SIX SIGMA AND INVENTORY CONTROL.pptx

Please use the following two slides as a
template for your presentation at NES.
Lean Six Sigma Techniques
for Inventory Management
Otto Tawanda Chisiri

Competition
Every
morning in
Africa, a
gazelle
wakes up; it
knows it
must run
faster than
the fastest
lion or it will
not survive.
Every
morning in
Africa, a lion
wakes up; it
knows it
must outrun
the slowest
gazelle or it
will starve.
Whether you are the lion or a
gazelle - when the sun comes up,
you had better be running!
(author unknown)
2
@2016 Otto tawanda Chisiri
9/1/2022

Outline
• Lean Six Sigma
• Inventory Management Issues: Excess &
Obsolete Inventories
• 10-Step Solution Process
• Conclusion

• Lean Six Sigma is a combination of two separate but
complementary process improvement methodologies
with an Enterprise Level perspective
What is Lean Six Sigma

• Lean Concepts grew out of the Toyota Production
System (1960s)
• Lean’s goal is to eliminate all forms of waste in the
process and use employee creativity
• The currency of lean is time
• Requires process mapping
– ID value added step in process
– ID non-value added steps
What is Lean
 Simplicity
 Waste
Reduction
 Efficiency

What is Six Sigma
• Six Sigma dates back to the 1920’s and work done on
Statistical Process Control in the US
• Six Sigma’s goal is to understand customer need and
deliver perfection every time
• Six Sigma’s currency is consistency
– Reduce variation in process
– Reduce defects
– Produce consistently good product
 Consistency
 Reduced
Variability
 Effectiveness

Six Sigma DMAIC Approach
Control
Improve
Analyze
Measure
Define
• Define: Define the problem
• Measure: Gather information on the current system
• Analyze: Analyze data and current process to
identify root causes
• Improve: Develop and implement a solution
• Control: Validate results, standardize new process,
and monitor results of new process

Sir Bill Smith
“ the Father of six sigma”
Father of Six Sigma
9/1/2022 @2016 Otto tawanda Chisiri 8

The Characteristics of Six Sigma
Statistical Quality Control
• Six Sigma is clearly derived from the Greek letter σ (Sigma) from
the Greek alphabet, which is used to denote Standard Deviation
• in Statistics. Standard Deviation is used to measure variance,
which is an important tool for measuring non-conformance as
far as the quality of the output is concerne
Methodical Approach
• The Six Sigma is not merely a quality improvement strategy in
theory, as it features a well defined methodical approach of
application in DMAIC and DMADV which can be used to improve
the quality of production. DMAIC is an acronym for Design-
Measure-Analyze-Improve-Control. The alternative method
DMADV stands for Design-Measure-Analyze-Design-Verify.

Define
Measure
Analyze
Improve
Control
Tools:
• SIPOC
• Voice of Customer (VOC) Analysis
• Value Stream Mapping
• Process Mapping
The DMAIC Process with Tools

4. Create a SIPOC Chart
• Translate Customer Requirements into output specs and identify related Key Process
Output Variables (KPOVs).
• Go upsteam to the process steps which most impact the Output and determine the Key
Process Input Variables (KPIVs) which effect the KPOV’s.
• Try to use leading measures instead of lagging measures – if lagging, then close/reduce
amount of lag.
The SIPOC Chart
O
U
T
P
U
T
PROCESS
C
U
S
T
O
M
E
R
Requirements, Specs and Information
S
U
P
P
L
I
E
R
I
N
P
U
T
Boundary -
(Start of
Process)
Boundary -
(Completion
of Process)

SIPOC Chart
Suppliers:
Start Boundary ____________ End Boundary ____________
Process
Inputs: Outputs: Customers:

Define
Measure
Analyze
Improve
Control
Tools:
• SIPOC
• Voice of Customer (VOC) Analysis
• Process Mapping
• Value Stream Mapping
The DMAIC Process with Tools
DAY 1

• Who are they?
– Defined as: “Any person or organization that receives a product or service
(Output) from the work activities (Process)”
– Whose needs must be met for this process to be successful?
• Types of “customers”:
• External: Individuals or organizations outside of your business who are
usually associated with paying money for your products and services
• Internal: Colleagues who receive products, services, support or information
from your process – i.e. Engineering, Manufacturing, Quality, Marketing,
Regulatory: Any government agency that has standards the process or
product must conform to – i.e. OSHA, EPA, FDA, UL, MilSpec,etc.
• Which customer?
– Customers can often be logically placed into groups or segments (not all
customers should be treated equally)
Who Are the Customers?

Customers Define “Quality”
You must
understand what
the customers care
about as it relates
to your process.
Price
and
Cost
Customers
Accuracy
Flexibility
and
Options
Aesthetics
Timeliness
Ease
of Use

Where do Process Design Requirements come from?
– Customers (Voice of the Customer – VOC)
– Business (Voice of the Business – VOB)
– Stakeholders
– Regulatory Agencies
– Suppliers
– Others
Process Design Requirements

Process Design Requirements
A B C
Process
Supplier
Stakeholders
Those who have
some “stake” in
the product/
service process
success or
failure.
Customer
External
Those who
receive/use
the process
outside your
organization
Those who
may be
affected by
production
use of the
product/
process (e.g.
pollution)
Process/
Service
• Management
• Shareholder
• Regulatory Agency
Consumer
Bystander
Dealers
Internal
“The Next Process is Your
Customer”
Internal
“The Next Process is Your
Customer”

Performance Need Categories
Quality
Cost
Speed
Service and
Safety
Corporate
Responsibility
Product or Service Features, Characteristics Relating to the Function of the Product or
Service, Reliability, Availability, Effectiveness, Recovery, Customer Returns, Defects,
Rework or Scrap (Derived Primarily from the Customer – VOC)
Process Cost Efficiency, Purchase Price, Repair Costs, Maintenance Costs.
(Derived Primarily from the Business – VOB)0
Lead Times, Delivery Times, Turnaround Times, Setup Times, Delays, Up
Time, Equipment Availability, (Derived equally from the Customer or the
Business – VOC/VOB)
Environment, Health and Safety Policy, Service Requirements, After-Purchase
Reliability, Parts Availability, Service, Warranties, Maintainability, Customer-Required
Maintenance, Product Liability, Product/Service Safety, Recordable Injuries, Lost
Time.
Ethical Business Conduct, Business Risk Management, Environment, Health and
Safety Policy, Code of Conduct

1. Gather the Voice of the Customer (VOC)
2. Translate the VOC into Critical Customer
Requirements (CCRs)
3. Convert the CCRs into Key Process Output
Variables (KPOVs)
4. Create a tactical Supplier Input Process
Output Customer (SIPOC) chart
4 Steps to Validating the Project through VOC

1. Gather the Voice of the Customer (VOC):
• The first step in gathering the VOC, is customer segmentation.
– All customers are not created equal, and do not create equal value
– Avoid “squeaky wheel” syndrome
• If customers aren’t segmented, it may prove impossible to get a single
“voice,” and the multiple voices may lead in opposite directions.
• Customers should be segmented or grouped according to their similar need
for products and services
• Identify and focus on the most important segments
Customer Segmentation
Total Customers Total Value
The Greatest Value Can Come From a
Small Portion of Your Customer Base

Objective
• Identifying customer segments using “buckets”
Instructions
1. Select a specific process output (product or service) from your division.
2. List customers of the product or service.
3. Identify ways to segment each customer.
4. Present findings to participants.
Customer Segment Matrix
Product/Service Customers Potential Segments
- Sample Form -

Sample – Making Coffee
Customer Segmentation Worksheet
Customer Internal or
External?
Segments/ Description Priority

Exercise # 2
Customer Segmentation Worksheet
Customer Internal or
External?
Segments/ Description Priority

Listening to the VOC
Select Sources of Customer Information
Sources of Customer Information
Internal and
External Data
Listening
Post
Research
Methods
 Existing Company
Information i.e.
product returns,
market share, etc.
 Industry Experts
 Secondary Data
 Competitors
 Complaints
 Customer Service
Representatives
 Sales
Representatives
 Billing
 Accounts Receivable
 Collection
 Interviews
 Surveys
 Focus Groups
 Observations

Requirements (CCRs)
Once the Voice of the Customer has been gathered, that
information must be translated into Critical Customer
Requirements (CCRs).
Good customer requirements:
– Are specific and measurable (and the method of measurement is specific)
– Are related directly to an attribute of the product or service
– Don’t have alternatives and don’t bias the design toward a particular approach or
technology
– Are complete and unambiguous
– Describe what, not how
Voice of
the Customer
After Clarifying,
the Key Issue(s) Is...
Critical Customer
Requirements
“I hate dealing with
this company!”
Products are not
delivered on time
10 day lead time
±1 day

Requirements (CCRs)

Requirements (CCRs)
• Making sense of qualitative data is an iterative process
• It involves interpretation and prioritization
• Often requires follow-up with additional research
• Useful tools:
– Affinity Analysis
– Tree Diagrams
Getting Value from VOC Data

Requirements (CCRs)
• The first step in getting value from
customer data is organizing it in a
way that will reveal themes
• An affinity diagram is a good tool for
this purpose since it organizes
language data into related groups
– Gather ideas from interview
transcripts, surveys, etc.
– Generate customer need statements
on cards or sticky notes (in the
customer’s own language if at all
possible)
– Group the cards to find the “affinity”
– Label the groups of cards
Affinity Diagrams
Theme 1
Need 1 Need 2
Theme 2
Need 3 Need 4
Need 5
Theme 3
Need 7
Need 8

Exercise # 4 : Affinity Diagrams

3. Convert CCRs into KPOVs
• Once the Critical Customer Requirements of the product have
been defined, they must be converted into Key Process Output
Variables for the process
• The process is a function of converting inputs (Xs) into outputs
(KPOVs or Ys)
Y = f(X1, X2, X3,…Xn)
• We must first define all of the Ys that our process must satisfy, in
order to use the ADVANCE philosophy to focus on the correct Xs
to improve the process
Intro Nursing System Theory...

System Theory
Inputs Outputs
Throughput
Process

3. Convert CCRs into KPOVs
• Key Process Output Variables come from two sources:
–The Critical to Customer Requirements (Voice of the Customer - VOC)
–The Critical to Business Requirements (Voice of the Business – VOB)
• These two sources come together to develop the Big
“Y” outputs that the process must meet
Getting to KPOVs (Big “Y”s)
CCR’s
CCR’s Customer
Issues
Customer
Issues
________
________
________
________
________
________
________
________
________
________
________
________
VOC
VOC
________
________
________
________
________
________
VOB
VOB
________
________
________
________
Business
Issues
Business
Issues
________
________
________
________
CBR’s
CBR’s
________
________
________
________
VOB- Voice of the Business
CBR- Critical Business Requirements
VOC- Voice of the Customer
CCR- Critical Customer Requirements
Y1
Y2
Y3
Yn
KPOVs

3. Convert CCRs into Big Ys
• In finalizing the Big “Y”s for the process, they must be:
– Tangible
– Meaningful
– Measurable
Finalizing the Big “Y”s

Exercise # 5 : Identifying Big “Y”s

Finalizing the Big “Y”s
• Once the KPOVs have been identified, a SIPOC chart can be
created
• Supplier Input Process Output Customer (S IPOC) Chart
uppliers – All internal and external suppliers to the process
nputs – All inputs to the process i.e. material, forms, information, etc.
rocess – One block representing the entire process
utputs – All outputs for both internal and external customers
ustomers – All internal and external customers to the process

 Leading Measures tell the need to adjust process before the fact.
 Evaluate inputs and adjust downstream process to reflect results
of evaluation.
 Lagging Measures inform about process performance and the
need for adjustment after the fact.
 Some close lagging measures are able to give immediate feedback to the
process – small likelihood of providing inconsistent service.
 Evaluate results of process step and feed information upstream.
 Some long lagging measures take so long to give feedback that decision-
making is not timely and not well defined – great likelihood of providing
inconsistent service.
 Evaluate results of process output and feed information upstream.
Leading and Lagging Measures

Use the SIPOC Chart to Develop Measures
Suppliers:
Input Measures Process Measures Output Measures
Measures that evaluate the degree to
which the inputs to a process are
consistent with what the process needs
to effectively and efficiently convert into
customer-satisfying outputs.
Examples:
 Supplier quality
 Supplier on-time performance
 MRP accuracy
 Specifications
Measures that evaluate the
effectiveness, efficiency and quality of
the transformation processes – the
steps and activities used to convert
inputs into customer-satisfying outputs
Examples:
 Process lead time
 Setup time
 Capacity of process
Measures that evaluate dimensions
of the output – may focus on the
performance of the business as well
as those associated with the delivery
of products to customers.
Examples:
 On-time delivery
 Defect rate
 Unit cost
Process

Exercise # 6 : SIPOC Chart
Suppliers:
Process

Takeaways
• The Voice of the Customer is translated into Critical Customer
Requirements for the product and then Key Process Output
Variables for the process.
• The Voice of the Business (value chain partners) is also used to
drive additional KPOVs.
• A SIPOC Chart is used to develop the relationship between the
KPOVs (Y’s) and the KPIVs (X’s).
• The Project Problem Statement should be validated using the
information from the VOC and VOB.

Summary
 Voice of the Customer (VOC) is the expression of customer
needs and desires.
 Voice of the Customer (VOC) is a important key input to
strategy and process design.
 4 Steps to Validating the Project through VOC
 1. Gather the Voice of the Customer (VOC)
 2. Translate the VOC into Critical Customer
Requirements (CCRs)
 3. Convert the CCRs into Key Process Output Variables
(KPOVs)
 4. Create a tactical Supplier Input Process Output
Customer (SIPOC) chart
 A SIPOC Chart is used to develop the relationship between
the KPOVs (Y’s) and the KPIVs (X’s).

Six Sigma Objectives
Overall Business Improvement
Six Sigma methodology focuses on business improvement.
Beyond reducing the number of defects present in any given
number of products.
Remedy Defects/Variability
Any business seeking improved numbers must reduce the
number of defective products or services it produces.
Defective products can harm customer satisfaction levels.

Reduce Costs
Reduced costs equal increased profits. A company
implementing Six Sigma principles has to look to reduce costs
wherever it possibly can--without reducing quality.
Improve Cycle Time
Any reduction in the amount of time it takes to
produce a product or perform a service means money
saved, both in maintenance costs and personnel
wages. Additionally, customer satisfaction improves
when both retailers and end users receive products
sooner than expected. The company that can get a
product to its customer faster may win her business.

Increase Customer Satisfaction
Customer satisfaction depends upon successful resolution
of all Six Sigma’s other objectives. But customer satisfaction
is an objective all its own.

Levels of Six Sigma

Learning Curve

Methodologies
Six Sigma projects follow two project methodologies :
1. DMAIC
2. DMADV
These methodologies, composed of five phases.

1. DMAIC
DMAIC is used for projects aimed at improving an existing
business process.
2. DMADV
DMADV is used for projects aimed at creating new product or
process designs.

1. DMAIC
The DMAIC project methodology has Five phases:
1. Define
2. Measure
3. Analyze
4. Improve
5. Control

1.Define
Define the system, the voice of the customer and
their requirements, and the project goals,
specifically.
2.Measure
Measure key aspects of the current process and
collect relevant data.

3.Analyze
Analyze the data to investigate and verify cause-and
effect relationships. Determine what the
relationships are, and attempt to ensure that all
factors have been considered. Seek out root cause
of the defect under investigation.
4.Improve
Improve or optimize the current process based upon
data analysis using techniques such as design of
experiments, poka yoke or mistake proofing,
and standard work to create a new, future state
process. Set up pilot runs to establish process
capability.

5.Control
Control the future state process to ensure that any
deviations from target are corrected before they
result in defects. Implement control systems such
as statistical process control, production boards,
visual workplaces, and continuously monitor the
process.

2. DMADV
DMADV project methodology has Five phase:
1. Define
2. Measure
3. Analyze
4. Design
5. Verify

1.Define :
Define design goals that are consistent with
customer demands and the enterprise strategy.
2.Measure
Measure and identify CTQs (characteristics that
are Critical To Quality), product capabilities,
production process capability, and risks.

3.Analyze
Analyze to develop and design alternatives.
4. Design
Design an improved alternative, best suited per
analysis in the previous step

5. Verify
Verify the design, set up pilot runs,
implement the production process and
hand it over to the process owner(s).

Learning Curve

Lean Management
Waste Elimination

Lean Introduction
9/1/2022
@2016 Otto tawanda Chisiri 64
6

What is Lean Six Sigma?
Lean Six Sigma is an approach to improve the performance of
your organization.
Lean: to eliminate WASTE while improving process flow to
achieve speed and agility at lower cost.
Six Sigma: to eliminate DEFECTS and VARIATION.
These principles are applied through understanding Process
Management.
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When integrated and successfully implemented major
improvements can be achieved in the organizations performance.

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Lean and Six Sigma are not
something extra to add to
your daily roles and
responsibilities!
Lean and Six Sigma ARE your
daily responsibility.

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The Goals of the Lean
Enterprise

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Goal 4: Reduce Total Costs – direct and indirect costs
associated with a product or service
Goals of the Lean Enterprise
Goal 1: Improve Quality – both product and service
Goal 2: Eliminate Waste – eliminate activities that
do not add value
Goal 3: Reduce Lead Times – focus on quicker response
to changes in customer demand

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7. Establish performance metrics to evaluate effectiveness
How to Achieve Improved Quality
1. Document customer expectations and requirements
2. Review characteristics of service or product design to
verify that they meet the customers’ requirements
3. Review your process metrics to verify capability to meet
customers’ requirements
4. Identify processes where errors can create defects
5. Conduct problem solving activities to identify root causes
6. Apply error proofing techniques to prevent defects

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How to Eliminate Wastes
1. Identify a product or service that is inefficient
2. Identify associated processes that perform poorly – start
with an operation that has the lowest production output
3. Create a Value Stream Map (VSM)
4. Review the VSM and identify wastes
5. Determine metrics for identifying the frequency and
severity of the wastes
6. Periodically review the metrics to continue eliminating wastes

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How to Reduce Lead Times
1. Create a Value Stream Map (VSM)
2. Calculate the times required for the value-added steps
3. Review the VSM to identify where you can reduce lead times
4. Identify the constraints in the process and develop a plan
to eliminate them or mitigate them
5. Determine metrics to identify the location, duration and
frequency of the lead times within the process
6. Once the plan is implemented measure and document the
improvements

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How to Reduce Total Costs
1. Determine if improvement efforts will start with new or
existing production lines
2. If the focus is on new products use target pricing, target
costing and value engineering
3. If the focus is on existing products – identify the high cost
products and apply Kaizen costing and cost maintenance
4. Identify the constraints in the process and develop a plan
to eliminate them or mitigate them

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Organizational Obstacles to Adopting Lean
1. Lack of persistent and challenging leadership
2. Lack of a clear vision of the future and what can be
achieved
3. Failure to link Kaizen processes to everyone’s formal work
4. Lack of patience and follow through
5. Failure to perceive LEAN as a viable strategy for competitive
advantage
6. Failure to engage and involve employees at an early stage
7. Lack of constant visibility by management on the shop floor
Author: Brian Heymans Lean Manufacturing and the Food Industry “Continuous Systems Improvement” 2009.
8. CULTURE CULTURE CULTURE CULTURE

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Marketplace Obstacles to Adopting Lean
1. Extraordinary long procurement lead times – agricultural
products long growing seasons and maturing cycles – not
uncommon for procurement cycles to be over a year (dairy,
coffee, cocoa, wheat, corn products, soybean and vegetable
oils, nuts, meat products, and sugar and other sweeteners)
2. Short shelf life
3. Production lead times are very short
Author: Brian Heymans Lean Manufacturing and the Food Industry “Continuous Systems Improvement” 2009.

Lean Principles
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Seven Areas of WASTE
1. Defects
A defect is a product or service that
does not conform to the customers’
specifications.
Correcting or repairing a defect in
materials or parts adds unnecessary
costs because of additional equipment
and labor expenses. An example is the
labor cost of scheduling employees to
work overtime to rework defects.

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Examples of Defect Wastes
1. ___________________________________________
2. ___________________________________________
3. ___________________________________________
4. ___________________________________________
5. ___________________________________________

2. Overproduction
 Producing more product than is required by the
customer.
 Producing parts at a faster rate than processed
customer orders.
Doing this requires more raw
product inventory than necessary,
over uses machines and people
and requires more storage area.
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Examples of Overproduction Wastes
1. ___________________________________________
2. ___________________________________________
3. ___________________________________________
4. ___________________________________________
5. ___________________________________________

3. Extra or Over Processing
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Extra or Over Processing - work
that has no relationship to
advancing the production line or
improving the quality of a product
or service.
Example: When an inside sales
person must obtain customer
information that should have been
obtained by the outside
salesperson handling the account.

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Examples of Extra/Over Processing Wastes
1. ___________________________________________
2. ___________________________________________
3. ___________________________________________
4. ___________________________________________
5. ___________________________________________

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4. Transportation
Transportation is a secondary
required action that does not
directly contribute value to the
product.
It’s essential to avoid
unnecessary transportation of
products – (1) transportation
adds time to the process and (2)
the products can be damaged
during transportation.

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Examples of Transportation Wastes
1. ___________________________________________
2. ___________________________________________
3. ___________________________________________
4. ___________________________________________
5. ___________________________________________

5. Inventory
Inventory is a drain on an organization’s capital. The more
inventory - the higher the carrying costs.
If quality issues arise defective material may be hidden in
finished goods.
To remain flexible to ever changing customer requirements and
to control product variations inventory must be minimized.
Inventory hides unacceptable
change-over times, excessive
downtimes and production
scheduling inefficiencies.
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Examples of Inventory Wastes
1. ___________________________________________
2. ___________________________________________
3. ___________________________________________
4. ___________________________________________
5. ___________________________________________

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6. Motion
Motion waste refers to people
moving within and outside of their
immediate work area to find tools
or materials. Any movement of
people or machinery that does not
contribute added value to the
product; i.e., programming delay
times and excessive walking
distance between operations or
operator’s having to walk back
and forth to retrieve materials not
available in the immediate work
area.

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Examples of Motion Wastes
1. ___________________________________________
2. ___________________________________________
3. ___________________________________________
4. ___________________________________________
5. ___________________________________________

7. Waiting or Queuing
Idle time between operations or
events, i.e. an employee
waiting for machine cycle to finish or
a machine waiting for the operator
to load new parts.
Periods of inactivity in a
downstream process that occur
because an upstream activity does
not deliver product on time.
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Examples of Waiting Wastes
1. ___________________________________________
2. ___________________________________________
3. ___________________________________________
4. ___________________________________________
5. ___________________________________________

The Bad and the Ugly
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The Good
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Poka-Yoke
Methods
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 Pronounced POH-kah YOH-kay
 “To make mistakes impossible.”
 Plain English: “Mistake Proofing.”
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 Poka-Yoke has two parts:
 Making mistakes impossible (prevention).
 Making mistakes immediately obvious (detection).
 Why is Poka-Yoke important?
 One of the simplest tools to learn.
 Extremely high impact - often at little cost.
 Developed by S. Shingo of Toyota

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1
6
5
4
3
2
7
8

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Defects
Mistakes
Process
Prevention
Poka-Yoke that focuses here
works on mistake prevention
or making mistakes
impossible.
Detection
Poka-Yoke that focuses
here works on mistake
detection or making sure
mistakes do not turn into
defects.
People and systems do make mistakes. A portion of those
mistakes turn into defects.

What Poka-Yoke IS NOT:
 Retraining people.
 Disciplining people who make mistakes.
 Work instructions.
 Improving the attentiveness of people.
 Increased human attention or intervention.
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What Poka-Yoke IS:
 Poka-Yoke means “mistake proofing”.
 Poka-Yoke focuses on preventing and detecting mistakes.
 Poka-Yoke is directly connected with the occurrence and
detectability tasks of FMEA.
 Poka-Yoke is classified as a control method but can be
considered as a solution to a problem as well if it prevents
a problem from occurring.

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In Summary

Six Sigma Principles & Techniques
Customer Centric
Focus on customer
needs
Process Focused
Think process
not function
Data Driven
Focus on facts
not perceptions
Standardized
Reduce variation in
products & services
Change Management
Empower employees
via training
Reduce Defects
Get it right the
First time

How Do Lean & Six Sigma Blend
• Both require an organizational paradigm shift in how
we view work
• Both aim to reduce operational costs
• Lean reduces waste in the process then Six Sigma
creates consistency to reduce your defect rate
• Together they add both efficiency and effectiveness
to a process
• Generally you “lean” a process first then apply six
sigma tools

Excess & Obsolete Inventory
• The issues:
– Poorly managed inventories lead to problems with write-offs
of slow, excess, and obsolete inventories which can hinder
profits
– Multi-billion dollar problem
– Improvement strategies often have a short-term focus
– Improvement strategies often fail to identify root causes

Excess & Obsolete Inventory
• Benefits of a solution:
– Private Sector: Firms that can generate a given level of profit
with a lower level of investment in inventory will generate
higher cash flows and better ROIs
– Federal Sector: Minimizing inventory investment maximizes
available funding for executing validated mission requirements
– Keep in mind that inventory is part of your organizations
capital investment

10-Step Solution Process*
• Align Project to Business Goals
• Clearly Define Project Goals
• Ensure Buy-In from Stakeholders
• Identify Variables
• Collect Data
• Identify Root Causes
• Develop Improvement Plan
• Develop Standard Operating Procedure (SOP)
• Implement Improvement Plan
• Develop Control Strategies
Adapted form “Lean Six Sigma for Supply Chain Management”, James W. Martin, 2007.
*Adapted from, Martin, J. W. (2007). Lean Six Sigma for supply chain management. New York, NY: McGraw-Hill.

1. Align Project to Business Goals
• Projects should be strategically selected based on
their potential business benefits
• Ensure the project is aligned with your senior
managements’ goals and objectives
• Typical business benefits include:
– Cost Savings
– Cost Avoidance
– Benchmarking
• All your great work can sometimes be in vain
without proper alignment of your project with to
your business’ goals

2. Clearly Define Project
• Project Charter
– Objectives
– Scope
– Overall Approach – to include choice of inventory model for
the analysis
• Communications plan
• Current State Process
• Risk Assessment

3. Ensure Buy-In From Stakeholders
• Ensure everyone understands the fundamentals of
Lean Six Sigma, but vary your focus based on the
audience
• Executive Training Sessions
– Emphasize strategic focus
– Emphasize Enterprise benefits
• Champion Training
– Emphasize Operational effectiveness
• Other Stakeholder Training
– Emphasize impact on their area of operation

4. Identify Variables
• Begin process by asking relevant questions to help
you understand how the system works:
– How do demand variation and lead time impact
inventory?
– Is my excess inventory linked to particular
suppliers?
– How do lot size and long lead times impact
inventory?
– What is my desired target for excess and
obsolete inventory?
• Define your critical input variables, Xs [Y = f(X)]

5. Collect Data
• Develop comprehensive data collection plan
– Requirements planning module
– Inventory record files
– Warehouse management system module
– Current metrics
• Extract data form IT system/s
• Validate system data by conducting a manual count of
inventoried items associated with problem
• Organize/align data with inventory model
• Collect management data, e.g., lead time, lot size,
expected demand and its variation, forecasting
accuracy, on-time delivery, related to inventory
investment problem

6. Identify Root Causes
• Use an inventory model to analyze inventory
population to understand how key process input
variables impact excess and obsolete inventory, i.e.,
key process output variables
• Construct a value stream map for the entire inventory
process
• Calculate inventory balance for every item and
location in population of interest based on each items
service level, lead time, and demand variation
• Develop a fishbone diagram to support the root
cause analysis process

6. Identify Root Causes (continued)
Some typical root causes associated with excess and
obsolete inventory include:
• Long lead times
– Large Lot Sizes
• Poor forecasting accuracy
– Inaccurate historical demand data
– Poor forecasting model methodology
• Quality/Design Issues
– Ineffective product
– Warranty issues

7. Develop Improvement Plan
• Develop countermeasures to eliminate root causes
• Incorporate countermeasures into implementation
alternatives
• Use cost benefit analysis to select implementation
solution
• Test solution
• Develop pilot plan
• Implement pilot and analyze results
• Develop and implement full scale improvement
plan

8. Develop SOP
• Distill important concepts, techniques, and
requirements into a format that can be readily used
by supply personnel in their regular work
• Clearly delineate the various roles and their
associated responsibilities and expected performance
standards
• Don’t rush the SOP! If you do you will have
problems during implementation:
– Build a team
– Get organizational support
– Review and test SOP
– Ratify and approve SOP

9. Implement Improvement Plan
• A good SOP is key to your implementation plan:
– Publicize your SOP and emphasize the significance of the
changes being implemented by the SOP
– Distribute as needed and make it readily accessible to
potential users and stakeholders
• Implement change management:
– Conduct training classes to ensure personnel understand
their roles and have the knowledge and skill to implement
– Get buy-in from implementers regarding the change
• Develop a mechanism to monitor performance,
identify potential problems, and provide support
during the implementation process

10. Develop Control Strategies
• Monitor and control implementation plan
– Sustain monitoring (metrics, control charts)
– Show improvement is sustainable.
• Assess change effectiveness
– Compile before and after operational metrics to validate the
success of the implementation
– Show impact in senior leader metrics to emphasizes
enterprise benefit
• Conduct after action review and record lessons
learned
• Reward key contributors
– Builds esprit de corps
– Sustains support for the implementation

Conclusion
• Typical benefits of LSS projects to reduce and
eliminate excess and obsolete inventory include:
– Higher supply chain system accuracy
– Creation of quantified inventory models
– Higher location survey and cycle count accuracy
– Permanent reduction in excess and obsolete
inventory
– Higher cash flows and better ROIs for private
sector firms
– Maximizes available funding for executing
validated mission requirements in federal sector

Thank You

SIX SIGMA AND INVENTORY CONTROL.pptx

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