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Applying DMAIC to Inventory Problems

Fixing an inventory disaster

Eric Clower
Fri, 03/12/2010 - 12:50
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In July of 2008, I stepped out of an engineering leadership role and into an operational role. The transition was exciting and overwhelming. While I had been in and around manufacturing for a little more than a decade, I had never operated as a part of supply chain or production management. The closest I had really been to this side of the business was as a program manager, but even that role was predominantly engineering-based. My initial marching orders were simple: Turn the business around. For the month of July, our on-time delivery (OTD) was 64 percent, our scrap per earned hour (total dollars scrapped divided by total hours put to stock or earned hours) was $15, and our quality failures were hovering around 40,000 parts per million (PPM). While margin was not terrible, all other indicators were. If you did not catch the date above—July 2008—we were starting this initiative just before the great global recession.

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Comments

Submitted by Dave Gentile on Tue, 03/16/2010 - 18:01

Inventory Controls

The changes you made sound impressive, but your article omits any mention of robust manufacturing controls and focuses on a complex, expensive and potentially non-value added infrastructure that continually chases, counts and records parts. I imagine Toyota would say "Why do we need bar code scanners and computers? We know when, where and how many parts are needed at all points." - and put in controls to cause / detect the correct flows.

> Also, I didn't understand why your "true cost" was your "standard cost" divided by inventory accuracy, i.e. 10 x 1.06 = 10.60. Can you show the math?

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