DMAIC for Inventory Reduction - TAPS

Manoj Ganeshan MS in Reliability and Quality Engineering University of Arizona

Key Words

TAPS - Tata Auto Plastics Systems Indica - Small size car manufactured by Customer

FG - Finished Goods
RM - Raw material RG / RP - Reground / Re- pelletized Comp - Components SP Supplier parts

WIP - Work in progress

BOM- Bill of Materials
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Process Flow Diagram

RM ( plastic material) Material stays in Stores

SP

RG/RP

RM(WIP)

COMP (WIP)

Material as WIP

FG

Finished products wait in FG before being dispatched

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Cost of Poor Quality Pareto Chart Process Flowchart Critical to Matrix (CT)

DEFINE
Identify what is important to the customer. Define Project Scope Y= Number of days of Inventory = Weekly Inventory ($)/ Sales($) per day

DEFINE
Problem Statement The Avg inventory was about $ 200 K . No of days of Inventory (Y)---- 12.8 days Industry Benchmark--------8 days.

Gap to be reduced

Note

The initial benchmarking figures are based on data collected in March 01. The actual average sales per day in this time period was $15,931.5

Process to be improved

Inventory Management Customers VP- Operations VP- Finance What do the customers care about

CTQ ---Quality of inputs must be good( Customer-Opns) CTC------ Inventory Carrying Cost must be minimum ( Customer- Finance) CTD------ On-Time delivery of material to production( Customer-Opns)

Characteristic should be selected for improvement Inventory Carrying Cost CTC.

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Impact to business if the characteristic (s) is/are improved

Reduced Inventory

Less Inventory Carrying Cost

Improved profitability and cash flow

Process Boundaries

Start: Raw Material receipt by the Stores End: Dispatch of finished goods by through invoice

Deliverables

Reduce Inventory and the Number of days of Inventory (Y)

Collateral Damage No Line Stoppage

Project Scope/ Focus

TAPS Mold Shop Safari Fiat Indica Paint Shop Bajaj LTJD

FG

RM (S)

RG/RP (WIP)

SP RM (WIP)

Comp (WIP)

MEASURE

Process Mapping Check Sheets Pareto Chart Measurement Systems Analysis (MSA) Process Capability Analysis

Determine what to measure (Y) and validate the measurement system

Quantify Current performance Set Improvement Target

Data Collection
Inventory classified into 6 groups. ( Stratification of Data)

1. 2. 3.

4.

RM (Stores) SP RG/RP FG WIP Components RM (WIP)

Selected for Improvement

5. 6.

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MSA.Measurement System Analysis

Discrepancies found in Measurement Systems(Computer vs.. Manual) Deviations rectified- Systematic Sampling done.
BEFORE (Data in Kilograms)

ITEM 6251 Y G001 8021 M G001

Manual 585 505

System 5657 3008

Deviation > 100 % > 100 %

Feb Data Unsatisfactory

AFTER(Data in Kilograms)
ITEM 6251 Y G001 8021 M G001 Manual 5074 900 System 4905 900 Deviation 3% 0%

Mar Data Satisfactory

Actions taken for improvement: Educated responsible manufacturing associates for MRP data entry. Took actual daily physical inventory for 2 weeks and analyzed problems faced at various stages of data entry. 11

ANALYZE

C & E Diagram 5-Why Analysis Hypothesis Testing FMEA Multi Vari Charts Correlation and Regression DOE

Explore Data

Generate Hypothesis about causes

Verify/ Eliminate Causes

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C & E Diagram for RG / RP

Method
2. ) Consumption is less than set norm Poor acceptance Fear of rejection Inconsistency of material performance in the past Contamination of RG-RP No system to control contamination during grinding No awareness Lack of communication Lack of clarity No ownership Indicates a highly probable cause Data available

RG / RP
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Verification of Cause 2 in RM C&E Diagram

TOTAL INDICA RM
INVENTORY LEVEL vs RM CONSUMPTION
40000 35000 30000 25000 20000 15000 10000 5000 0

Actual Inventory Actual Production

3/ 1/ 00 3/ 3/ 00 3/ 5/ 00 3/ 7/ 00 3/ 9/ 00 0 0 0 0 0 0 0 0 0 0 2/ 18 /0 2/ 20 /0 2/ 22 /0 2/ 24 /0 2/ 26 /0 2/ 28 /0 3/ 11 /0 3/ 13 /0 3/ 15 /0
DATE

2/ 16 /0

3/ 17 /0

TOTAL INV ( in kg)

TOTAL PRODUCTION ( in kg)

16 Feb - 18 Mar EXAMPLES Actual Inventory

BUMPER RM
PRODUCTION vs INVENTORY LEVEL FOR XPP 1090 BLACK 6000 5000
RM ( in kg)

4000 3000 2000 1000 0

2/ 16 /0 2/ 0 17 /0 2/ 0 18 /0 2/ 0 19 /0 2/ 0 20 /0 2/ 0 21 /0 2/ 0 22 /0 2/ 0 23 /0 2/ 0 24 /0 2/ 0 25 /0 2/ 0 26 /0 2/ 0 27 /0 2/ 0 28 /0 2/ 0 29 /0 0 3/ 1/ 00 3/ 2/ 00 3/ 3/ 00 3/ 4/ 00 3/ 5/ 00 3/ 6/ 00 3/ 7/ 00 3/ 8/ 00 3/ 9/ 0 3/ 0 10 /0 3/ 0 11 /0 3/ 0 12 /0 3/ 0 13 /0 3/ 0 14 /0 3/ 0 15 /0 3/ 0 16 /0 3/ 0 17 /0 3/ 0 18 /0 0

Actual Production
DATE TOTAL INV ( in kg) TOTAL PRODUCTION ( in kg)

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Voting Down the List of Causes - RG/RP

SELECTION OF ROOT CAUSES FOR RG-RP
TEAM MEMBERS SNO 1 2 3 4 5 6 CAUSE Long cycle time between generation and usage Consumption is less than set norm Wrong Change Management Unusable grades of RG High Rejections Trials I 4 3 7 4 1 1 2 2 1 1 4 2 2 2 3 1 2 1 2 2 II III IV 3 3 5 V VI 2 4 VII 3 3 TOTAL RATING 12 29 2 11 16 1

The team has identified & verified these as the most important causes of the effect.

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Setting Improvement Target

Category Actual Inventory (In Days) Target (In Days)

RM

2.6

RG/RP
SP FG WIP Total

3
3.4 2.7 1.1 12.8

1.5
2 2 0.5 8
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DOE Mistake Proofing Statistical Tolerancing FMEA Hypothesis Testing

IMPROVE

Determine solutions(ways to counteract causes) including operating levels and tolerances

Install solutions and provide statistical evidence that the solutions work

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Improvement Phase
Problem statement

Key Output Variables

Key Causes
Stocking Policy not dynamic Production Planning not synchronised RP not factored Consumption less than norm

Countermeasure
Stocking Policy per varying customer demand
Material purchase aligned with prod. Agreement on use of RP reached Month wise reduction plan documented

RM / SP Levels

Inventory High

RG / RP levels

High Rejection Long cycle time

Another Six Sigma team is addressing this issue Being analysed

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Sample 1: Project Planning Worksheet

Countermeasure - Stocking Policy, Imported SP
2.) Dynamic stocking policy - Imported SP Duration Start date End date Responsibility

a.) Month wise, item wise inventory reduction plan (upto Sept 01) to be prepared. 2 days b.) Item wise purchase quantities to be worked out

18-Apr

20-Apr

S. Kolhe

2 week

21-Apr

5-May

c.) Monthly call off to be given for all imported items. Maintain reserve stocks Continuous

6-May Continuous

V. M. Limaye

What needs to be done How Long will it take?

Whos going to help do it

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12.8
12 12.0 11

Before

Overall Results...

Countermeasure implementation initiated

Y Axis - Number of Days of Total Inventory

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8.9 Target

After
6.66 Mar Apr May June

7.95
6.7 July Aug
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Days

Before
2.6

RM Results...
Y Axis - Number of Days of RM Inventory

2.4

2.2

2.0
2.0

Target After
1.95 1.73 1.72

1.8

1.69

1.6

Mar

Apr

May

June

July

Aug
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Days 4.1
3.5

RG/RP Results...
Y Axis - Number of Days of RG/RP Inventory 2.82

Before
3.0

3.0
2.5

2.0

2.2

2.2

After
1.88

1.5

Target

Mar

Apr

May

June

July

Aug
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Days
3.5

Before
3.4

SP Results...
Y Axis - Number of Days of SP Inventory

3.0

2.5

2.59

2.0

2.0
1.5

After
1.51
1.35

Target

1.04

1.0

Mar

Apr

May

June

July

Aug
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Days
3.0

Before
2.72

FG Results...
Y Axis - Number of Days of FG Inventory

2.5

2.54

2.0

Target
1.82

After

1.74 1.55

1.5

1.0

0.82
0.5

Mar

Apr

May

June

July

Aug
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Signs of Improvement
PRODUCTION vs INVENTORY LEVEL FOR 6251Y G001

7000 6000 5000

RM ( in kg)

Synchronization activity started

First signs of Improvements

4000 3000 2000 1000 0

3/ 1/ 00 3/ 3/ 00 3/ 5/ 00 3/ 7/ 00 3/ 9/ 00 2/ 16 /0 0 2/ 18 /0 0 2/ 20 /0 0 2/ 22 /0 0 2/ 24 /0 0 2/ 26 /0 0 2/ 28 /0 0 3/ 11 /0 0 3/ 13 /0 0 3/ 15 /0 0 3/ 17 /0 0

Actual Inventory

Actual Production 16 Feb - 18 Mar

DATE TOTAL INV ( in kg) TOTAL PRODUCTION ( in kg)

Inference: Attempts should be made to synchronize daily RM purchase with production batch size
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Control Plans Control Charts Visual Management Procedures/ Work Instructions Process Capability Total Productive Maintenance (TPM)

CONTROL
Put Controls in place to maintain improvement over time Provide statistical evidence that the improvement is sustained

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Control Phase

Our team determined how to keep the best practices (our Xs) in control in order to maintain the improvement in Y over time. Developed a detailed control plan for Xs( Causes) Y = f (X1, X2, X3, )

Continue to sample Y X 1 =Stocking policy not dynamic X 2 =Prod planning not synchronized ..and so on

Implement a process to control our Xs

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Control Phase..

Inventory management process reasonably under control & we are holding gains. Uncovered a new problem- Quality of product( CTQ) Must reduce the production of RG material by systematically reducing bumper rejections. Best inventory practices developed in this project can be leveraged to other projects.

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Overall Results

~ 42 % reduction in number of days of Indica Mould Shop Inventory in 6 months (March - August 01)

~ US $ 45,000 reduction in actual working capital with a ~ 45 % increase in sales volume between March and August 01.

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Key Project Learnings

DMAIC is an effective strategy for improving processes such as inventory management Complexities of inventory measurement realized The importance of cascading / focusing / prioritizing our problem to a manageable level Estimating project savings in the initial stages is very crucial as it helps clarify teams & management's expectations from the project. How to apply C&E diagrams to identify root causes
Concentrating on Causes (Xs), verification through data the big Xs, and systematically improving Y by controlling Xs

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Closing Remarks Our team delivered measurable results & we are holding the gains for the last three months Success was definitely through team work Accountability amongst team members was good This project was data driven Commitment from management was very good This project provided indisputable evidence that Six-Sigma works for transactional processes also Lets make Six-Sigma The Way We Work
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