Improving Cvs Inventory System Essays

Improving Cvs Inventory System Essays Improving Cvs Inventory System Essay Improving Cvs Inventory System Essay The purpose of this project was to gain experience in quality improvement by working with an organization to identify a business problem, analyze the causes, develop an improvement plan, implement changes, and to verify the effectiveness of the solutions. For this project we had to keep scope in mind. This project had to follow certain criteria, such as: that it is a manageable project with a local organization, it can be completed within the time frame of the course, it has a direct impact on external customers, it is relatively simple, and that it is not something that is currently undergoing major changes. The partner organization that our group worked with was CVS Pharmacies, and our main problem had to do with their current inventory process. Through problem identification tools, that helped us determine the what, when, where, how and who of the problem, as well as through tools such as SIPOC, catter plots, CE diagrams and KPIV/KPOV diagrams we were able to develop a focused problem statement. Our focused problem statement says that due to a poor inventory process, it takes too long for employees to find items that are out of stock (on the shelves), that have been requested for by customers, resulting in lost productivity, as well as frustration by customers, employees and ma nagement. This lost productivity results in poor quality that can be associated with a cost, as poor quality has a cost. We used a DMAIC (Define, Measure, Analyze, Improve, Control) approach to help us with this project. The define portion was used to identify the nature of the customer service problem, the measure phase was used to determine key service metrics, during the analyze stage we analyzed the reasons for poor service, within the improve stage we established new service protocols and implemented training strategies, and during the control phase we implemented controls to maintain the improvements that have been made. Some of the major results/findings of the report can be found in the graphs below. They show a summarization of data collected before and after recommendations have been made, in order to determine if any improvements have taken place. In conclusion we were able to make dramatic changes within the CVS we partnered with regarding their inventory process, we were able to reduce average times by 54%, range reduced by 70%, and standard deviation reduced by 50%, it can be concluded that the implementation plan we have instilled within the organization has made improvements to the overall inventory process. Recommendations for the CVS organization include two main ideas, organization and employee motivation. It is crucial that CVS maintain the current organization of their overstock area, with each isle having its own place within overstock, making it much easier for employees to find items. Also the CVS must keep their employees both well informed and motivated. Their employees must understand how important it is to have an organized stockroom, and must be taught how to maintain it. Also employers must motivate their employees to keep a more organized inventory, and also help motivate them to try and keep the shelves stocked, preventing them from even having to go in the overstock inventory area. In conclusion: due to an improved inventory process, it now takes less time for employees to find overstock items, this results in more productivity, a reduced cost of poor quality, as well as less frustration by customers, employees and management. Improvement Opportunity: The Define Phase The purpose of this project was to gain experience in quality improvement by working with an organization to identify a business problem, analyze the causes, develop an improvement plan, implement changes, and to verify the effectiveness of the solutions. For this project we had to keep scope in mind. This project had to follow certain criteria, such as: that it is a manageable project with a local organization, it can be completed within the time frame of the course, it has a direct impact on external customers, it is relatively simple, and that it is not something that is currently undergoing major changes. The company that our group has partnered with for this project is CVS Pharmacies. We looked into this company to see if there were any areas for improvement within the organization that would have an impact on external customers. Within this define stage is when we did exactly that, we defined the problem. One problem that we found within the CVS Pharmacy, that would be easy enough to handle given the scope of the project, concerned the stores current inventory (overstock, backstock) system. It seemed that currently there was no formalized process with regard to placing items in overstock, resulting in an unorganized and unconventional overstock area. This created a problem because it made it harder for employees to find items within overstock, once they have been requested by a customer. For example, a customer wants to by an item, but that shelf is empty, they then ask an employee to check overstock to see if there are any more of the requested items, but due to the lack of organization it takes a long time for employees to find these items, if they even find them. This is a problem because it results in lost productivity from employees, since they spend much time looking for overstock items, as well as frustration from customers, who must wait; frustration from employees who struggle trying to quickly find items; and managers who are angered because their employees are frustrated, and by the loss of productivity. The main key measure that was used to evaluate success was time. It was agreed that the easiest way one could measure and later evaluate and compare data for this project was by minutes. Minutes it takes for employees to find overstock items for customers. This way one could compare averages and deviations from both before and after an attempt to relieve this problem, to determine if any improvements to the process have been made. One of the ways our group used to determine our problem and to get a better understanding of the entire process was through the development of a SIPOC diagram. A SIPOC diagram helps identify the key Suppliers, Inputs, Process, Outputs, and Customers of the situation. Our developed SIPOC Diagram is seen below. Performance: The Measure Phase During the measure phase our group collected data that indicated the what, when, and where of the problem. The define stage helped as well in the identification of key input and output variables through the use of KPIV and KPOV diagrams. Also during this stage is when the identification of a target performance level was found, as well as a quantification of the current performance level, and a measurement systems analysis. What we measured was the amount of time in minutes in takes employees to find overstock items for customers. This measurement was timed from the moment the customer engaged the employee until the moment that customer received the status of the requested item, with it either being located or deemed unavailable at that location. The figure below is the KPIV and KPOV diagram, this diagram was used to identity both key process input variables as well as key process output variables. Some of the key process input variables include management, employees, customers, and current information systems. In retrospect some of the key process output variables include customer service, better time management for employees, and other tasks that need to be completed. In summary this process has problems because it is taking too long for items to get from overstock to the customer. Also during this measure phase we gathered data. The data gathered for this project as aforementioned was time in minutes it takes employees to retrieve items from overstock. For this our group collected over thirty points of data. A summary of the data we collected can be seen in the figure below, and raw data can be found within the appendix. We analyzed this data to determine the average time it takes employees to find items from within overstock; we also calculated the range of times, as well as the standard deviation. Summary of Data| Â  | Average| | 2 min 55 Sec. | Range| | Â  | | Low| 1 min 20 Sec. | | High| 12 min 20 Sec. | Standard Deviation| 1 min 38 Sec. | Another item measured was how much time on average an employee spends looking for requested items in any given shift, in order to determine the cost of this poor quality. It turned out that out of 18 hours worked, a total of two hours was spent by one employee looking for requested items, averaging out to roughly 48 minutes per eight hour shift. With this information a cost of this poor quality was determined. It was found by multiplying that 48 min per eight hour shift times five days per week, times 50 weeks for the year and lastly multiplying it by the average wage rate of CVS employees of $10 per hour. The projected cost of poor quality was found to be a loss of 203 hours per employee per year, with a rough cost of $2030 per employee per year as well. Later this data can be compared to future data to determine if any quality process improvements have been made. Analysis Findings: The Analyze Phase During the analyze phase, our group started off by developing the focused problem statement. We developed this statement by using a when, where, who, and how analysis. This analysis can be seen below. * What – Employees take too long to find items requested by the customer in overstock when the item is not on the shelves. This results in frustration among the customers as well as the employees. When – The problem takes place during operational hours of the store. * Where – The problem occurs on the sales floor as well as in overstock. * Who – The people involved in the process are the employees, customers, and management. * How – This problem takes place because of a poor inventory process with no set procedures. The next step was to determine the root cause of the problem. We did this by asking the 5 whys to get to the core of why customers and employees were experiencing unnecessary wait times to find the merchandise they were looking for: 1. Why is the process taking so long? The products are not on the shelf. 2. Why are the products not on the shelf? The stockroom is unorganized. 3. Why is the stockroom unorganized? Management has not implemented an effective process to organize the stockroom. 4. Why hasn’t management implemented an effective organization process? Management has not found the problem significant enough to make a change to the current process. 5. Why doesn’t management find it important to change the current process? Management is either not using or does not have the information about the possible losses from the current unorganized state of the stockroom and the possible gains from implementing a new system to organize the stockroom. Next, we brainstormed the potential factors that were causing the extended wait times into a cause-and-effect diagram. As shown below, the main four major categories involved were the equipment, process, people, and management | | | | | | | | | | | | | | | | EQUIPMENT| | | | PROCESS| | | | | | | | | | | | Scanner Gun| | | No formalized process| | | | Once a Week| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Employee motivation| | Inconsistency| | | | | | and competency| | | | | | | | | | | Not uniform| | | | | Customers| | | | | | | | | | | | | | | | PEOPLE| | | MANAGEMENT| | | | | We believed that there were three theories of causes, which were the people, management, and the process itself. First, the people factor was a main source because of the lack of employee motivation. Employees would either be frustrated with trying to find the merchandise, possibly causing them to quit searching altogether, or would simply lack the motivation to want to find the items in an unorganized stockroom. Also, since there was no formalized procedure in place, each employee had their own technique in trying to retrieve items from overstock to the sales floor. Next, management is a potential theory of cause because they may not have seen that a problem existed and did not take steps to fix or analyze that there may have been a problem. Last, there was no formalized process. When the customer would request an item, many items were left in overstock when the item could have been on the shelves to prevent wait time. Next we used a scatter plot (which can be seen below) to see if the isle number and the time taken to find each item had any correlation. From the scatter plot below, there did not seem to be any correlation between the isles where the items were positioned in the store and the time it took to find each item. The Improve Phase Possible Solutions: While brainstorming for this project our group came up with four possible solutions to the problem of finding out of stock items at CVS. They were; Organization of the back room, manager and employee involvement, the regular filling of outs, and more frequent resupply. * Organization of the back room simply means what it says, to organize the on hand inventory in such a way as to make it easier to find an item that is out of stock on the sales floor. * Management and employee involvement is to get the staff at the CVS to create a culture of maintaining the sales floor and on hand inventories more closely, and to strive to not have the problem of having to find the items in the first place. Filling outs regularly means to go through the sales floor periodically though out the day and fill the empty spaces on the shelves with the appropriate merchandise. * Resupplying more often was thought to have more frequent deliveries of merchandise to prevent selling out of items and possibly to help maintain a smaller on hand inventory in the back, possibly along the lines of JIT. Tests of Theories: To test the organization of th e back room the area was organized by aisle and the merchandise that would belong on that aisle grouped in that area. It took a little while to complete but was fairly simple and straight forward. The reorganization was done in an afternoon and the staff was reminded to maintain the placement of the stock. Manager and employee involvement was trickier. The concept had to be presented to CVS management in such a way as to get their attention and cooperation. Improved customer service and resulting sales were the key points. Unfortunately, there was a lack of interest on the part of both management and employees to change their current behaviors. To get the outs filled regularly the employees (or more specifically, Phong) were instructed to walk the sales floor though out the day and to fill any outs they came across. This one tied in closely with management and employee involvement and as such there was trouble in getting the employees to remember to continue checking and filling outs. They would do it perhaps once during the day, not enough to make a serious impact. For the more frequent resupply the on hand inventory was monitored to see what items were running out and how fast, as well as how long it took to receive new shipment of those items. It was discovered though that only a few items would ever completely run out. And the cost that would be incurred to reschedule deliveries and quantities for a few small items far outweighed the inconvenience of them being out of stock. While these were being implemented the time it took to find an item for the customer was being documented to compare to the previous data collected at the beginning of the project. Select Best Solution: While we were testing the possible solutions it became clear that some simply would not work. The more frequent resupply was not worth the effort and quite simply beyond the capabilities of the group to implement. Without being able to generate a culture of involvement with the managers and employees not only did it make improvement difficult to achieve and maintain it also affected the plan to frequently fill the outs on the shelf, as staff members simply were not involved at a necessary level to perform. As simple as that solution was it was not being effective. The best solution turned out to be to reorganize the back room. It was done in one day and was easy to keep staff members continuing to use it once it was done. As well it was not much different from the past, simply better organized. As well as our data showed the time it took to find an item did in fact decrease. Improvement Plan and Implementation: In a way the plan and implementation are already complete. The times to find items have already improved and the organization of the back room has already been done so the real plan now is to make sure that the CVS staff maintains the back room in that order and does not let it return to its previous disorganized stated. Hopefully over time this first step will foster a more proactive attitude towards the on hand inventory and actions such as filling the outs regularly will come naturally. Measures of Results: The data below was collected before implementation and after implementation. The average time before implementation was 2. 99 minutes and after implementation the average was 1. 34 minutes. The average time it took to locate items dropped dramatically with a reduction of 54%, which average time dropping from 175 seconds down to 80 seconds. Also the range has been reduced by 70%, with range being reduced from 11 minutes down to 2 minutes 40 seconds. The low of the range was brought down by a full minute, and the high was reduced by roughly nine minutes. Also we compared our two standard deviations and found a reduction of 50%, going from 1 minute 38 seconds down to 49 seconds. But what about the cost of poor quality, has that been reduced? Yes, it has. Originally our cost of poor quality was calculated within the measure phase of the project and was projected at $2030, or 203 lost hours per employee per year, but with the new processes in place these numbers have been reduced to $930, or 93 hours. This reduction of the cost of poor quality saves CVS on average $1100 per employee per year. The Control Phase Several steps need to be taken to maintain the improvements made on CVS’s inventory system. It needs to start with upper management. Upper management needs to create a culture of quality and set an example for the employees. Upper management should set new standards and procedures for the employees to follow. The employees should receive training equivalent to at least 1 day of work throughout the workweek for a period of 1-2 weeks to ensure full comprehension of the new formalized inventory process. The sales floor should be checked twice a week for items out of stock and items running low in stock on the sales floor. When either situation occurs, the safety stock from the stockroom should be used to fill in the empty shelves. Employees should be given scanner guns to determine if the items are available on the spot for the customer before they have to walk to the stockroom. The appropriate reorder point should be determined to prevent running out of safety stock, reducing the risk of stock-outs. Several lessons were learned from deciding to implement an organization process for a stockroom. The best way to organize a stockroom is by using shelves and pallets. First, we need to place food items on food shelves and paper items on paper shelves. Canned goods should be placed together in rows containing specific foods. Any bulk items should be placed on the top shelves. Next, extra containers and shelving should be purchased to ensure the stockroom has a place for everything including future shipments. The best way is to make exactly another front store in the backroom so we know where the items are when we need to find them for customers. Several lessons were learned from the overall project. The first was to understand the DMAIC process of Six Sigma and using it to solve problems. It is a valuable tool in solving significant business problems and identifying and removing defects to improve quality, ultimately saving the business costs associated with poor quality. We also learned to use a team approach to problem-solving. The DMAIC process requires a team effort from top management to lower-level employees and works best when everyone involved contributes their efforts to improve a process. Finally, the time spent on the project taught us to apply the appropriate problem-solving tools throughout the entire process. Conclusion After working with the CVS organization for several weeks, we were able to make a comparison of are original data and are second set of data that was collected during the improve phase. This was done to see, if in fact we have made some sort of quantifiable improvement to the process. One of the easiest ways to do this is through data comparison. As you may recall, we originally measured how long it takes for employees to retrieve items from overstock once they have been requested by the customer. We then calculated average, standard deviation, and the range of the data. The original data as well as the second data set can be seen below. Once one has all the quantifiable data available for comparison, it is easy to determine whether or not an improvement to the system and process has been made. By looking above it can easily be seen that an improvement has been made. The average time it took to locate items dropped dramatically with a reduction of 54%, which average time dropping from 175 seconds down to 80 seconds. Also the range has been reduced by 70%, with range being reduced from 11 minutes down to 2 minutes 40 seconds. The low of the range was brought down by a full minute, and the high was reduced by roughly nine minutes. Also we compared our two standard deviations and found a reduction of 50%, going from 1 minute 38 seconds down to 49 seconds. But what about the cost of poor quality, has that been reduced? Yes, it has. Originally our cost of poor quality was calculated within the measure phase of the project and was projected at $2030, or 203 lost hours per employee per year, but with the new processes in place these numbers have been reduced to $930, or 93 hours. This reduction of the cost of poor quality saves CVS on average $1100 per employee per year. In conclusion the recommendations that we applied to this process has had an overall improvement to the inventory system at our partner CVS location. Through the use of the DMAIC (Define, Measure, Analyze, Improve, and Control) process and with the help of several tools such as SIPOC diagrams, Cause and Effect diagrams, as well as tools to help identify key players such as the KPOV/KPIV diagrams, and through the implementation of a better formalized process; we were able to dramatically improve the inventory process for our CVS partnership store, with average time reduced by 54%, range reduced by 70%, and standard deviation reduced by 50%, it can be concluded that the implementation plan we have instilled within the organization has made improvements to the overall inventory process.