“Power of One” Fast Track Supply Chain Streamlining; Part 2

photo.jpgThe removal or replacement of inefficient processes is the core concept of lean business practices.

Four key categories where cost-savings can occur include:
-Order Processing
-Inventory and Raw Materials
-Material Acquisition
-Payments

Part 1 of this supply chain management discussion analyzed and explained the disproportionately complex and costly manner in which MRO materials are typically managed. It also identified a number of associated risks and costs. Here in Part 2, we will demonstrate real world, case study results.

Several years ago, and following extensive 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

Case Study Empirical Data

Let’s review some real numbers provided by an early adopter of EVP. Company “XYZ” spends about $500,000 annually on MRO products. Murray Percival has partnered with Company “XYZ” with the expectation of supplying half of that total ($250,000). This is based on the type and quantity of products being purchased.

After one year of support the EVP Program has already proven its value.

PO Processing

The Company determined that the average cost of creating a purchase order was $125.00. This value includes creating, printing, posting, reviewing, matching invoices, handling discrepancies, and closing each PO. By adding items to the program the need for individual purchase orders was eliminated. The process has been automated and provides repeatable replenishment via the EVP process. Prior to implementing EVP, Company “XYZ” produced 634 purchase orders totaling $79,250 in hidden costs. One year after implementation of the EVP program, the total number of POs produced was 344 at a cost of $43,000. The total savings provided through reduction of purchase orders equaled $36,250. An additional benefit was the buyer’s ability to spend more time on value added actions and pick up extra responsibilities which included managing and purchasing all bare boards.

Freight

More often than not we find that there are significant savings available with improved freight management. The following are a few points to consider when evaluating your freight management. With multiple suppliers of MRO materials companies cannot consolidate shipments; more incoming shipments equals higher freight charges and more hours spent receiving and stocking products. For every shipment that includes a hazardous product the receiver is billed an additional $27.50. Because The Company increased the number of MRO items purchased through Murray Percival they were able to reduce the number of total shipments and hazardous materials shipment which considerably lowered their freight costs. For the 12 months prior to the EVP program total freight costs were $19,530.00. Twelve months after the implementation of the EVP program, freight costs equaled $8,640.00, a total savings of $10,890.00

“Stock outs” and Expirations

Managing “stock outs” and expired material is a continuous struggle. It is imperative that manufacturers have product available when needed for production. The consequences of these events are always costly. The subject company identified approximately 60 “stock out” occurrences in the year prior to implementing the EVP program. Of those 60, 45 were what we classify as “Non Threat” and 15 were classified as “Line Down”.

“Non Threat” is an out of stock scenario which does not cause a line down situation but does cause a “fire drill.” This situation entails multiple people frantically working to find available material as fast as possible. Costs associated with a fire drill include time and expediting fees. Company “XYZ” assigned a conservative $200.00 cost to each “Non Threat” situation creating a total cost of $9,000.00.

“Line Down” situations carry all the same chaotic issues as “Non Threat”; however, events of this nature bring production to a halt which is far more expensive. Company “XYZ” determined that each “line down” event cost them $2,040.00, totaling $30,600.00. Circuit board assembly demands a large amount of time sensitive material which is typically not on the Bill of Materials (BOM) and not covered by ERP systems. This increases the risk of “line down stock outs”.

The subject comapny also determined that the cost of expired material equaled 3% of their total MRO expenditure. 3% of $500,000 is an additional $15,000.00 in cost annually.

The savings generated during the first year of the EVP program were as follows:

Reduction of Purchase Orders $36,250
Reduction in Shipments $10,890
Zero “Stock Outs” $19,800
Zero occurrences of Expired Material $7,500
Total Savings $74,440

Fast Track Supply Chain Streamlining

In summary, the EVP program has proven to reduce purchase orders, expired material, on hand material, “stock outs,”“line down” events, and freight costs. The integral scan, track, and replenishment process streamlines procurement and minimizes non value added tasks. In the words of their MRO buyer:

“The EVP program has been a welcome addition for us. The people at Murray Percival have been great to work with, and the program is going very well and we are now adding additional items. We didn’t realize how much time we were spending issuing PO after PO for supplies. It’s amazing to see the difference. Thanks.”.

Your company’s results may vary from the case study depending on your MRO management process and size; however, it is a good illustration of the savings that the Murray Percival EVP Program can create for your company. Let us show you. “We know How.”

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
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Murray Percival Company offers thousands of capital and consumable products for virtually every facet of printed circuit electronics assembly and repair. With more than 60 manufacturers to choose from, Murray Percival Co. is ready to take on your challenges with technical information, and over 50 years of experience in the circuit board manufacturing and repair industry. We have a multi-state technical sales force, as well as, on-demand shipping to anywhere in the continental United States. Our "We Know How" knowledge base provides in-depth support information for many of our products. We also offer competitive specialty pricing for customers that register on our Web Store.

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