SECTION A $[40$ MARKS$]$

Read the case study below and answer ALL the questions that follow.

Article: Using Measurement to Drive Behaviour Change

Author: Roy Zhang

Inventory takes up a significant amount of cash flow at IBM and many other companies. Due to fast depreciation in technology products, machines that are inventoried are not worth as much as they age. To combat this loss in value, practitioners at an IBM warehouse conducted a Six Sigma project to reduce their hardware inventory. They learned that it is possible to change patterns and behaviour by implementing and maintaining a measurement system.

Inventory Issue

In the IBM global supply chain, when salespeople make a deal or anticipate the closing of a deal, they will ask the customer fulfilment team to place an order on their behalf. The plant will then process the order and ship the product to the country from which it was ordered. The machine will then stay in that country$$s warehouse until it is shipped to the end customer. The process map is shown in Figure $1.$

Figure $1$: Computer Supply Chain

Because the inventory management process is part of the customer fulfilment process, the customer fulfilment team initiated a Black Belt project to investigate this area.

Root Cause Analysis

There are many reasons why inventory stays in the warehouse. Unfortunately, most of these factors are outside the reach of the customer fulfilment team.

Some of these factors are:

$$ The customer delays the delivery date.

$$ The deal is not closed at the time anticipated by the sales person.

$$ The salesperson brings a machine into the country early to secure supply.

$$ The customer changes configuration requirements, thus the existing machine in the warehouse is no longer needed.

$$ The salesperson wants to keep the inventory in hope of selling it to another potential customer.

In this whole process, the customer fulfilment team is only the execution arm. It fully relies on the sales team$$s decisions to manage country inventory. Because many of the root causes for high inventory are related to the sales team, the Black Belts completed a deep dive on the sales team$$s behaviours and their impact on inventory $($Figure $2).$ One key root cause identified was lack of motivation in lowering inventory in a country$$s warehouse.

Figure $2$: Sales Team$$s Behaviour and Attitudes and Its Impact on Inventory Sales Behavior and Attitudes Affecting Inventory Afraid of losing supply or missing delivery date when deal is closed if hardware isn$$t ordered early Over$-$confident in closing deals Not aware of cost associated with inventory Lack of motivation to lower inventory Unfamiliar with customer fulfilment processes Inventory management is a low priority compared to sales

The customer fulfilment team already had regular meetings with the sales and finance teams to review inventory status. During these meeting, the teams would discuss how to manage existing inventory in the warehouse. These discussions

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turned into a plan for the following month. However, from data analysis, the Black Belts could see that a large amount of inventory was not managed according to the plan and remained in the warehouse at the end of the month.

Finding a Solution

Based on their analysis, the Black Belt team developed the following improvement plan:

$1.$ Agree on Importance

During review meetings, sales managers, the CFO and customer fulfilment teams came to an agreement on the importance of lowering inventory. The CFO played a key role in this meeting as she was highly concerned about the financial impact from high inventory. It is important to get all key stakeholders to share the same vision and objective when implementing a solution. In this case, although the customer fulfilment team does not have direct influence over the sales team, they leveraged the CFO$$s authority to get the sales managers$$ commitment. With this high$-$level management commitment, they can carry out the rest of the plan.

$2.$ Keep Records

The customer fulfilment team decided to keep records of sales commitments for inventory management. The CFO also aggressively requested that the sales team should either deliver products to customers within $30$ days or return the product to the plant for reutilization to prevent the sales team from keeping inventory in a country for a long period. Putting the product information on paper helped the sales team become more serious about their commitment because the records can be traced and reviewed. The $30-$day short$-$term commitment also is important. This discouraged the sales team from bringing machines into the country too early. From now on$,$ if they bring machines early, they have to explain the plan for the machines during next review.

$3.$ Increase Follow$-$up

The customer fulfilment now completes a close follow$-$up on execution with the sales team throughout the month.

This continuous follow$-$up effort helps keep inventory management on the sales team$$s agenda. By maintaining a clos