When Should Materials, Components or Supplies be Stocked at Point of Use?

It is unlikely that you will be able to effectively stock all the material, components, and supplies one needs to do work at Point of Use. Nine times out of 10, floor space is the greatest challenge to managing material, components, and supplies at Point of Use (POU). So then which ones should be stocked at POU?

While no two situations are alike, here are nine (9) rules of thumb we commonly use when confronted with more material, components, and supplies than space.

Top 9 Rules of Thumb:

Rule 1:  To Kaizen or Not to Kaizen that is the Question?

Often we are confronted with deployment of production assets, people, and non-production related stuff that defies stocking items at POU. Every time we capitulate to the pressure to get started with the good intentions of, “We will fix it later”. Later never comes and everybody suffers. So, when it doubt - Kaizen.

Rule 2: Where Used

The greater the use of an item within and across product types the greater the need for
POU Item locations

Rule 3: Work Order Volume

The higher the number of work orders calling for pervasively used items the greater the need for POU Item locations

Rule 4: Item Usage

The higher the volume of either pervasively used or single use items the greater the need for POU Item locations

Rule 5: Frequency of Use

The greater the frequency an item is used within an assembly, within a work station, or throughout a production line, the greater the need for POU Item locations

Rule 6: Physical Factors

•  Configuration of the Manufacturing Process
         (i.e. Flow, mfging cells, work stations…)
•  Cleanroom vs Non-Cleanroom
•  Direct Labor
•  Space
•  Movement
•  Size of the Parts X Usage
•  Item Packaging
• Item Minimum Order Quantity

Rule 7: Parent Child Relationships for POU Item Locations

If cumulative usage of an item < Minimum Order Qty then POU Locations must have Parent Child relationships to avoid excess inventory.

Rule 8: There are Several Replenishment Methods for
POU Item Locations

Each method has characteristics that Favors its use:

• Kanban
• VMI
• MRP Planned Orders /Pos

Rule 9: There must be a replenishment plan for every Item at POU

This rule is akin to there must be a process for every part rule. No part can be stocked at POU without clear visual ques indicating the type of replenishment process (VMI, Kanban, MRP Planned orders/ POs) is at work to ensure item availability to work order requirements.
Want to know more? Contact Doug Markham at dmarkham.ipowerne@gmail.com.

VMI: What are Your Expectations?

Customers are becoming more and more comfortable with Vendor Managed Inventory Programs (VMI) and with that rising comfort level come a commensurate rise in customer expectations. In a recent article on Industrial Distributor growth strategies the writers stated: “What has changed are not expectations, but rather what constitutes success. In the past, partial orders, errors, or multiple days for delivery were part of the distribution landscape. That is no longer the case.”

The article continued: “On the back of improvements in logistics and the capabilities provided by information technology, distributors have improved fulfillment performance substantially. Best-in-class distributors have aggressively embraced any means to meet customer expectations, and this has caused the customer to steadily redefine success upward,” they concluded.

Increased Customer ExpectationsWe are finding that rising expectations are not limited to perfect order fulfillment. We have also found that our customers have ratcheted up inventory management expectations altogether. Our customers want their Expense and C level Inventory items managed as tightly as their A and B items. It is no longer penny wise and pound foolish to drive down the inventory levels of items that were once thought best to be handled via semi-annual or annual purchases. We place an increasingly higher rate of low dollar items at Point of Use with goals of 4-6 turns. It is our responsibility to balance Inventory cost and service level (what I like to call Touches vs Turns). 15 touches on an item with an annual spend of $500 is just as undesirable to us as 2 turns on an item with $100,000 spend is to the customer.

In addition, our customers have demanded a broad offering of commodities be included in the program to optimize the benefits of VMI (i.e. volume pricing, less suppliers, improved availability, less inventory, and elimination of stock outs). Not only do they desire a broader offering, they want the offering extended to all their manufacturing sites.
Our customer’s expectations can be summarized in three words: critical mass, reach, and enabling technologies.

- Critical mass means access to a broad basket of industrial components and supplies from top name manufacturers as well as the purchasing power to achieve superior pricing.

- Reach means ability to source from both domestic and low cost countries as well as executing VMI programs where the customer’s plants may be.

- Enabling technologies refers to not only the IT systems at play executing VMI programs (Automated data collection, portals, mobile devices, etc.,etc..) but also the technologies required to augment VMI programs such as Dispensing Systems, Online ordering and self- service.

Perhaps it is time to ask yourself what your expectations for VMI success are - and take them up a notch.

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The iPower Distribution Group of New England is a leader in VMI programs. iPower delivers the widest breadth and deepest supply of Tier 1 commodities in the Northeast. Our supply chain provides $800m annually of industrial components, supplies, and packaging materials. To learn more visit us at http://www.ipowerne.com.

iPower to Present Free Workshop Oct 7 on Selecting a Replenishment System

We are looking forward to participating in The Hope Group’s Motion Control Technology Workshop event on October 7, 2014 at its headquarters in Northborough, MA. There will be several technical workshops and seminars ranging from Energy Conservation for air compressors, to Pneumatic/Automation Fieldbus technology. Among this array of technical seminars, we will be presenting an overview of how VMI and Integrated Supply technology can be applied to help companies make selecting a replenishment system less painful.

The goal is to bring components and supplies to Point of Use and Just in Time; but, how do you actually accomplish that? We will discuss this in detail and provide concrete examples of how we do it. You can Register to attend the event or call Cathy Donohue at The Hope Group at 508-351-1809 for time and directions.

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The iPower Distribution Group of New England is a leader in VMI programs. iPower delivers the widest breadth and deepest supply of Tier 1 commodities in the Northeast. Our supply chain provides $800m annually of industrial components, supplies, and packaging materials. To learn more visit us at http://www.ipowerne.com.

Yes, You Can Keep Your Consumables in Check

Despite what I heard the other day from an Ops VP who said, “what Lean experts don’t tell you is that consumables at point of production leads to over consumption,” the truth is you can keep your consumables in check. It’s not uncommon for top management to worry about reckless use of consumables and even the disappearance of expensive tools. Proper analysis and planning will prevent this from becoming a problem.

While I don’t know what Lean experts that VP of Ops was dealing with, I can confidently state that a thoughtful implementation of a conservation process will keep consumable consumption in check and expensive tools in-house. To start on this process it’s important to obtain accurate and complete consumption data, which means what, where, and how much is used? If this data is not readily available, it can be gathered through surveys, intra-department focus groups, or one-on-one interviews. When you combine data collected this way with spend data gathered through invoice crawls you can expect a high rate of useable data.

With good data in hand, the first step is to build a budget based on work centers and account codes. Then, tie each consumable supply and tool to the cost center and account code where it is used. You can tie consumable spend to production level as a way to gauge rate of use per unit produced by work center. Prepare and review weekly or monthly activity reports by cost center and account code to measure progress toward goals.

Finally, use positive reinforcement toward employee compliance, as part of a plan to raise awareness about the consumable spend issue. It is a well proven fact that positive recognition tends to produce repeatable behaviors. Also, tie consumable spend reduction targets to your overall Lean recognition program. Over consumption of consumables is not something that anyone should believe is an automatic unwelcome consequence of Point of Use Solutions in Lean initiatives.
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The iPower Distribution Group of New England is a leader in VMI programs. iPower delivers the widest breadth and deepest supply of Tier 1 commodities in the Northeast. Our supply chain provides $800m annually of industrial components, supplies, and packaging materials. To learn more visit us at http://www.ipowerne.com.

Do Your Lean Initiatives Short Sheet Materials Management?

A heads up to those of you that might be in the planning stages of a Lean Manufacturing initiative. If you intend to use outside professional resources make sure the scope of the engagement includes materials management and that the consultants have the chops to do it.


Here’s why: I find the Industrial Engineering end of the engagement (i.e., cellular manufacturing, standard work, production leveling, reduction of batch sizes, SMED, and visual controls) consumes 80 percent of the focus, energy, and project time leaving materials management holding the short straw. It is human nature for consultants to want to burn calories on what I would equate to the show holes of a golf course. The show holes are those holes that run along whatever access roads lead you to or by the Country Club. Country Club owners know if the show holes don’t grab the public’s attention it is unlikely it will call for a tee time. And so it goes with consultants (for the record, I was gainfully employed as a consultant for many years) building show holes makes a good, big first impression. Unfortunately, when it comes to complex company-wide engagements many times strong starts are not followed by strong finishes.

Here is a good case in point; recently a team of lean consultants redesigned a modest work cell to create the obligatory U-Shape, conducted time and motion studies, balanced the line, established work standards, created work instructions and added visual controls. All very good stuff! Toward the end of the engagement they assembled shelving and established a 4 Bin Toyota Kanban system at Point of Production for a handful of A items used in the new cell. When the team was confronted with the reality that there were hundreds of B, C, and Expense items unaddressed they dutifully took notes and thanked the team for sharing this with them. What the team didn’t know was later that day the consultants brought the project to closure and moved on. When these good folks departed the scene, there were boxes of material and racks of parts literally jammed at the back of the cell. In the consultant’s mind, the show holes were complete, the breadcrumb path paved, and now it was time for others to pick up the torch and finish the job.

If you find yourself in this position, do the smart think and call us. We are experts at bringing thousands of production parts and supplies to the point of production. We not only design and implement solutions, but we also stay behind and do the day to day management with our people, processes and enabling technology.
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The iPower Distribution Group of New England is a leader in VMI programs. iPower delivers the widest breadth and deepest supply of Tier 1 commodities in the Northeast. Our supply chain provides $800m annually of industrial components, supplies, and packaging materials. To learn more visit us at http://www.ipowerne.com.

Specialty Bolt and Screw Provided Leadership for Fastener Quality Act

Over the last decade, as a result of creative efforts by Specialty Bolt and Screw, the safety and comfort of everybody has been expanded and improved. When President Bush (41) signed the Fastener Quality Act in the late 1990’s, it marked a milestone in corporate/government cooperation to address a real safety concern with an effective response. Specialty Bolt and Screw was a founding member of iPower New England in the early 1990’s and became involved in the national issue of fastener safety in response to inferior foreign product that was misleading domestic customers on quality standards.

Together, with four other national fastener suppliers, Specialty Bolt and Screw (SBS) was called upon by congressional leaders in the Senate Commerce Committee to craft a tough, realistic, and verifiable piece of legislation, which when enacted became known as the Fastener Quality Act (FQA). Kevin Queenin, President of SBS pushed the industry to initiate and sustain serious efforts to restore responsibility, accountability, and traceability with the industry.

The impact of the law has been recognized widely as many of the issues faced by the military and commercial businesses during the 1980’s have been ameliorated. According to Kevin, the work on the legislation, the awareness it created, and the law itself, even with its many subsequent amendments, has contributed to lasting changes, which have greatly enhanced quality in the product produced and distributed by the North American fastener industry.

As a major player in the iPower New England supply chain system, it’s gratifying to have leaders like Kevin and his team keeping a focus on what’s best for the customer and the industry. You can read more about the law, the technology, and the training effort that is on-going to understand how to continually supply conforming product to its customers.

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The iPower Distribution Group of New England is a leader in VMI programs. iPower delivers the widest breadth and deepest supply of Tier 1 commodities in the Northeast. Our supply chain provides $800m annually of industrial components, supplies, and packaging materials. To learn more visit us at http://www.ipowerne.com/.

The Case of the "Just in Case" Inventory

(I've asked our Business Development Manager, Jeff Casey,
to share an interesting story about a customer we helped
that he was directly involved with.)

By Jeff Casey

We got to the customer site and issues of overstocked inventory jumped out at us the minute we began the plant tour. The customer’s floor setup was textbook cellular manufacturing and its vendor managed inventory program for fasteners was centralized by region meaning more than one cell could pull material from a kiosk of hardware. We call this type of configuration mother/daughter whereby the production cell employee fills small bins as required for use at his or her work bench. The fasteners were stored in bins on freestanding sheet metal racks with pitched shelves (technically known as a double-sided pick rack).

It didn’t take an Ernst and Young cycle count to realize that the yellow plastic bins were wildly oversized and overfilled for this low volume OEM. These bins were stuffed to the gills. If you had conducted a blindfold test asking someone to lift a bin and guess at the contents responses of solid bar stock or M80 grade concrete replete with steel rebar would not have been farfetched. They never would have guessed the actual contents: (one example) twenty thousand pieces of an M4 X 8 Socket Head Cap Screws 18-8 stainless steel topped with a quarter inch of dust. Can you say – over-inventoried?

Not only had their supplier over-inventoried them, the customer had enabled it, nay, encouraged it. Many of these sturdy shelf racks failed under the crippling weight of the jam packed little screws, nuts, and washers. The customer had quite an unusual response to their overstocked condition. Instead of rightfully demanding the supplier return and credit the material, a well intending but misguided employee repaired the racks by welding additional supports to accommodate the load. “Keep it coming,” they must have said, “Problem solved”.

To turn this problem around, we interviewed assembly technicians, extracted fasteners from the subassembly BOMs and combed through each cell to ensure we had gathered a comprehensive “where-used” profile. One hundred and fifty man hours later we were ready to embark on the program implementation. But before we could begin to build a point of use system we had to do a little housekeeping.

Step 1: Over four tons equaling $120,000 of excess fastener inventory was removed from the floor and moved to a centralized burn-down area.

Step 2: $68,000 worth of active parts were redeployed to the production cells

Step 3: $53,000 was deemed dead inventory and sold as scrap metal

Once implemented, our inventory specialist managing the new point of use system predictably began to notice a growing noise level on the production floor. While there we no material issues, fear, uncertainty, and doubt began to set in. As we had seen many times before, the assembly technicians had become addicted to the calming effects of piles of inventory. We took $120K off of the floor and folks began to get the shakes. It took a while but within a couple of months we had won their confidence and the noise level receded.

Today the program has grown into a widespread lean point of use replenishment system with easy to understand visual controls. Two important but not unexpected benefits grew out of the program implementation. First, it opened up twenty hours of free time for the fastener commodity buyer to focus on more strategic initiatives. He’s not chasing parts anymore and the customer is saving on all those UPS Red charges, too. It is still hard to believe that with $120,000 in excess inventory they still had stock outs!

Second, once the double side pick racks had been removed and the excess inventory was burned down enough floor space was opened up to accommodate a new production line the plant had been competing for.

While this was an extreme case of Just in Case inventory, many of our current customers had similar symptoms. If you think you may be suffering from a bout of Just in Case why don’t you give us a call!

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The iPower Distribution Group of New England is a leader in VMI programs. iPower delivers the widest breadth and deepest supply of Tier 1 commodities in the Northeast. Our supply chain provides $800m annually of industrial components, supplies, and packaging materials. To learn more visit us at http://www.ipowerne.com.