Revamping NetApp’s Service Parts Operations by Process Optimization

AbstractThe authors discuss the use of Six Sigma by NetApp, a data storage system provider, to solve the service parts inventory problem in the company’s multiechelon logistics network.This study demonstrates how NetApp, a data storage system provider, used Six Sigma to solve the service parts inventory problem in its multiechelon logistics network, which its inventory management system was unable to fix. The nonstationary demand for service parts created a blind spot for the system, thus hampering NetApp’s contractual commitment to customers of an almost 100% fill rate (FR) for replacing service parts. Constant customer complaints because of FRs that were less than 100% caused NetApp to improve the performance of its service parts replenishment and order fulfillment processes. By following the Six Sigma approach and using the associated qualitative and quantitative tools, the company worked systemically to identify the major causes of insufficient stock and systematically corrected the problem. NetApp formulated a cost-effective inventory solution for its inventory planning system, which resulted in a 10% decrease in the ratio of inventory to revenue and an FR increase from 99.1% to 99.6%. The standard deviation of the replenishment lead time also declined from 4.97 to 1.87 days, implying that the variation of the replenishment lead time was greatly reduced. The Six Sigma process, therefore, provided new insights and a new approach to enable NetApp to manage its inventory planning process.