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How do you manage inventory risks and uncertainties using Six Sigma tools and techniques?

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Inventory risks and uncertainties can affect the quality, cost, and delivery of your products or services. They can result from factors such as demand fluctuations, supply disruptions, process variations, or human errors. How can you use Six Sigma tools and techniques to manage these challenges and improve your inventory management and flow efficiency?

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Sandana Thevar (Sandy) DMS

Product Manager @ Enate | 20x LinkedIn Top Voice | Lean Six Sigma Master Black Belt??| CAPM??| Scrum Certified? | Agile…
Ts. Jeetenraj Singh Randawa

Engineering Manager at Intel Corporation , Certified Six Sigma Black Belt, Certified TTT by HRD Corp
Junia ?raujo

Coordenadora de Cultura e Gest?o de Pessoas | Especialista em DHO

1 Define your inventory goals and metrics

The first step of any Six Sigma project is to define your problem statement, your customer requirements, and your project objectives. For inventory management, you need to identify your inventory goals and metrics, such as inventory turnover, service level, fill rate, or stock-out rate. You also need to establish your current performance level and your target improvement level.

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Ts. Jeetenraj Singh Randawa

Engineering Manager at Intel Corporation , Certified Six Sigma Black Belt, Certified TTT by HRD Corp
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Here's how Six Sigma principles can be applied to inventory management: Define: Clearly define inventory management goals and objectives, such as optimizing inventory levels, reducing carrying costs, and improving supply chain efficiency. Measure: Use data-driven analysis to measure current inventory performance and identify areas of improvement. Analyze: Apply Six Sigma tools such as Pareto analysis, root cause analysis, and statistical process control to identify root causes of inventory risks and uncertainties. Improve: Implement solutions to address identified root causes and improve inventory management processes. Control: Establish control mechanisms to monitor and sustain improvements in inventory management.

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Junia ?raujo

Coordenadora de Cultura e Gest?o de Pessoas | Especialista em DHO
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Six Sigma é uma metodologia de melhoria de processos para reduzir defeitos e varia??es nos processos fabris e empresariais. Como você pode aplicar: -> Análise DMAIC (Definir, Medir, Analisar, Melhorar e Controlar) Exemplo: - Defina os objetivos do gerenciamento de estoques - Me?a os indicadores-chave de desempenho (KPIs) - Analise os dados para identificar áreas de melhoria. -> Mapeamento de Processos Utilize ferramentas como fluxogramas para mapear o processo de gerenciamento de estoques e identificar possíveis fontes de riscos e incertezas. -> Análise de Causa Raiz Ao enfrentar problemas de estoque, utilize técnicas como os "5 Porquês" ou diagrama de Ishikawa (espinha de peixe);

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2 Measure your inventory processes and data

The second step is to measure your inventory processes and data, using tools such as value stream mapping, process flow charts, or data collection plans. You need to map out your inventory flow, identify your inventory types and locations, and collect relevant data on inventory levels, demand patterns, lead times, and costs. You also need to verify the accuracy and reliability of your data, using tools such as measurement system analysis or data validation.

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Sandana Thevar (Sandy) DMS

Product Manager @ Enate | 20x LinkedIn Top Voice | Lean Six Sigma Master Black Belt??| CAPM??| Scrum Certified? | Agile | Risk Management | ISO 9001:2015 | Data Science | Design Thinking | Product Design & Development
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To manage inventory risks and uncertainties, I use Six Sigma tools to measure and analyze our inventory processes and data. By identifying inefficiencies and variations, I can implement improvements that reduce stockouts, overstocking, and other risks. This data-driven approach helps optimize inventory levels, ensuring smooth operations and minimizing uncertainties.

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3 Analyze your inventory risks and uncertainties

The third step is to analyze your inventory risks and uncertainties, using tools such as cause-and-effect diagrams, Pareto charts, or hypothesis tests. You need to identify the root causes of your inventory problems, such as demand variability, supply uncertainty, process inefficiency, or human error. You also need to quantify the impact of these causes on your inventory performance, using tools such as statistical process control, process capability analysis, or simulation.

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Mohamed Sadek, CPIM

Demand Planning Manager MENA @ adidas | CPIM
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Analyzing inventory risks and uncertainties are very important to track and manage inventory performance. For example, demand forecast is one of the top contributors to inventory risks and uncertainty. So demand forecast itself must be tracked, measured and improved through forecast accuracy analysis like MAD, Bias, tracking signal and MSE. Another example is supply chain variability to make sure the MRP elements are updated for example is MRP is calculated as per LT of 3 months but the actual LT has a trend of increase over multiple months to be 4 Months so here we will expect inventory shortage.

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4 Improve your inventory policies and practices

The fourth step is to improve your inventory policies and practices, using tools such as brainstorming, benchmarking, or design of experiments. You need to generate and evaluate potential solutions to reduce your inventory risks and uncertainties, such as demand forecasting, inventory optimization, supplier management, or quality control. You also need to implement and test your solutions, using tools such as pilot testing, change management, or error-proofing.

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5 Control your inventory performance and improvement

The fifth step is to control your inventory performance and improvement, using tools such as control charts, dashboards, or audits. You need to monitor and maintain your inventory performance, using your defined goals and metrics. You also need to sustain and standardize your inventory improvement, using tools such as documentation, training, or feedback.

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6 Review and learn from your inventory project

The sixth and final step is to review and learn from your inventory project, using tools such as project reviews, lessons learned, or best practices. You need to evaluate and communicate your inventory project results, using tools such as cost-benefit analysis, return on investment, or customer satisfaction. You also need to identify and share your inventory project learnings, using tools such as gap analysis, continuous improvement, or knowledge management.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How do you manage inventory risks and uncertainties using Six Sigma tools and techniques?

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1 Define your inventory goals and metrics

2 Measure your inventory processes and data

3 Analyze your inventory risks and uncertainties

4 Improve your inventory policies and practices

5 Control your inventory performance and improvement

6 Review and learn from your inventory project

7 Here’s what else to consider

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