Running head: ONE 1

Submit a paper that describes the scenario provided in the final project case study, identifies quantifiable

factors that may affect operational performance, develops a problem statement, and proposes a strategy

for resolving a company’s problem. 

Milestone One

Introduction

Production can often feel unpredictable, as demands for a product go up and down

through the months and years. At A-Cat the Vice President is working on better forecasting when
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it comes to demand for their transformers. They have a lengthy history of both over predicting,

as well as under predicting, demand in the past which has led to stocking issues. Vice President

Arun Mittra has enlisted Head of Operations Ms. Ratnaparkhi to produce a report, that even the

lowest level employee will be able to understand, and will help to alleviate the continuous

understocking and overstocking issues that plague the company.

This project will impact both internal and external stakeholders of the company. Internal

stakeholders for this project include management and the production department, which will be

responsible for producing the predicted amounts. External stakeholders include the shareholders

of the company, as tight product control is likely to increase profits, as well as the company’s

customers that need products in hand.

Quantifiable Factors

It is critical to A-Cat to be able to predict how many transformers they are going to need

to meet the demand from sales, without having a large amount of overstock. Historical numbers

within the one-way analysis of variance show that demand for the refrigeration transformers

increased between 2006 and 2008, and had a notable spike between the warming months of April

and July. Additionally the numbers from 2006 to 2010 show that the company has had consistent

growth from 2006 through 2010.

Problem Statement

After reviewing the information presented it seems that the central conflict at A-Cat is a

differing of opinions by team managers. Historically the leadership of the company used
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historical information to make educated guesses on what the actual need would be. However

“removing bias from the problem statement is one of the ways Six Sigma prevents organizations

and individuals from using gut feelings and intuition when trying to solve problems” (Gygi,

Williams, & DeCarlo, nd). While past performance can sometimes be a helpful guide, it is not a

perfect model or predictor of the future. Therefore these numbers were often incorrect, leaving

supplies either in overabundance or falling short of need. When a definitive mean is presented

the team leaders cannot then agree on whether the target for stock numbers would be above or

below that mean.

The goal of this report would be to accurately produce a stock projection number that

would be “just enough”. This means that count on hand would be sufficient to meet all demand

without substantial overage. The original mean estimate presented has been 745 and a review of

the quarterly data shows that sales have consistently exceed this number. More current numbers

have bumped the mean estimation to 1000, however the quarterly reports still show that actual

use has exceeded this average at 1057 per month from 2006 to 2010.

As these numbers show simple guessing is not going to work for the company going

forward. They are exceeding even their current predictions, and need to agree on a direction of

how to proceed. If they do not they will continue to experience stock shortages and resource

overuse, failure to meet demands of their consumers, and will eventually develop a reputation for

being unreliable. This is a situation that no company can afford to see themselves in, as once a

customer is lost they are nearly impossible to win back.

Strategy

Since “if the goal for your business is to become one of the more successful businesses in
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the country, you’ll need a good quality control strategy that will help get you there” it is critical

to building an accurate model that hard numbers are utilized (Aveta, nd). Since the departments

have been using estimates in the past a new procedure would need to be implemented to use

actual hard counts of products used. This will allow the model to become more accurate as time

moves forward, resulting in less cost to the company and its shareholders.

The graph below shows that, even with month to month variance, the company has been

showing consistent 3.73% growth per year over the last few years. This shows why the

estimations have been falling short, as every year has a higher demand than the one before it.

This means that any projection model that is developed has to reflect this projected growth, or

supplies will fall short.

Growth from 2006-2010

9000 8332
8000 7678
6492 6792
7000
5903 5774 6007 6290 6107
6000 5411
5032 4826 4765 4972
5000 4274
3947 4007 3692
4000 3291
2832
3000
2000
1000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Data also shows that production demand increases in the warming months of April

through July, with a drop off in August. As the transformers are used for refrigeration this

seasonality makes sense as people prepare for the summer, and the company can prepare ahead

for it.
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Production 2006-2008
3500
3000
2500
2000
1500
1000
500
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2006 2007 2008

By preparing accurate numbers, accounting for seasonality, and adjusting for expected

growth the team at A-Cat can build solid stock projection numbers that will meet all customer

demand, minimize stock overages, and provide the best possible use of resources for the

company.

References
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Aveta Business Institute. (nd). The Six Sigma Business Strategy. Retrieved from

http://www.sixsigmaonline.org/six-sigma-training-certification-information/the-six-

sigma-business-strategy/

Gygi, C., Williams, B., & DeCarlo, N., (nd). How to Write a Problem Statement for Six Sigma.

Retrieved from http://www.dummies.com/how-to/content/how-to-write-a-problem-

statement-for-six-sigma.html