Project 4B: DMAIC at Dymo

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

Define Phase: Using BI Business Intelligence can enhance: Process Improvement By creating a central data warehouse to manage each department’s 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…

Define Phase: Summary of LSS Tools “Be the recognized leader in innovative solutions that help people organize & identify their world.” Customer Requirements Who’s 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

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 Demand Planning Forecast by Segment & Product Family Finance Margin by Product Family Report Production Production & Turnover Report Note = Above shows sample input and outputs, for a complete list please see Appendix A

Define Phase: Gantt Chart Activity Collect Business Requirements Define SKU rollup to Product Family & Market Segment Link Inputs from Depts. into Access Create Queries for Reporting Purposes Obtain Feedback from the customer Make necessary improvements 1 2 3 4 5 6 7 Week

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.

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

Cause and effect diagram Methods/Procedures Software Inconsistent SKU linkage Faulty software Inconsistent product families Inconsistent market segments Inaccurate projections Lack of training The cause and effect diagram allows us to list all possible reasons leading to the inaccurate sales projections. By eliminating unlikely factors, we can then narrow down on the factors that warrant further investigation. After reviewing the cost and effect diagram, we identified the 3 factors that were likely responsible for the inaccurate projections – inconsistent SKU linkage and inconsistencies in product family and market segment definitions across departments. Personnel Random error 9

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

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

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.

Analysis Phase: Qualitative Analysis Cause and Effect Diagram Production Plan Variation of Inventory This is a narrowed down version for Cause and effect diagram used earlier in slide 9 Demand Plan

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 243000 7188.9 25333.79 Gap between PP and DP -5037 35803 162.1 2327.56

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 Standardized t Sig. B Std. Error Beta Constant 6860.81 1443.05 4.754 .000 Gap between PP and DP 2.024 .620 .186 3.267 .001

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 doesn’t explain the full variance of inventory as it is proposed to be Need improvement on both demand plan and production plan

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

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.

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

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?

Improve Phase: Current State Diagram

Improve Phase: Future Process Map Strategic & Financial Planning Demand Forecasting & Planning Supply Planning Distribution Planning Manufacturing Planning Material Planning Shipment Planning Order Promising one plan

Improve Phase: Future State Diagram

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

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

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

Control Phase: Control Plan

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) Average of Sample is a straight average of calculated.

Control Phase: C-chart

Dashboards

Variations in projections A column chart showing the projected sales units for the two departments side by side makes it easier to notice the variances in the 2 departments’ projections.

Excess & Obsolete Inventory The inconsistencies in sales projections lead to increased levels of excess and obsolete inventories. A bar chart provides a visualization of the E&O levels by product family. Management can determine how accurate/inaccurate the sales projections are by tracking changes in the level of E&O inventory. 32

Inventory - Regression

Margin by Product Family

Inventory Turnover

Questions?

Appendix

Business Requirements (Dept.) Sales / Marketing Demand Planning Finance Group Production / Supply SKU Product Family Material ID Product Description Budget Forecast Market Segment Obsolete Inventory Product Sub Family Sales Projections Invoice Sales Supply Plan Sales Price Demand Plan Actual Units Sold Material Status Demand Plan Dollarized Standard Production Cost Standard Cost Margin Average Sales Price OH Inventory & Value OH Inventory Value * All Projections, Forecasts, Plans are for 12 Months.

Business Requirements (Functional) Marketing & Sales Department Inputs Input Source Outputs Margin Finance 12 month Sales Projection SKU Self managed Average Sales price Product Description Actual units Sold Market Segment   Sales price Excess & Obsolete Inventory Production 12 month budget forecast Standard Cost

Business Requirements (Functional) Demand Planning Inputs Input Source Outputs SKU Self managed 12 month Demand Plan Product Description 12 month demand plan dollarized Market Segment   Product Family 12 month Sales projections Marketing/Sales Average Sales Price

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 Margin Actual units Sold Marketing/Sales Sales price (List price, net 98, net 95) OH Inventory   OH Inventory Value

Business Requirements (Functional) Production / Supply Inputs Input Source Outputs Material ID Self managed 12 month supply plan Product Description standard (production) cost Product Sub family Excess & Obsolete Inventory Material Status OH Inventory 12 month budget forecast Finance OH Inventory Value 12 month Demand plan Demand Planning