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The focus of this document is to illustrate the application of the Six-Sigma methodology within Infinity Resources Inc, a direct marketer, to the reduction of "redlines" in the order fulfillment process. A redline occurs when an item that appears on a pick ticket released to the warehouse, cannot be located and therefore the order cannot be filled complete. A redline results in a great deal of additional effort made by both the warehouse and customer service staffs. This situation also can be confusing to the customer, resulting in increased cost and decreased satisfaction. The purpose of this project is to:
- Identify the number of items that are redlined and the cost associated with each.
- Determine the root causes that lead to an item being redlined.
- Recommend changes in process to decrease the number of redlines, thus reducing unnecessary expense and improving customer satisfaction.
To accomplish this, a baseline was established. The baseline revealed that there were 17,875 items redlined out of 8,564,538 items shipped (.21%). This equates to a Z-Score of 4.36 Sigma and a DPMO of 2,087. The baseline indicated that the process was operating significantly better than the management team's perception but that a cost of "unquality" opportunity of $56,000 in labor expense existed.
The project's Analyze Phase indicated that 65% of redlines were due to product being "lost" and an additional 17% were due to erroneous cycle-counting reconciliations. The analysis revealed that product type and company differences were not statistically significant. The two factors provide leverage points to gain an 82% reduction. The following recommendations resulted from the analysis:
- Redesign the process ("rework loop") for communicating a redline to our customers.
- Increase the amount, and frequency, of audits for the receiving of all automated purchase orders.
- Decrease the cycle count variance thresholds that dictate additional counts being performed.
- Re-train all putaway personnel to ensure that proper technique is being used.
The outcome of these recommendations resulted in an 82% decrease in redlined items, saving the company over $45,000 annually. Not measured was the resultant improvement in customer service with fewer contacts coming into the call center as a result of process failure.
To learn more about this study and to review the complete report, please contact our sales team at (630) 775-3300.
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