Lean Six Sigma for Excess Engineering Inventory Growth: A Case Study on Unison Industries

This report analyses the principles, application, tools, and concepts of lean six sigma and provides a case study on Unison Industries. It identifies operational issues and challenges related to business objectives and management. The report recommends the implementation of lean six sigma concepts and applications to attain a 99% reduction in excess engineering inventory growth.

Leadership & Management
Leadership and Management

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Executive summary
This report will help to analyse the principles, application, tools, and concepts of lean six
sigma. Also, this report will also provide the concept of continuous improvement and also
their role in their business objectives and management in the Unison Industries. By using Six
Sigma, in this report, analyzed the case study on Unison Industries and provided a complete
report. Moreover, this report identified several operational issues and challenges which
related to the business objective of the Unison industries.

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Table of Contents
Introduction...........................................................................................................................................3
Discussion.............................................................................................................................................3
Conclusion.............................................................................................................................................9
References...........................................................................................................................................11

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Introduction
Lean six sigma is a kind of systematic approach to reducing or eliminating operational
actions that include no value added process. Lean methods are ensuring the priorities of the
customers for high satisfaction. This business report aims to reduce the excessive inventory
of Unison Industries by applying lean six sigma concept. In the year 2007, UI transitioned
towards a new ERP system known as ORACLE that covered high amount of excess
inventory. Therefore, the management of UI started to face a problem common to electronic
and mechanical aviation components manufacturing process as an excess amount of
inventory.
Further research investigated that, poor physical inventory management is one of the main
cause for excess engineering inventory growth. This business report is based on the
implementation of lean six sigma concepts and applications to attain a 99% reduction in
excess engineering inventory growth including a 25% reduction in the entire excess
engineering register. Finally, this professional report would provide the recommendation to
break the development of excess engineering inventory of UI (George, & George 2003).
Discussion
Task 1
1) Concepts of lean six sigma (two)
1) Operation management and business objectives both can be accomplished by appropriate
concepts of lean six sigma. Also, ‘reduction in the inventory levels’ is one of the significant
concepts of the lean six sigma. With the support of lean sigma concept, UI can reduce the
excess engineering inventory for further improvement in the operations management. Also,
the supply chain team can get clear and error-free information by adopting this concept of
lean six sigma.
2) The ‘improvement in product and service delivery time’ is another key contribution of
the lean six sigma concept. (de Koning, Server, van den Heuvel, Bisgaard & Does, 2006)
Stated that, UI could effectively increase the level of customer satisfaction by applying lean
six sigma concept, for example, improvement in product and service delivery time. By
improving the product and delivery time, UI can implement sustainability practice also.
2) Principals of lean six sigma (two)

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1) Operation management and corporate objectives both can be accomplished by apposite
principals of lean six sigma. In this manner, ‘identification of the consumer's need’ is an
important principle of the lean six sigma. The management of UI needs to focus on this
principle of lean six sigma for reducing excess engineering inventory cost. This principal can
also define the accurate need of the consumers for continuous improvement.
2) The ‘mapping the value stream’ is another key principle of lean six sigma for increasing
revenue and accomplish business goals. The supervisor of UI should focus on this principle
of lean six sigma for increasing customer satisfaction. This principal of the lean six sigma
also refers proper calculation regarding the measurement of the value stream of UI.
3) Tools of lean six sigma (two)
1) ‘Poke Yoke’ is a tool of lean six sigma that utilised to determine the original cause of the
organizational problems for measuring operational activities. The management of UI can
recognize the root cause of any kind of problem with this tool.
2) As per Pepper & Spedding, (2010), ‘Kaizen’ is another important tool of lean six sigma
that used to continuous improvement in the organization. With the help of this tool, UI can
reduce the rate of miscalculation in projects. The management of UI can improve the
operational activities for continuous improvement.
4) Applications of lean six sigma (two)
1) ‘Transportation’ is a key application that used for categorized the documents. With the
help of this application, UI can measure error-free documentation. By applying this
application, UI can measure the entire process of the documentation.
2) ‘Inventory’ is another key application of the lean six sigma that reduces excess costs for
accomplishing business objectives (Furterer, & Elshennawy, 2005). With the help of this
Inventory application, UI can reduce excess engineering inventory cost. Also, UI can reduce
the growth of excess engineering cost with the help of this application.
5) Concepts of continuous improvement (two)
1) The ‘Build work teams and employee involvement’ is a significant concept of
continuous improvement to the operation management and business objectives. UI can
increase revenue by building work teams and employee involvement as a significant concept
of continuous improvement.

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2) In words of Näslund, (2008), ‘Utilize problem-solving techniques within work teams’ is
another key concept for continued development in the business objectives. Problem-solving
techniques are part of employee job satisfaction concept for continuous improvement.
6) Principals of continuous improvement (two)
1) ‘Employee ideas are valuable’ is a key principle of continuous improvement to the
operation management and business objectives. Skills and aptitudes of the employees can be
increased by considering their valuable ideas for continuous improvement.
2) ‘The reflective Improvement’ is another key principle that helps in continuous
improvement to the operation management and business objectives (Snee, 2010). The rate of
customer’s reflection can be optimised by reflective improvement offered by UI.
7) Tools of continuous improvement
1) ‘Value stream mapping’ is a significant tool of continuous improvement because it
encourages the systematic thinking for improved better communication. By applying this
tool, UI can map the entire process of continues improvement.
2) ‘Gemba Walks’ is another critical tool of continuous improvement that helps the leaders
to determine the sense of upcoming events in the organization.
8) Applications of continuous improvement
1) DMAIC methodology is a key application for continuous improvement that includes five
phases, for example, define, measure, analyse, improve and control. This tool helps in the
employee development process.
2) Continuous improvement process (CIP) is another important application of continuous
improvement.
Task 2
1) Operational issues/challenges of UI
According to the case study, a vast quantity of UI inventory was pegged to excess in January
of 2009 including working capital, capacity, and resources.
i) The ERP system called as ORACLE conducted 65% of excess engineering inventory worth
to a dollar value which was equal to 20% of company’s engineering budget (2009). This was

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the first operational issue faced by UI (Arnheiter & Maleyeff, 2005). Also, further analysis
showed that UI had to face $200,000 due to month on month encasement in the excess
engineering inventory and due to received purchase orders as a critical operational issue.
ii) It also faced a faulty unit as a flagged by the ERP structure as excess and an investigation
proved that 102,716 defective units were produced within January 31st – February 28th. As
per (Andersson, Eriksson & Torstensson, 2006) around 79% was the calculated defect rate
that equated to a short-term ability score of 1.156 that can be considered as an operational
problem of UI.
iii) According to the case study, a basis cause of UI’s excess engineering inventory growth
was influenced by poor physical inventory management. Poor team performance was also
measured as a critical challenge of UI and misclassification of the inventory was occurred.
Engineering orders had been showing by physical inventory along with defective calculations
that cause excess engineering growth in the extra inventory that had been received already.
iv)On the other hand, UI’s supply chain team had also faced certain challenges and issues
regarding excess engineering inventory growth, for example, internal sales orders, finished
goods, work-in-progress, obsolete and raw materials. These above-mentioned issues and
challenges were being faced by the management of UI due to the physical inventory system
ERP as ORACLE (Byrne, Lubowe & Blitz, 2007)
Task 3
1) a. Impact of lean six sigma tool or technique to solve operational issues of UI
According to the case scenario, the management of UI needs to implement tools of lean six
sigma for resolving all operational challenges and issues that occurred due to an existing ERP
system. First of all, Kaizen is one of the innovative tools of the lean six sigma that can
minimize the impact of the excess engineering inventory (Dahlgaard & Mi Dahlgaard-Park,
2006). With the assistance of the Kaizen tool, UI can focus on the small improvements by
involving the commitment of down level employees at the organization as well as the rate of
mistakes can be reduced by applying these tools of lean six sigma.
Kaizen tool

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i) The management of UI can recover $200,000 due to month on month encasement in the
excess engineering inventory and improvement in the manufacturing can be appeared by
applying the kaizen tool of the lean six sigma.
ii) Kaizen also determines those 102,716 defective units were produced within January 31st –
February 28th that equated to a short-term ability score of 1.156. The management of UI can
determine the actual cause of these defective units by this tool.
iii) Kaizen can resolve poor physical inventory management was another operational issue of
UI and due to that misclassification of the inventory was occurred (Harry, 1994). The
management of UI can get more improved inventory by applying this tool.
iv) Kaizen can resolve supply chain team's challenges, for example, internal sales orders,
finished goods, work-in-progress, obsolete and raw materials. The rate of mistakes can also
be reduced by applying this tool.
Poke Yoke tool
i) Team performance of UI can be improved by applying another key tool of lean six sigma,
for example, Poke Yoke. In this manner, Poke Yoke tool is a mistake-proofing device that
mainly used to alert the service operator regarding any kind of defects or failure, for example,
$200,000 as per month on month encasement in the excess engineering inventory.
ii) The management of UI needs to adopt the Poke Yoke tool of lean six sigma for analyzing
the actual reason for making 102,716 defective units were produced within January 31st –
February 28th. As early mentioned, this tool could help UI to measure the root cause of these
miscalculations.
iii) This Poke Yoke tool also helps in improving the poor physical inventory management as
a critical operational issue of UI. Also, this tool can add more feature like invoice number,
date and so on that reduce the rate of mistakes.
iv) Poke Yoke can resolve certain challenges and issues of supply chain team of UI regarding
excess engineering inventory growth, for example, internal sales orders, raw materials,
finished goods, obsolete and work-in-progress. This tool can increase the self-confidence of
the supply chain team by minimizing the rate of mistakes and operational faults.
b) Recommended lean approach

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The management of UI needs to adopt lean six sigma concept to decrease the excess
engineering inventory growth for further improvements. According to the case scenario, UI
was using a physical inventory system that included many defects and problems. Certainly,
the management realized that the organizational proficiency had been affected by the decision
making the process of the ERP system. Also, customer service is also being damaged by this
inventory system (Bendell, 2006). The lean six sigma consultant suggested that the
management of UI must concentrate on the application of lean six sigma concept for
continues development and business growth. Therefore, applications and tools of lean six
sigma would be beneficial for the expansion of UI at the international context. It is highly
recommended that UI must focus on the interactive training session for increasing the skills
and information of the employees to manage to lean six sigma tools and application.
2. The management of Unison industries needs to apply two appropriate strategies and
approaches for continuous improvement in their business operations, for example, effective
manufacturing process and customer satisfaction.
i) The management of the organization should use the value-added service quality that
enables them to attract more customers. In other words, customer satisfaction is the most
important factor to resolve every operational challenge and issue in the organization. So, the
administration of Unison Industries must also adopt noteworthy training session to upsurge
the communication skills of the staffs to increase their performance. In this way, training is
the most important program which needs to be provided by the HR management of Unison
Industries that help to improve the communication skill and technical knowledge of all
supply chain team (Arnheiter & Maleyeff, 2005). On the other hand, the appropriate
techniques and tools of Six Sigma, like Kaizen and Poke Yoke which help to modernize their
business operations, and reduce costs, increase profits and improve employee acceptance—all
of which makes possible a better outcome for the future fiscal year.
ii) The management of Unison Industries should assess their present effective manufacturing
process to effectively resolve all operational issues and challenges by using lean six sigma
applications and tools like Kaizen and Poke Yoke. In Unison Industries, outsourcing can be a
cost-effective way to focus their efforts on what they do best as the business and build value-
added products and services. Before the manufacturing process gets started, it is crucial to
measure their current production and costs like internal sales orders, finished goods, work-in-
progress, obsolete and raw materials. Moreover, the management has to know accurately

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which core actions increase incomes and which non-core actions upsurge their expenditures
and mark their manufacturing process (Nave, 2002). In Unison Industries, the manufacturing
and operational issues are decreased to irrelevant figures with the severe quality standards of
the Six Sigma. In this way, the management needs to allow the extreme supervision that helps
to improve their manufacturing processes by growing their economies of scale and also
increase their distribution market. In this manner, the leaders of the Unison Industries also
need to focus on the manufacturing process and also their physical inventory to implement
the Lean six sigma concept in the supply chain procedures on the business operations.
Task 4
1. Impact of the continuous improvement process
Unison Industries can accomplish its desired goal and objectives by continuous improvement
process. Certainly, continuous improvement process has a deep impact on the organizational
proficiency and development. In this manner, the skills and appetites of the employees can be
enlarged by a continuous improvement process. The senior management of UI must follow
the flow of improvement for decreasing the impact of excess engineering inventory growth.
The level of customer satisfaction can be increased by the continuous improvement process.
In other words, the level of quality service can be improved by the continuous improvement
process (Thomas, Barton & Chuke-Okafor, 2008)
2. Learning and performance needs for continuous improvement
i) The organization has to promote further learning and understanding of continuous
improvement by applying a few leaning and performance needs, for example, technical
knowledge and communication skills. To increase the technical knowledge of the employees,
UI must appoint an efficient trainer who can increase the technical skills of the supply chain
team for continuous improvement.
ii) Communication skill must be reinforced among the employees in improving business
operations. In this manner, the employees can make effective co-ordinations by applying
effective communication skills. Moreover, with the help of effective communication skills,
the level of customer satisfaction can be increased. The coordination is very important for
increasing the organizational proficiency and communication skills are making effective
collaboration among employers and employees. Finally, effective communication training

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can be very useful for further learning and understanding of continuous improvement
(Goldsby &Martichenko, 2005).
3. The further continuous improvement process
i) The management of UI needs to adopt few further continuous improvement processes
across the operations in the next 12 months for improvement. Also, the 360-degree feedback
process is one of the effective systems by which the management of UI can gather
suggestions and feedback from the employees. By applying this process, UI can collect a
wide range of feedback from employees regarding any kind of issue or challenges.
ii) In this way, the personal development program is another key process that can increase
the self-confidence of the employees for enlarged improvement. Finally, both processes can
increase the business proficiency of UI for continues growth. By the assistance this process,
UI can increase the performance of its supply chain team.
Conclusion
The paper proposed the Lean Six Sigma techniques and tools also provide the complete
description of the phases in the Unison Industries. Moreover, this report also presented the
interpretations on the additional benefits and compared the lean six sigma tools and sigma
technique and tools with other approaches to improve the business operation and to assess the
effect of unceasing development process would have on the strategic objectives of the Unison
Industries. Moreover, their integration is concluded to be beneficial and possible (Näslund,
2008). Also, this report helped to identify the process how the applications and tools of lean
six sigma, as well as continuous improvement process, will help to achieve the business
objectives of Unison Industries. In this way, Lean Six Sigma are the two vital incessant
development practices to accomplish operative and provision quality in Unison Industries.
Moreover, this paper also discussed the existing tools, such as Kaizen and Poke Yoke which
described how Six Sigma fit in the manufacturing process in the organization. On the other
hand, this paper used to implement the proper lean strategies and also six sigma tools and
technique to solve the operational issues and several challenges for continuous improvement
as well as assess the influence of continuous improvement process which implemented
against their strategic objective and evaluate their performance to encourage further learning
across the context of the Unison Industries (Hoerl, & Gardner, 2010).

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In this way, fulfilling their business objective and understanding the profitable midpoint are
main factors which the management of the Unison Industries ought to consider while creating
a technique of six sigma. In this report, the management of Unison Industries would be up to
show they have the skill to recognize the physiognomies of UI and manufacturing processes
of this organization and be able to analyze, measure, improve, and control them (Byrne et al.,
2007). Moreover, the management or leader will also have the capability to conduct the total
review of the current practices and also gain a very strong understanding of their impact on
the quality performance.

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References
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Thomas, A., Barton, R., &Chuke-Okafor, C. (2008). Applying lean six sigma in a small
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