This document discusses Six Sigma and inventory management. It provides guidance on inventory goals, including properly identifying, slotting, accounting for, and ensuring inventory is sellable. It recommends reviewing inventory movement overall and by item, looking for gaps in sales before items become obsolete, and arranging inventory to improve efficiency. The document also covers overages, shortages and damages on receiving; timely returns processing; and using specific time frames or cycle counts for physical inventories.

1. SIX SIGMA
INVENTORY

2. SIX SIGMA
Six Sigma is a quality program that, when all is
said and done, improves your customer’s
experience, lowers your costs, and builds
better leaders. –JackWelch

3. In this segment we will examine the second point of
Six Sigma, Inventory.
A complete list of items such as
property, goods in stock, or the
contents of a building.
Inventory has many unique facets.

4. Inventory within a company is usually one of the top three assets
of the company. The other two are usually Capital Expenditures
and People.
Our goals with Inventory are:
Properly identified,
Properly slotted,
Accounted for,
Sellable

5. With Inventory a valuable asset, you want to maximize its benefit.
To maximize such benefit, we will examine:
• Review the movement from an overall view and by
individual part, or item.
• Look for gaps in sales of an part before becoming
obsolete.
• The parts arranged to improve efficiency in picking parts
for orders.
• OSD (Overages, Shortages, and Damages) on the
receiving end.
• Returns should be processed on a timely basis.
• Physical Counts: Specific time frame or cycle counts.

6. Review the movement from an overall view and by
individual part, or item.
As an overview, I calculate Days In Inventory. Watching this
measurement allows me to review Purchasing and Sales progress
at one glance. I also compare this figure to prior years.
You need to work closely with the Purchasing Department. Make
sure everyone is on the same path.
If you see more than usual inbound merchandise, make sure it is
covered by advanced orders.

7. Look for gaps in sales of an part before becoming
obsolete.
Reviewing data on a regular basis should provide the
foresight of when sales slow down to the point the part
becomes obsolete. If not, create a more informative report.
Visual is a great point of reference. If you have staff, your
staff should keep you informed of slow moving parts in the
warehouse.

8. The parts arranged to improve efficiency
in picking parts for orders.
There are many different ways to arrange your warehouse.
Warehouses can be arranged by part number, arranged by part
type by part number, arranged by part classification by part
number. You decide.
I recommend a high pick slot area. This will be an area closest to the packing table.
Your top (in volume) 20% parts should be located in this area. Given the right
combination of parts in this area, this principle will reduce the time required to pick
your orders.

9. OSD (Overages, Shortages, and
Damages) on the receiving end.
The Bill of Lading is treated as a legal document.Your receiving team
should always write the overages, shortages and damages on the Bill
of Lading.
As the product is being received, any damaged product should be
written on the Bill of Lading. The damage product should be placed in
a separate area for processing.
Know your supplier rules on return request for damage product.
Develop procedures to around the supplier rules to accomplish this
task.

10. Returns should be processed on a timely basis.
Returns is a source of funds. You should set-up procedures to
ensure returns are processed on a timely basis. Consider the
supplier requirement for returns when defining your return
procedures.
You may have multiple types of returns. You may have returns as
damaged at time of receipt;You may have returns as defective
product at time of sale. Make sure to include proper
documentation of returns by defined from the supplier.
Consider making Returns part of your KPI reporting.

11. PhysicalCounts
Specific time frame or cycle counts.
What are the two words most employees do not like to here?
InventoryTime. I do not blame them. Why do I want to count all
these parts. I am a Manager not in Inventory.
Consider Cycle Counts. Your team would count on a daily or
weekly basis a number of parts. I define all parts must be counted
2x a time. Higher volume parts would be counted more often.
I believe you gain much more data with cycle counting that you
can resolve issues faster with cycle counts.

12. Do not place your entire stock in the picking slot. Have a back stock
position. It seems that when the stock is plentiful, units will be lost.
However, when stock is limited people will try to conserve it.
Have your inventory team count the inventory after being received.
This is a great way to cycle count.
What are your ways to control Inventory. Let me know.
General Comments

13. We have completed the
Inventory section of
Six Sigma.
The next presentation we will examine Motion.
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14. SIX SIGMA
INVENTORY
THE END