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