A crucial part of supply chain is effective management of inventory. A manufacturer in highly technical operations continued to grabble with inventory inaccuracies and lost revenue.
challenge
Inventory accuracy for the organization was at 82%. This was well below the industry average of 97%. Data indicated that there was more inventory than there actually was. This resulted in excessive costs and long lead times for the required parts and equipment necessary for production to meet schedule deadlines and build rates. Inventory inaccuracies, including lost inventory, or excessive use, caused significant material cost implications to the company.
solution
Analyze current state of inventory processes. Develop processes and system related to driven cycle counts. Maximize the use of the ERP system for inventory control and allocation.
- Utilize system prioritization tools in ERP to minimize excess consumption by the team.
- Establish reporting tools to determine proper inventory allocation.
- Create Kanban locations to assist in identifying buffer stock to limit inventory shortages.
- Outline minimum and maximum allocations in the ERP system.
- Create minimum and maximum buy relationships with vendors to reduce inventory costs and overlap.
- Develop KPI’s to determine inventory planning and kitting operations to meet the cost performance index (CPI) and schedule performance index (SPI).
results
The organization’s inventory reporting is functional to determine inventory accuracy, consumption rates, and direct charge account activity. Leaders have a clear understanding of consumption rates and direct tie-in to the build schedule. Process improvements significantly reduced inventory costs.
- 98.2% in inventory accuracy
- $1M dollars in reduced inventory costs