Optimization of Base Stock Level Inventory System and Performance Indicators to Improve Customer Satisfaction in the Six Sigma Environment

Abstract

The main objective of this study was to measure the performances after implementation of innovative inventory management system in a stochastic environment and it was carried out in a casting company which currently implementing the six sigma concept towards achieving the product quality, on time delivery and customer satisfaction at the least cost. The main objectives of this proposed approach is to maintain the stock more economically and at the same time, it should be able to meet the demand. Sometimes, the demand may be more and the stock may not be able to meet demand, then the company will lose the profit and also the good will. In solving most of the real life problems, techniques of Applied Mathematics play a vital role. If the solution does not offer the sufficient amount of accuracy, then it is reformulated and solved. This iterative process is repeated until the exact solution is found. Maintaining optimal inventory and forecasting future demand are not easy for the decision maker of any enterprise. However, it is possible to strike a balance between the ideal zero inventory and the real-world avoidance of stock out costs through a minimum inventory system called Base Stock System. The study has examined the Performance Indicators (PIs) in order to assess the effectiveness and efficiency of the implementation of the six sigma system. This paper proposes a generalized approach for determining the Optimal Base Stock Level to forecast stochastic demand and improve the on time delivery and in turn, improve the efficiency of the process.