qty in locations Orders
incorrect
Locations not arranged
logically
Ensure qty is avail for order
I n different whse locations
Methods Environment Materials
Processes
© OPEX Resources Ltd. 2010
Whse locations Inventory

4. Pharmex 1-1-1 Inventory Allocations Project
Scatter plot of types of orders and % of fill rates.
Pharmex 1-1-1- Inventory Allocations Project
Fill POK, 100 STD, 100
POK, 100
rates STD, 99 STD, 99 STD, 99 STD, 99
by STD, 98
Rates 89 - 100%
order
type
Linear
POK, 92
(Fill
POK, 91
rates
POK, 90
by
POK , 89 POK, 89 POK, 89
order
POK, 88 POK, 88
type)
Order Types
POK STD RUSH SD ND 1D 2D BO Custom
POK STD POK STD POK POK STD POK STD POK STD POK POK POK STD POK
89 99 88 99 88 100 98 89 99 92 99 89 91 90 100 100
Fill rates by order type

5. 1-1-1 I nventory Allocations Project
Process or Product
Failure Modes and Effects Analysis (FMEA)
ocess Pharmex 1-1-1
Inventory
FMEA Date (Orig) ______________ (Rev) _____________
oduct Allocations
ame: Project
rocess
S O D R Actions S O D R
Step or Potential Potential Failure Actions
E Potential Causes C Current Controls E P Recommend Resp. E C E P
roduct Failure Mode Effects Taken
V C T N ed V C T N
Part
rder Partial qty Rush Can not locate Look for more Pre pick Picking Write
cking shipped manufacture 8 the inventory 5 inventory in other 3 120 locations on 8 5 3 120
locations pick ticket
Order shipped Shipped QTY Move inventory Rotate Invento Move
with partial qty 7 that is in the 8 prior to picking 9 504 inventory ry inventory 7 8 9 504
one location
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0

6. Proposed Process Map - Pharmex 1-1-1 I nventory Allocations Project
Sup pl ie rs I n put s Pr ocess Out put s Cust om e rs
Process the PO Ent er t h e
receipt, put or der lines
Pharmacy
equipment away stock and Pr in t t h e
update inventory pick t icket Printed order
Vendors location. Ver if y qt y acknowledgment US DOD
an d locat ion Verify qty
Pharmex order Go t o ordered vs qty
Print Order Pick locat ion t o allocated and qty
entry ticket pick t h e qt y picked CVS POK
Verify St age or der
qty/ product in f or sh ippin g
warehouse Gen er at e t h e Create order
Pharmex location via cycle BOL and packing
inv oice
manufacturing counts. list Walgreen’s POK
PO receipt
Customer order Print pick ticket Create the
update inventory invoice RiteAid POK
Pick order Ship and invoice
Control I nventory by taking Cycle Counts
© OPEX Resources Ltd. 2010

7. Proposed Order picking process flow
Process PO receipt -
Warehouse Inventory Receiving person
Arrange product in same or adjacent inventory locations
Put away product update inventory location -
reduce fork lift travel, increase visibility of products –
Warehouse person
Inventory Control person
Take Inventory Cycle Counts to verify
products/qty/locations -
Inventory Control person
Verify qty ordered vs qty allocated vs qty picked -
Order verification person
Create BOL, Ship order, Create Invoice -
Shipping person

8. • Partial orders / incomplete late orders metrics of proposed solution:
– Inventory control department to report inventory cycle count errors by product,
location, qty – in terms of dollars variance and % of qty error variance.
• Goal to be 99.96 % accurate
– Order control department to report on % of partial, incomplete and late orders –
in terms of qty on the order vs qty shipped and scheduled ship date on the order
vs actual ship date
• Goal to be 99 % on time and 98.5 % complete orders (reducing back orders)
– Shipping department to report on amount of back orders broken down by shift /
daily / weekly / monthly totals
• Goal to be 98.5 % one order, one shipment, one invoice (reducing back orders)
– Customer service department to report on amount of returns classified by reason
codes, customer numbers, product codes listing order numbers and reasons for
complaints
• Goal to reduce number of returns and customer complaints month over month trending