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07/02/2012 11:38 AM
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Hello to the lean community out there,
I was wondering if any of had advise on the following issue: I am part of an international team to tasked identify the root causes of high stock in our corporation.
The corportaion has 5 divisions, approximately 2 billion GBP sales and some 70 sites around the globe - so easy task ;-).
I have done something similar on my site, a 500 peeople, 60 Mio GBp sales manufacturing site. using an Ishikawa I tried to identify all influencing factors that might lead to high stock, but I struggle to drill this down to real actions as the topic is so complex.
Is there any literature / experience out there on this topic, preferrably using "lean glasses" looking at this?
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07/03/2012 09:39 AM
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Hello Sascha ,
I have already been in a similar situation in my earlier organization. We had identified many actions - some of them are listed below.
(1) Analyze inventory division-wise. Identify items contributing to 80% of the value. And analyze them in detail - i.e. open orders, past due orders, no. of months the current stock would take to be consumed. Check whether Accordingly place lock in system to prevent releasing of new purchase orders.
(2) Find out shortage list for the current month from production / shipment plan and provide to procurement department for not bringing any additional material than that required for current month. Ideal would be to check on a weekly / daily basis but initially working on monthly would also provide results.
Also analyze daily receipts and find material recieved which is not to be used in current month. Ask SCM to send back such material.
(3) Share list of excess material with other manufacturing plants and sell excess material to them.
(4) List Obselete and Slow moving (OSMI) items and check with engineering whether the same can be used in place of similar components.
Bought-out OSMI items like motors, valves, cables and other items can be sold off to companies buying such items.
(5) Need to review contracts with suppliers. Either go for VMI or make arrangements with 3rd party logistics to hold back material and supply as per production "Pull".
Regards ,
Mehul Shah
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07/05/2012 11:06 AM
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Most companies do not have an effective SIOP (Sales, Information and Operations Planning process. This connects the customer with operations and suppliers. It also includes inventory policies.
The process takes place monthly and takes up to a year to become robust.
Next, review your actual inventory to your inventory policy. Make sure you have a full analysis of DOS (days of supply) or inventory turns on all raw material, work in progress, and finished goods. How much inventory is excess and obsolete? Separate DOS targets by A, B, C usage and also by product lines as appropriate. Bulk rail car delivery for plastic raw material for example would have a higher inventory than discrete manufacturing components where suppliers are nearby.
Production planning should be focused on small batch production and set to yield leveled production and the same quantities every day if possible. Any flexing should take place at the finished goods level so production is consistent day after day.
Suppliers receive weekly schedules that do not vary because production follows leveled plan and the production schedule is made daily. Misses to daily production schedules cause variation throughout the supply chain and cause safety stock to be added, thus increasing stock levels.
Suppliers must be reliable in their delivery performance with high quality on time performance. Incoming quality levels must be as good as or better than outgoing quality levels.
Logistics are an important part of the supply chain with frequent pickups through milk runs a key.
There are many more details to support the above. Supply Chain Management expertise needs to be developed in most companies but has a big payoff. It is a challenging area of the business and few Sr.Managers have experience in the field so it gets shortchanged.
From personal experience this approach works globally in manufacturing and warehousing and distribution.
Reducing supply chain costs remains the last "goldmine" in improving customer satisfaction, lead time reduction and cost reduction.
Ron Turkett
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07/06/2012 10:43 AM
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very good information, thanks
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07/20/2012 11:47 AM
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Communication flow is first, material flow is second. Inventory is up because people are asking for it. GO SEE to find out why, instead of speculating possibilities. I am betting you will be surprised, not always pleasantly.
A big part of international issues have to do with vendor or transportation reliability. Everyone is afraid of running out - often time delays in inventory updates cause people to think they do not have something (it arrives one day, not in system before overdue notice comes out). Timing is everything. Faster information, less cost.
Remember the bigger part of Lean savings come from working with Vendors for reliability.
Dan
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