| Causes of Excess and Obsolete Inventory | | | | In improvement projects, teams start by analyzing |
| One of the root causes of excess and obsolete | | | | the inventory and defining the project goals. These |
| inventory is the poor and inaccurate forecasting of | | | | goals are the guidelines for the team for system |
| the required levels. Long lead times and poor quality | | | | operations. Data fields are based on the questions |
| are high-level causes of such problems. | | | | and IT systems are used to design an inventory |
| When lot sizes are large, the lead time also increases; | | | | model to find the root causes of the inventory |
| it may also increase if the schedules go off track, | | | | problem. |
| there is late delivery and processes are complicated | | | | In the next Measure phase, a measurement system |
| or need a lot of rework. If there is poor demand | | | | and data collection plans are made. An on-site physical |
| management (i.e. when the demand and supply do | | | | count of inventory and a management report analysis |
| not match due to inaccurate demand data, poor | | | | is also done to determine the accuracy of supply |
| forecasting and unrealistic sales projections), there is | | | | chain metrics such as lead time, lot size, etc. In the |
| excess inventory. | | | | Analyze phase, using the inventory models, the key |
| Lean Six Sigma can be used to reduce waste and | | | | process input variables that have an impact on |
| rework, process workflow to reduce the inventory | | | | inventory management are identified. |
| excesses and obsolete inventory pile-up. It can also | | | | A simple inventory balance may also be used to |
| be used to improve the quality levels so that the | | | | calculate service levels, lead time and demand |
| diverse factors causing waste within the workflow | | | | variation. This helps to identify which items and which |
| can be eliminated. | | | | locations have too much or too little inventory. All this |
| Using Lean Six Sigma to Tackle Root Causes | | | | helps determine the root causes of the problem. |
| Lean Six Sigma teams can make use of the DMAIC | | | | In the Improve phase, the measures to overcome |
| methodology to find the root causes of the problem | | | | such problems are identified and utilized to bring |
| of excess and obsolete inventory. Using some of the | | | | about improvements in the system. |
| excel-based inventory models and other software, | | | | There are other problems that are identified in the |
| they can easily determine the key process input | | | | analysis and execution of such projects. Lean tools |
| variables of the problem, by following the general Six | | | | such as 5S can be used in the Control phase to |
| Sigma root cause philosophy of Y=f (x) to analyze | | | | sustain the improvements over a period of time. |
| and identify the problem areas. | | | | Inventory models can also be utilized to reflect the |
| They can also be used to show sales, marketing, | | | | supply chain functions and show the effect of |
| manufacturing and other functions in the supply chain | | | | demand management practices on the excess and |
| where the functions are responsible for the high | | | | obsolete inventory. Companies can use Lean Six |
| lead-time, and consequently improve on demand | | | | Sigma to reduce and eliminate waste in inventory and |
| management practices. | | | | streamline the entire company's operations. |