MANUFACTURING
DESIGN
ENGINEERING
Profit Boost: Lean Manufacturing + Inventory Management
Products
Products
QUALITY TOOLS MISSION and LEAN OBJECTIVES
PROVIDE ON-TIME DELIVERY REDUCE LEADTIME MINIMIZE INVENTORY REDUCE CUSTOMER PRICES
Quality Tool Production Philosophy
KANBAN/CONWIP
(Minimizes Inventory / Minimizes Lead Time) KANBAN/CONWIP Batch Build
Increasing Cost
Small lot size, low inventory Total Costs
Large lot size, high inventory
Optimal Range
Set up costs
Inventory costs
Increasing Lot Size
Batch Build with No Inventory
Typical demand: 1000 units per month Typical order: 1000 units with a 4 week lead time
1000 unit order placed
Process time Work Center A Work Center B Work Center C
Week 1
Week 2
Week 3
Week 4
1000 units ship
Batch Build with No Inventory
1000 unit order placed Work Center A Work Center C
Work Center B Week 1 Week 2 Week 3 Week 4 1000 units ship
Problem:
The present demand is met but the lead time is too long. I want shorter lead times for 1000 units.
Batch Build with Simple Stocking Solution: Add Inventory / Kanban
1000 unit order placed Inventory Level =1000 Work Center A 1000 Units Inventory Replenished Work Center C
Work Center B Week 1 Week 2 Week 3 Week 4
1000 units inventory ship
Near zero lead time 1000 unit inventory
Batch Build with Simple Stocking Inventory costs
Interest Warehouse Insurance Obsolescence Damage Opportunity Cost It is widely accepted that inventory costs for one year are approximately 25% of the total cost of the product.
Problem:
I want to reduce the amount of inventory in the system.
Batch Build with Simple Stocking Solution: Step 1. Reduce cycle time by reducing lot sizes.
Order Placed for 1000 units
Work Center A
Work Center C
Work Center B Week 1 Week 2 Week 3 Week 4 1000 units ship
Order Placed for 500 units
Less time spent in each work center A B Week 1 Week 2 C
500 units ship
The smaller the order size, the less time a job spends at each work center and the less time it takes to move through the plant.
Batch Build with Simple Stocking Step 2. Deliver smaller quantities, more frequently.
500 unit order placed A Inv. = 500 B Week 1 500 units inventory ship Week 2 500 units ship C 500 unit order placed A B Week 3 Week 4 C 500 Units Inventory Replenished
Near zero lead time Inventory cut to 500 units Twice as many orders placed
Batch Build with Simple Stocking
Problem: There is still too much inventory. I want even less.
Batch Build with Simple Stocking Solution: Step 1. Reduce cycle time by reducing lot sizes Step 2. Reduce inventory
250 unit order placed A B Inv. = 250 Week 1 250 units inventory ship Week 2 250 units ship 250 units ship Week 3 Week 4 250 unit order placed C A B 250 unit order placed C A B 250 unit order placed C A B C 250 Units Inventory Replenished
250 units ship
Inventory cut to 250 units Near zero lead time Four times as many orders placed
Batch Build with Simple Stocking
Theoretically, we can infinitely increase the number of orders, reduce cycle times and push all of the inventory out of the system.
Shorter Turns =
order order order order order order order order order order order order ship
Lower Inventory
Week 1
ship ship ship ship
Week 2
ship ship ship
Week 3
ship ship
Week 4
ship ship
With no stock in the system our stocking program turns into a CONTINUOUS FLOW system.
OBSTACLES TO DOING THIS
ON A PART BY PART BASIS, CUSTOMERS ACTUAL DEMAND IS VERY SPORADIC - HOW CAN WE CONTINUOUSLY MAKE THAT PART WHEN DEMAND ISNT CONTINUOUS? FOR MAJORITY OF PARTS WE RUN, SETUPS CAN CONSUME AS MUCH TIME (OR MORE) THAN ACTUAL RUN-TIME - HOW CAN WE MAKE SMALL QUANTITIES ECONOMICALLY? WE MANUFACTURE OVER 5000 PART NUMBERS FOR OVER 175 CUSTOMERS - I.E. HIGH MIX, AND A RANGE OF VOLUMES...
A Case Study at QUALITY TOOL of a
CONTINUOUS IMPROVEMENT / LEAN EVENT
program that overcomes these obstacles.
Case Study: The Situation QUALITY TOOL has a customer that:
Has over 800 part numbers in production at QT.
Part volumes range from 1/year to 1000s/year. Lead times are less than our cycle time. FG inventory at QT is approximately $500k. Packaging is number one cause of rejects. Forecast is available. QUALITY TOOL has the following challenges:
Meeting & reducing lead times.
Reducing inventory. Packaging the product - preventing damage. Cutting costs.
The Solution - Step 1
OBJECTIVE: IMPLEMENT QUICK FIX TO MEET LEAD TIMES METHOD: USE FORECAST TO ANTICIPATE DEMAND
Forecast in paper form - too tough to manage Develop software to receive forecast electronically Merge forecast with our own MRP data Generate reports that show us what to build eliminate process of manual discovery
The Solution - Step 1 RESULT: DATABASE CREATED LINKING FORECAST TO MRP
The Solution - Step 2 OBJECTIVE: DETERMINE IF A CONTINUOUS FLOW MODEL CAN BE ADAPTED TO THIS CUSTOMER METHOD: ANALYZE ACTUAL PART DEMAND RESULT:
TYPICAL PART DEMAND OVER TIME PROCESS DEMAND OVER TIME
Time
Process Demand
Part Demand
Time
The Solution - Step 3 OBJECTIVE: REDUCE TIME IN THE PROCESS METHOD: ANALYZE AVERAGE CYCLE TIME FOR ALL PARTS RESULT:
2 Days
8 Days
4 Days
4 Days
6 Days
2 Days
SHEAR Engineering Review Order material/pre-sheared blanks (3 to 7 days) Queued at shear Shear < 1hr DATA ENTRY Queue order Put order in system Stuff shop router packet
PUNCHING Queue 3+days Turret = 1.5hr
FORMING PAINT Queue 3+days Queue at Brake = 3.7hr painter, 4+days Return to warehouse, 1day SHIP Re-pack parts Load truck
Non Value Add Time Value Add Time
The Solution - Step 4
OBJECTIVE: REDUCE THE NON-VALUE ADD TIME
METHOD: USE LEAN MANUFACTURING TECHNIQUES, KAIZEN PRINCIPLES (5S, ETC.). START AT THE END OF THE PROCESS
The Solution - Step 4 RESULT: STANDARD PACKAGING DEVELOPED
The Solution - Step 4 RESULT: COMMON TURRET TOOL LOAD CREATED
Percentage of Set-Ups vs. Tool Inventory
120% 100% 80% 60% 40% 20% 0% 1 52 103 154 205 256 307 358 409 460 511 562 % of Set-Ups
# of Tools
Turret / Tooling
The Solution - Step 4 ADDITIONAL RESULTS: Developed press brake tooling identification scheme. Tools documented by their I.D. on setup sheets. Standardized blank sizes from >100 unique blanks to 20. Our supplier agreed to maintain these sizes for us on their floor - reducing raw material lead time down to 1 day. Cross trained (2) additional people to perform order entry function.
The Score CYCLE TIME:
1 Day
2 Days
2 Days
2 Days
4 Days
1 Day
DATA ENTRY SHEAR -1 day - 6 days
PUNCHING FORMING -2 days - 2 days
PAINT - 2 days
SHIP - 1 day
CYCLE TIME REDUCED 54%. FROM 26 DAYS TO 12 DAYS (so far)
DELIVERY: DELIVERY PERFORMANCE INCREASED FROM 74% TO
92% (AT SAME TIME CUSTOMER HAS CUT LEAD TIME
REQUIREMENTS FROM 20 DAYS TO 10 DAYS)
QUALITY: REJECTS DUE TO PACKAGING REDUCED 100%
(11,200 DPPM TO 100 DPPM)
INVENTORY: REDUCED 78% FROM $500K TO $110K PRICE: REDUCED 21% TO CUSTOMER
Continuous Improvement... REDUCE CYCLE TIME FURTHER:
1 1 1 2
DATA ENTRY & SHEAR PUNCH GOAL: 5 DAY CYCLE TIME FORM PAINT & SHIP
DELIVERY: 100% QUALITY: 0 REJECTS INVENTORY: REDUCE TO $0. ELIMINATE BUILDING TO FORECAST,
ALL PRODUCT - BUILD TO ORDER.
PRICE: ONGOING REVIEW AND PRICE REDUCTIONS
AS JOINT LEAN INITIATIVES PROGRESS.
QUALITY TOOL IS THE LOWEST COST MANUFACTURER TO OUR CUSTOMERS, because
WE UNDERSTAND THE THEORETICAL RELATIONSHIP BETWEEN LEAD-TIME, CYCLE TIME, INVENTORY, AND COST. WE RECOGNIZE THE PRACTICAL OBSTACLES TO OPTIMIZING ALL 4 FACTORS IN A MFG. ENVIRONMENT. OUR SYSTEM AND METHODS ARE PROVEN WITH REAL-WORLD EXAMPLES. WE HAVE MINIMIZED THE OBSTACLES TO BECOME OUR CUSTOMERS LOWEST COST MANUFACTURER.
With our success in Lean, we commit to do the following for our customers:
PROVIDE ON-TIME DELIVERY REDUCE LEADTIMES REDUCE INVENTORY REDUCE COST
Inventory Integrated Lean & Inventory Management
Experts in administration of On- & Off-Site programs. Lean / Continuous Flow Fabrication KANBAN Consignment Pull Systems Build to Forecast Landed-Cost Estimating & Delivery
Kanban
Internal
Optimizes batch sizing of component parts Ensures long-leadtime purchased parts stock Accommodates short notice pull-ins
External
Compresses leadtime Eliminates large blanket POs Liability covers more WIP than FG Pull system has built-in redundancy for complex assemblies
Synchronized production with demand
Sheet metal chassis KanBan system to reduce inventory
Consignment
Current Consignment Program:
4 International distribution hubs QTI monitors off-site inventory and maintains minimum stock levels. Customer portal ERP access is required for inventory tracking, order placement, and invoicing. Zero Lead-time 100% On-time Delivery
VMI / SMI
Hybridization
Most Contract manufacturer (job shop) VMI schemes employ a mixture of Kanban, Consignment, Build-toForecast, or other pull type programs. These systems are flexible and can be combined or adapted to meet the specific needs of the customer and the product.
Fully Integrated Service Approach
DESIGN COMPLETE PROJECT OR ASSISTS CUSTOMER IN DFM PROTOTYPE FABRICATES SOFT TOOLING INITIAL BUILDS DESIGN ITERATE UPDATES DESIGN OR GIVES FEEDBACK
Soft Tooled
DELIVERY
INVENTORY MANAGEMENT
Mixed Tooling
DESIGN RELEASE FOR PRODUCTION. QTI QUOTES TOOLING LEVEL and PART COST
QTI DESIGN ACTION QUALITY TOOL ACTION
Hard Tooled
Bottom Line
Bottom Line Impact (internal)
Lower Raw Material Inventory Due to blank/sheet standardization Lower WIP Due to reduced process/cycle times Lower Finished Goods Inventory Due to reduced process/cycle times Significant Top Line Impact
Bottom Line
Top Line Impact (external)
Increased sales, due to Shorter leadtimes Lower prices Increased capacity Lower Customer inventory carrying costs On-time Delivery Impact Flexibility
Bottom Line
True Synergy
The combination of Lean Manufacturing and Managed Inventory Systems enhances the effectiveness and value of each. Implemented together, these practices significantly reduce costs, while improving service levels to customers.
MANUFACTURING
DESIGN
ENGINEERING
