Organizations adopt Lean Supply Chain Management processes to ensure that operations are efficient, low cost, and generate the highest level of customer satisfaction. There are three levels of activity on which Lean Supply Chain Management focuses:
- Strategic: At this level, management will be looking at high level strategic decisions concerning the whole organization, such as the size and location of manufacturing sites, partnerships with suppliers, products to be manufactured, and sales.
- Tactical: Tactical decisions focus on adopting measures that will produce cost benefits such as using industry best practices, developing a purchasing strategy with favored suppliers, working with logistics companies to save on shipping costs, and developing warehouse strategies to reduce the cost of storing inventory.
- Operational: Decisions at this level effect how the products move through the supply chain. Operational decisions involve scheduling changes to production, purchasing agreements with suppliers, taking orders from customers, and moving products through the warehouse.
The removal or replacement of inefficient processes is the core concept of lean business practices. Four key categories where cost-savings can occur are:
-Inventory and Raw Materials
Managing MRO materials is disproportionately complex and costly
When sourcing and managing MRO materials, numerous steps must occur efficiently and accurately. This is one reason why unnecessary emergencies frequently arise. Too often the CEO, CFO, and other executive level managers are involved in the MRO management process. An in depth analysis of one typical MRO Management operation identified the following:
1.New requirements arise from a new process or customer order
2.Material specifications are reviewed and researched to determine what type of materials are needed
3.A search for the material(s) is required to locate suppliers and determine price and availability
4.Suppliers are now added to the ERP system
5.Orders are placed (along with hundreds of others each month)
6.Materials are shipped and received
7.Attention is required to ensure material is marked correctly and has adequate shelf life
8.Material is entered into the stock area for storage
9.Material is tracked during use and purchasing notified when low stock levels occur
10.The cycle is repeated
These processes rarely run as planned — especially because MRO items are typically not listed on the original Bill of Materials, or managed by one individual. Because these items are not tracked they are often the first to run out or expire, causing interruptions in production and creating confusion and fire drills in order to get production started again. Consider just a few of the associated risks and costs.
Setting up new suppliers is time consuming, costly, and redundant
Supporting numerous vendors, POs, shipments, invoices and payments is wasteful
Short shelf life creates added scrap and waste
Complicated logistics leads to over stocking
Line-down work stoppages are extremely costly
Jobs are delayed or short shipped; increasing WIP, lowering margins, and angering customers
Following years of research, Murray Percival Company introduced their Enhanced Vendor Partnership (EVP) program. EVP is an MRO focused, demand driven automated replenishment system designed to positively impact supply chain operating margins. It features track and trace automation to replenish inventory, cut costs, and reduce waste.
EVP from Murray Percival features:
- Track and trace automation
- Easy to use scanner
- Consolidated shipments
- Access to thousands of products
- MRO inventory management
- Monitor expired and slow moving material
- Reduce waste
- Reduce suppliers
- Time sensitive material reporting
- Consumption reporting
- Automated replenishment
- Proven Value added process improvement
Part 2 of this discussion will focus upon case study, empirical data on one company that saved in excess of $74,000 on their typical $500K annual MRO expenditure.