Improving Inventory Management Process for Freestock/Floor Stock

Addressing stock-outs in Freestock/Floor Stock inventory management using Six Sigma tools and methodologies. The project aims to reduce stock-outs by 25%, identify root causes, and optimize processes to enhance customer satisfaction and operational efficiency.

• Inventory Management
• Six Sigma
• Process Improvement
• Stock-Outs
• Operational Efficiency

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1. Freestock/Floor Stock Vendor Managed Inventory -Endries- Dax Tripp, Jeffrey Howell, Tiffanie Martin, Ben Ruby, Alice Cook Dr. Jimenez, Wes Olive, Psyche Bryant May 5, 2015 1

2. Problem Statement What is the Current Problem? Out of all the orders that affected Schedule Attainment in December 2014, 13% were related to Freestock/Floor stock Stock-Outs What is Freestock/Floor Stock? Freestock/Floor Stock Typically Comprise Commonly used Fasteners which are Hardware that Adjoin Objects using Screws, Bolts Among Other Components Philips Freestock/Floor Stock Components List Currently Also Includes Wire, Glue, Tape, Bags Among Others Impact of Not having the Correct Mixture of Freestock/Floor Stock Components? Missed Customer Orders Assembly Downtime Firefighting Confusion on Replenishment Process Ownership of Process Goal: Reduce stock outs by 25% 2 DMAIC presentation template Confidential

3. Define Utilized Six Sigma Tools: SIPOC Process to Identify Scope of the Process our Project will Address Suppliers Inputs Process Outputs Customers Decision Tree for Scope of Project Tool or reason used to eliminate boxes Voice of the customer: Deliver Orders On-Time Basis of split Freestock/ Floorstock Stock Outs Stock Outs Represent Highest Percentage Schedule Attainment BOM Error Line Balance Other ways 83% of Stock Outs are due to Endries Vendor Endries Tower Star Others Initial problem statement: Eliminate Freestock/Floorstock Stock Outs from Occurring because of Endries 3 DMAIC presentation template Confidential

4. Measurement Data Gathered Process Chart 3.8% Value Added DPR Customer Attainment Endries Annual Usage Usage, Lead Time, VMI Philips Item Master 43% Alignment Bin Measurements 23% within 20% EOH 4 DMAIC presentation template Confidential

5. Freestock Issues Stock Outs and Current Process Endries VMI Classification Months Usage Lead Time Component Type Philips VMI Classification Annual Usage 5 DMAIC presentation template Confidential

6. Analyze Design of Experiments to Verify Root Causes for Stock Outs Analysis of variance table [Partial sum of squares - Type III] Sum of Squaresdf Mean Square F Value p- value Prob > F Rank of Significance Significant factors have p-values < 0.05 Source model is significant 7 6 Model 13197.52 41 321.89 2.03 0.039 A-Endries VMI B-Item Master SC C-Months Usage D-Annual Usage E-Lead Time F-Component Screw DE AC CD CE AE AD Residual Cor Total 722.27 819.39 415.14 34.52 47.27 31.64 1732.64 1198.89 1198.89 1164.52 848.27 708.89 3486.59 16684.11 63 1 1 1 1 1 1 1 1 1 1 1 1 722.27 819.39 415.14 34.52 47.27 31.64 1732.64 1198.89 1198.89 1164.52 848.27 708.89 158.48 4.56 5.17 2.62 0.22 0.3 0.2 10.93 7.56 7.56 7.35 5.35 4.47 0.0442 0.0331 0.1198 0.6453 0.5905 0.6594 0.0032 0.0117 0.0117 0.0128 0.0304 0.046 R2= 0.79 Adj R2= 0.4 1 2 2 4 5 8 Most significant factor is the interaction between Lead Time and Annual Usage. 22 Std. Dev. Mean C.V. % PRESS 12.59 6.33 198.94 R-Squared Adj R-Squared Pred R-Squared Adeq Precision 0.791 0.4016 -0.7685 7.226 6 DMAIC presentation template Confidential 29506.38

7. Analyze Solutions Desirability at 0.949 if usage set at < 500. Desirability reduced to 0.7 if annual usage required to be > 500. 7 DMAIC presentation template Confidential

8. Improve Solution: Develop Criterion for Each Category Freestock- VMI Freestock Purchase ?? ?? + (??)(??) #?????? Kanban System SCQ = Information Philips Manufacturing Facility Vendor Distribution Center Replenish Bin(s) 8 DMAIC presentation template Confidential

9. Improve Using Six Sigma Tools: RACI Chart to Clarify Roles and Responsibilities Responsible Accountable Consulted Informed Process Map for Source Code Conversion Material Flow for Based on Source Code & 9 DMAIC presentation template Confidential

10. Control Dashboards Dashboard to Track Stock-Outs & Performance Stock-Outs by Week, Stock-Outs by Source Code/Criteria Read-Out of Components with Highest Impact and by Criteria % of Components Seen by Both Parties 10 DMAIC presentation template Confidential

11. Control Measuring System Statistical Proof that Methods Implemented have dropped Stock- Outs We Expect this Trend to Continue as Components are Addressed 11 DMAIC presentation template Confidential

12. Collaborating With A Special Thank you to: Philips Members Texas State University Members Chris Venicx Plant Manager Wes Olive Supply-Chain Manager Psyche Bryant Assembly/Manufacturing Mgr. Felipe Caldeira Industrial Engineer Francisco Gutierrez Senior Industrial Engineer Dr. Jesus Jimenez Industrial Engineering Capstone Faculty Advisor Additional Thanks Dr. Tongdan Jin Industrial Engineering Professor Dr. Clara Novoa Industrial Engineering Professor Dr. Eduardo Perez Industrial Engineering Professor 12 DMAIC presentation template Confidential