Performance measurement and determination of optimal base stock level inventory system to improve the customer satisfaction in the Six Sigma environment

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. 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. This study has examined the performance indicators and investigations have been undertaken to assess the effectiveness and efficiency of the implementation of the Six Sigma system. This paper proposes a generalised 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.