Staying on top of change
From the February 2020 print edition
If there is one constant in supply chain management, it’s change. Managing inventory, sustaining critical spares and supplying materials required to maintain production—these activities never stop. For some manufacturers, supply chain management is more like a checklist. Part ordered? Check. Invoice paid? Check. For others, it’s about creating a strategy behind the actions.
For those taking the strategic approach, the New Year is always a good time to evaluate successes and failures from the past year. This includes examining the causes and identifying areas of weakness that need to be addressed while also confirming the successes that must be sustained. It’s also a good time to evaluate and introduce continuous improvement to your supply chain management program.
The first step is to define the starting point. While there are differing opinions, in this context we’ll define continuous improvement as “programs and processes that improve plant reliability and reduce costs.”
While supply professionals concentrate mostly on reducing costs, others, like maintenance management, engineers and production personnel, focus on plant and operations reliability. In any continuous improvement plan, both are important to success.
Disruptions in the supply chain (consider the 10,000-pound gorillas Google and Amazon) are forcing companies to rethink how and where materials are sourced. Technology enables anyone and everyone to optimize piece price. As a result, finding additional savings in material costs alone is becoming more challenging. Supply chain professionals must find alternative ways to lower costs beyond piece price.
That’s where a continuous improvement program can help. A forward-thinking supply chain organization looks to engage with internal and external stakeholders to drive continuous improvement opportunities for the entire organization, making materials more readily available at lower total costs. That strategic approach enables others further down the supply chain—maintenance, for example—to be better prepared.
Identify the problem
Continuous improvement is like problem solving: first, identify the problem before trying to solve it. Whether using Lean principles, Six Sigma, DMAIC (design, measure, analyze, implement and control), Plan Do Check Act (PDCA) or some other program, all of these methods begin with planning:
- Understand and identify the objectives;
- Determine the approach;
- Design and implement the plan;
- Analyze the results; and
- ]Confirm those results and manage the program to maintain or improve.
Among the methodologies to consider:
- Cross-functional engagement: Different perspectives bring greater visibility, creating opportunity for sustained improvement.
- ‘Kaizen events: Continuous improvement requires continued education, whether it involves new technologies, improved processes or new personnel.
- LEAN Six-Sigma: A team-oriented approach designed to identify and eliminate waste. It’s a team approach with multiple layers of training and certification available, if desired.
- Value-stream mapping: More of a single technique, value-stream mapping is intended to better manage the flow of materials in the manufacturing process by identifying inefficient or slow areas of production. It fosters a communicative approach.
- 30-60-90 day / 1-3-5-year plans: Setting benchmarks throughout a continuous improvement initiative is imperative. Understanding where you started and where you want to be means a stronger focus on the different elements required to get you there.
Among the different types of initiatives:
- Reliability and up-time
- Accepting of non-OEM materials
- Shutdown Planning (e.g. kitting)
- Scheduled maintenance to avoid unplanned downtime and parts interruptions
- Inventory Management
Implementing an inventory management program—whether through in-house resources or third-party efforts – directly affects maintenance wrench time. It also impacts the amount of time spent fixing or maintaining production equipment.
It’s an important ingredient in a continuous improvement program. Better understanding of material needs and the flow of those materials through the supply chain allow for more accurate parts availability.
That translates to less time ordering or searching for parts, as well as more time fixing the equipment that’s broken. The good news in this is that this process leads to higher levels of maintenance efficiency, higher productivity and lower total costs.
For one company in the life sciences industry, the continuous improvement objective was to optimize inventory without increasing out-of-stock risk. To accomplish that, the first step was to determine relevancy of spare parts to the existing operating equipment. That was done by:
- Documenting part transaction history;
- Assessing bill of materials for accuracy;
- Verifying risk tolerance in terms of inventory turns;
- Developing desired stocking strategy; and
- Analyzing inventory findings;
The findings were as follows:
- 28 per cent of SKUs considered active;
- 42 per cent of SKUs with no usage history;
- 32 per cent of SKUs (18 per cent of spend) was not linked to equipment; and
- There was opportunity to reduce inventory.
The action taken was:
- To update the equipment bill of materials and create a spare part usage profile to identify opportunities for current inventory reduction without increasing risk; and
- To adjust and apply a replenishment strategy based on agreed-to terms that will drive future inventory to desired levels.
A well-developed continuous improvement program enables supply professionals to gain leverage on the overall purchase, generate better reporting, reduce duplicate inventory, improve order accuracy and introduce automation for easing transactional costs.
Continuous improvement initiatives fail because of unclear objectives, failure to measure and track progress and lack of executive support. To overcome these challenges, it’s imperative to remain focused, strategic and timely.
It’s a time-intensive exercise, but well worth the outcome.