Six Sigma In Controlling Slow Moving Inventory

As the primary key in the whole Supply Chain system, the inventory management is drawing more and more attention from the enterprisers. The right level of inventory is very crucial, excessive inventory occupies big amount of operating capital, which prevents the healthy circulation of the cash flow. Overstocking sometimes leads to product write off in worse case, causing an increase in operating cost. Both impact the profitability of the company.This thesis starts with an introduction of Six Sigma basic concept & theory, the tools and methodology, as well as the DMAIC system of Six Sigma implementation. This thesis is aimed to reduce the Slow Moving Inventory (SMI) rate, which is a key performance index in the inventory management of The Dow Chemical Company, and focuses on how the Six Sigma MAIC methodology is fully applied. First of all, identify what is the project scope, the defect and the baseline performance by reviewing the inventory in whole supply chain. Secondly, Data collection and mining. Taking advantage of some quantified analysis charts e.g. Cause & Effective Chart etc., the key factor or root cause X is found out. After that, the brain-storming sessions and value chain mappings are utilized to find out the solution. Consequently, the implementation of the project improves the setting of safety stock, which is proved to be the root cause of the constant high level of SMI rate. After 9 month of implementation, the SMI performance is dramatically improved.The successful roll out of the project not only result in a remarkable annual saving in supply chain cost to serve, but also optimize the work process among different supply chain functions within the company, and further promote the six sigma methodology into people's heart and mind, making it become the preferred way of working.This project success, which is an example of practice, demonstrates that Six Sigma is a best practice for problem solving in Supply Chain inventory management.