Articles

Deep Dive into Inventory Management Concepts for the Service Industry


Deep Dive into Inventory Management Concepts for the Service Industry

The concept of inventory and its management in the service industry is quite complicated to explain and can vary, depending on the context. Inventory in a service domain is different from what it is in the manufacturing sector. Inventory in the service domain is intangible and can be understood easily with these examples:

  • Inventory in a hospital’s emergency ward might be the patients waiting for the service attendants. In this context, the rising count of patients means that the hospital might have reduced the service staff (inventory). In other words, the hospital needs to effectively manage its people inventory to serve more patients in a more efficient and timely manner.
  • In the context of the service domain, inventory is often considered as an intangible good that has no physical property. For instance, seats at a movie theater are the inventory, but there are other labels for unused capacity, like occupancy rate, and others. Here remaining seats are the inventory for which there are no buyers.

In the previous instance, the inventory (service staff) should be filled-up to meet the higher demand. In the latter scenario, however, inventory must be reduced to ensure minimum wastage and optimum utilization.

Lean Inventory Management is the Future

In a recent decade, Six-Sigma has evolved into Lean Six-Sigma (or LSS), and that is why Lean principles equally apply to inventory management across industries. Lean Inventory Management principles are, therefore, appropriate for businesses outside the manufacturing sector, and include service providers, along with wholesalers, distributors, and retailers who deal in physical goods. Thus, you need not be a manufacturer to relish the benefits of Six-Sigma concepts.

Lean has its roots in Japanese Kaizen techniques and is an ideal approach for the organizations that support the continuous improvement for their products, services, processes, and functionalities. Lean, therefore, emphasizes incremental improvement to efficiency and quality over time.

Implementing Lean Principles in inventory management can ensure quantifiable improvements for small and medium-sized businesses. Moreover, Lean Supply Chain methodologies help organizations in improving workflows, reducing costs, and increasing profits. Unlike Six-Sigma, these benefits are for enterprises of all sizes and not just for large-scale manufacturing units.

The Future-Ready Principles

Similar to Six-Sigma, there are five guiding principles in Lean Inventory Management that are evolved from quality management and manufacturing principles of the past decades.

Modern businesses, therefore, administer the following methodologies to efficiently manage the pressing issues that they face in this competitive environment.

  • Value: Identify the value that an organization will get from Lean Inventory Management.
  • Flow: Optimize inventory flow by eliminating all business obstacles.
    • The principle evolves from the Japanese 5-S Lean methodology (Sort, Straighten, Sweep, Standardize, and Sustain).
  • Pull: Move inventory only when customers demand it.
    • The concept comes from the Kanban Lean principle.
  • Responsiveness: Be flexible and adjustable to change.
    • The methodology adapts the principles of Kaizen Lean.
  • Perfection: Be consistent in refining the inventory management processes to improve quality and efficiency, while reducing cycle time and cost.
    • The tactic derives from the Six-Sigma methodology – DMAIC (Define, Measure, Analyze, Improve, and Control).

Organization-Wide Transformations

Effective implementation of appropriate Lean Inventory Management principles can help organizations in transforming these six major processes across various functionalities:

  • Demand Management: Businesses should move the inventory only when there is a demand
  • Cost and Waste Reduction: Organizations should manage the inventory to the extent that it does not affect the customer in any negative way.
  • Process Standardization: Enterprises must plan to standardize their business functions and inventory transportation.
  • Industry Standardization: Businesses should consider standardizing their product parts and components.
  • Cultural Change: Operation leads must make sure that everyone along the supply chain must work as a team.
    • This echoes principles from Just-in-Time manufacturing.
  • Cross-Organization Collaboration: Teams, from across an organization, that work on a particular project or try finding solutions for a specific concern are critical to innovation, better performance, and improving customer engagements.

Inference

In conclusion, Six-Sigma methodologies, approaches, and tools still have a place in modern industries. These principles and concepts are, however, transitioned into Lean Six-Sigma and Lean Inventory Management methodologies. These future-proof initiatives include inventory management principles that help businesses in reducing waste, minimizing costs, increasing efficiency, and raising business gains.

Posted on 18 July, 2019

214 times 3

Categories : Lean Six Sigma White Belt Course

Comments so far.. Add new comment

Katherine 29/09/2019

Wonderful work, I respect your teaching style. Thanks for your efforts.

laura 28/07/2019

Dear mam , You doing good work for working pupil..who engage in the industry especially, have willing for improvement

Neolen 23/07/2019

Best, clear explanation, well-drafted course.

Related Articles

How to Build an Organization-Wide Mindset for Continuous Improvement through Lean Six Sigma?

How to Build an Organization-Wide Mindset for Continuous Improvement through Lean Six Sigma?

My manager suggested me not to say “Best Practices” because there are no best ways to perform any task.

Everything around us has a room for improvement only if we are open to accept and implement changes. Fear ...

Managing Process Fluctuations in Production Mechanism

Operational fluctuations are common in manufacturing units; Production processes may be faster or sluggish; Machines may work faster or slower, or may face a complete breakdown; Suppliers may send materials earlier or late in more or less quantity; Workforce ready to produce on day-one, might need more training, or sick at home; Customers may also behave randomly by ordering more or fewer units...

DMAIC Can Help Improve Business Processes of Modern Enterprises – Learn How?

The Lean Six Sigma is a structured and data-driven problem-solving approach that quality leads, project managers, and other professionals use to resolve business problems. The DMAIC (D = Define; M = Measure; A = Analyze; I = Improve; C = Control) process is, however, a subset within the Lean Six Sigma concept. The methodology has evolved from the manufacturing industry...

Know about Janam Sandhu

Janam Sandhu (Six Sigma and Management Guru) is here to teach you Lean and Six sigma in an easy to understand format and I assure you if you follow my videos and blogs you will be able to understand and implement these techniques with ease.

When I look at the six sigma and lean I feel they are such easy and wonderful techniques which have been developed to help you carry your business in simple and efficient manner but when I look at current trends and the way lean and six sigma training being carried out, I feel their only mission is to complicate things.

Read more about us