Project 4B: DMAIC at Dymo

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Project 4B DMAIC at Dymo
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Define Phase Executive Summary

• Project Status
• Unable to control Inventory efficiently
• Current State
• Existing process involves multiple departments
  manipulating data received from other departments
  to serve their purposes
• Findings
• Defining product families market segments is
  inconsistent across departments
• Next Steps
• Initiate BI project to address efficiency issues

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Define Phase Using BI

• Business Intelligence can enhance
• Process Improvement
• By creating a central data warehouse to manage
  each departments information rather than in
  multiple places
• Leadership Decision Making
• By developing standard reports via a common
  definition of SKU, product family and market
  segment, etc

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Define Phase Summary of LSS Tools

• Be the recognized leader in innovative
  solutions that help people organize identify
  their world.
• Customer Requirements
• Whos the Customer? Sales, Finance, Production
  Demand
• Voice of the Customer Reliable data to assist in
  decision making
• Understanding the Process
• SIPOC
• Complete Charter
• Ganntt Chart

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Define Phase SIPOC
Suppliers Inputs Process Outputs Customers
Marketing SKU Product Description Market Segment Product Family Material ID 12 Month Projections Excess Obsolete Sales Projection Reports Marketing
Demand Planning SKU Product Description Market Segment Product Family Material ID 12 Month Projections Forecast by Segment Product Family Demand Planning
Finance SKU Product Description Market Segment Product Family Material ID 12 Month Projections Margin by Product Family Report Finance
Production SKU Product Description Market Segment Product Family Material ID 12 Month Projections Production Turnover Report Production
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Define Phase Gantt Chart
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Measure Phase Executive Summary

• Project Status
• Investigating inconsistency between market
  segment and product family definitions
• Current State
• Sales, demand and production plans created are
  inconsistent, resulting in high inventory levels
• Findings
• Inconsistencies in SKU linkage, product family
  and market segment definitions
• Next Steps
• Analyze the data collected to validate
  relationships between variation of inventory and
  the information gap.

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Measure Phase Using BI

• Business Intelligence can enhance
• Process Improvement
• A cause and effect diagram shows possible
  factors that might be causing the inaccurate
  projections
• Leadership Decision Making
• By eliminating other causes and narrowing down
  on the causes that warrant further investigation,
  Management can then take corrective action

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Cause and effect diagram
Methods/Procedures
Software
Inconsistent SKU linkage
Faulty software
Inconsistent product families
Inconsistent market segments
Inaccurate projections
Lack of training
Personnel
Random error
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Analyze Phase Executive Summary

• Project Status
• Validate relationships between variation of
  inventory and information gap.
• Current State
• Demand plan is created from sales forecast, which
  in turn determines the production plan.
  Inventory is byproduct of these.
• Findings
• The inconsistency between demand plan and
  production plan could be the culprit in inventory
  spikes.
• Next Steps
• Improve demand and production plan using BI tool

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Analysis Phase Using BI

• Provide better understanding of how inventory
  varies along with a number of factors such as
• The gap between demand plan and production plan
• The mismatches of SKU among different departments
  such as marketing department, sales department,
  production department, and finance department
• Enhance Inventory Management Decision Making
• Enhance Demand Plan
• Enhance Production Plan

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Analysis Phase Summary of LSS Tools

• Qualitative Analysis
• Cause and Effect Diagram
• Understanding the causes of inventory variation
• Quantitative Analysis
• Regression Analysis
• To verify the impacts of inconsistency between
  production plan and demand plan.

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Analysis Phase Qualitative Analysis

• Cause and Effect Diagram

Production Plan
Variation of Inventory
Demand Plan
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Analysis Phase Quantitative Analysis

• Regression Analysis
• Hypothesis Inventory is predicted as Production
  Plan Demand Plan
• Descriptive Statistics
• Note PP Production Plan DP Demand Plan

Variables N Min Max Mean Std. Deviation
Inventory 300 0 243000 7188.9 25333.79
Gap between PP and DP 300 -5037 35803 162.1 2327.56
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Analysis Phase Quantitative Analysis

• Regression Analysis
• Hypothesis Inventory is predicted as Production
  Plan Demand Plan
• Regression statistics model summary
• Regression statistics coefficients
• Note PP Production Plan DP Demand Plan

Model R R Square Adjusted R2
1 0.186 0.035 0.031
Model Unstandardized Unstandardized Standardized t Sig.
Model B Std. Error Beta t Sig.
Constant 6860.81 1443.05 4.754 .000
Gap between PP and DP 2.024 .620 .186 3.267 .001
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Analysis Phase Quantitative Analysis

• Regression Analysis
• Hypothesis Inventory is predicted as Production
  Plan Demand Plan
• Conclusion
• The linear relationship between inventory and gap
  between production plan and demand plan is
  significant
• However, such a gap doesnt explain the full
  variance of inventory as it is proposed to be
• Need improvement on both demand plan and
  production plan

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Improve Phase Executive Summary

• Project Status
• Improve demand and production plan utilizing BI
  system
• Current State
• Existing process is inconsistent across
  departments causing demand production plan to be
  inaccurate.
• Findings
• We are able to reduce touch points and
  streamline process by making simple changes This
  introduces accuracy and efficiency.
• Next Steps
• Create uniform control system to keep integrity
  of the data/process

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Improve Phase Using BI

• BI system streamlines reports and queries that
  return consistent results
• BI system maintains data integrity by making
  SKU/Material pair unique and define product
  family and market segment
• BI system reduces touch points that can introduce
  random inconsistency in the current process.

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Improve Phase LSS Tools

• Current State Diagram
• Develop current state
• Identifying where breaks occur/major
  opportunities for improvement
• Point out key touch points
• Future State Diagram
• Develop future state diagram
• Simplifies the process with quick/simple changes
• Creates a desirable level of output

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Improve Phase Current Process Map
SKU belongs to which Product Family?
Demand adjusts sales plan creating a Demand plan
by Product group
Sales Creates a Sales Plan by market Segment
What group does the material belong to?
I need Margin Budget by SKU
Production Creates a production plan based on
Demand Plan
Finance creates Budget and Margin at aggregate
level.
How does material ID tie to SKU/market segment?
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Improve Phase Current State Diagram
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Improve Phase Future Process Map
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Improve Phase Future State Diagram
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Control Phase Executive Summary

• Project Status
• Introduce Controls in process management and
  planning
• Current State
• Existing process contains no control or
  ownership structure in place which causes defects
  and mistakes to occur.
• Findings
• By introducing a control priority structure we
  can measure and control the defects.
• Next Steps
• Continuous improvement and control

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Control Phase Using BI

• Use BI system to streamline reports and queries
  that return consistent results
• Exception reporting to show mismatches in
  SKU/Material linkage.
• Exception reporting to show mismatches in supply
  plan, demand plan and production plan

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Control Phase LSS Tools

• Control plan
• Prevention Vs. detection chart for transaction
  process
• Identifies typical failure cycle and aids in
  creating proper detection and prevention methods
• Monitor
• Statistical Process Control using C- chart to
  monitor outcome for continuous improvement

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Control Phase Control Plan
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Control Phase C-chart

• Current production plan compared to what the
  production plan should be using the BI tool
• BI tool calculation is Demand plan Inventory
  (/- 200 threshold allowed)

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Control Phase C-chart
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Dashboards
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Variations in projections
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Excess Obsolete Inventory
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Inventory - Regression
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Margin by Product Family
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Inventory Turnover
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Questions?
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Appendix
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Business Requirements (Dept.)
Sales / Marketing Demand Planning Finance Group Production / Supply
SKU SKU Product Family Material ID
Product Description Product Description Budget Forecast Product Description
Market Segment Market Segment Obsolete Inventory Product Sub Family
Sales Projections Product Family Invoice Sales Supply Plan
Sales Price Demand Plan Actual Units Sold Material Status
Obsolete Inventory Demand Plan Dollarized Standard Production Cost Standard Production Cost
Standard Cost Sales Projections Margin Budget Forecast
Budget Forecast Budget Forecast Sales Price Demand Plan
Actual Units Sold Average Sales Price OH Inventory Value Demand Plan Dollarized
Margin OH Inventory Value Obsolete Inventory
OH Inventory Value
All Projections, Forecasts, Plans are for 12
Months.
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Business Requirements (Functional)
Marketing Sales Department
Inputs Input Source Outputs
Margin Finance 12 month Sales Projection
SKU Self managed Average Sales price
Product Description Self managed Actual units Sold
Market Segment Self managed  
Sales price Finance  
Excess Obsolete Inventory Production  
12 month budget forecast Finance  
Standard Cost Production  

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Business Requirements (Functional)
Demand Planning
Inputs Input Source Outputs
SKU Self managed 12 month Demand Plan
Product Description Self managed 12 month demand plan dollarized
Market Segment Self managed  
Product Family Self managed  
12 month Sales projections Marketing/Sales  
Average Sales Price Marketing/Sales  
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Business Requirements (Functional)
Finance Department
Inputs Input Source Outputs
Product Family Self managed 12 month budget forecast (Aggregate level)
Excess Obsolete Inventory Production Invoice sales (Aggregate level)
Standard (production) cost Production Margin
Actual units Sold Marketing/Sales Sales price (List price, net 98, net 95)
OH Inventory Production  
OH Inventory Value Production  
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Business Requirements (Functional)
Production / Supply
Inputs Input Source Outputs
Material ID Self managed 12 month supply plan
Product Description Self managed standard (production) cost
Product Sub family Self managed Excess Obsolete Inventory
Material Status Self managed OH Inventory
12 month budget forecast Finance OH Inventory Value
12 month Demand plan Demand Planning