When its all about delivery, how many SKU’s of raw material can your shop effectively manage?


Hey, I'm askin you a question here!


Precision machining shops have been applying 5-S principles in operations  for a number of years.
PMPA’s NATIONAL TECHNICAL CONFERENCE in 2003 featured a session on Lean setup’s that focused on a 5-S approach.
But applicability of lean tools and 5-S isn’t limited to only shop operations. The raw material procurement process seems like a great place to try to lean your system and improve your competitive advantage by saying “yes” quicker than the shop waiting for a specific size of barstock.
With materials markets and customer demand  in a very confounding state, now is a great time to apply 5-S to your raw material procurement system.
Here’s How:
Sort your material requirements into material grade and size categories. With today’s prices and longer lead times, minimizing the number of specific sizes that you need per grade will get you to yes quicker than waiting for each particular starting size of bar stock. This will permit flexibility to make parts from the same grade  in a similar size range from two or three stock sizes rather than having five or six item-specific sizes to order, inventory, track and expedite.
Straighten your existing materials inventory and orders to give you a clear view of your raw material on hand and on order. Can any of your “orphan items”  be applied to make another product. You need to know your inventory.
Sweep your inventory and order book of unnecessary items and orders. Will having a material “tag sale” make sense on items that you are unlikely to use?
Standardize your material order procedures and quoting process. You want to consistently order materials that can be used for multiple-applications,  in easier to find standard sizes. You are not well served by trying to manage  multiple orders of long lead time-specific items. This is where engineering can add real value to your company! Create a team to determine your needs by reviewing order book and customer commitments as well as supplier lead times and flexibility.
Sustain the process.  Now that you have done all you can to minimize waste in your system of excess material item counts, it’s time to get customers to help you to further reduce the waste. Show your customers how you are standardizing stock sizes to minimize lead time and maximize your ability to say “yes.” Ask for their assistance to help shrink the negative consequences by giving you firm commitments that reflect the material market’s lead times. Then you and they can be more confident in your ability to meet their ever changing needs.
Applying the   5-S system to your material procurement system will create savings that should more than cover the increased yield loss of the additional stock removal:

  • It will also help you get a higher percentage of quotes, as you will be able to quote earlier delivery dates than someone who has to find a particular starting size in the market.
  •  I think that when you see your customers accept your price for soonest delivery (based on an appropriate price that reflects the cost to whittle the part out from a larger-diameter “mother size”) you will be convinced that it is delivery not price that is driving todays customers.
  • How much can you save if you reduce the number of raw material items on hand, increasing inventory turns? Less is more. What is the cost to place and follow up a purchase order? To hold multiple items in inventory? What are your current inventory turns? What should they be?  

5-S your raw material procurement system. Everyone will thank you for it.
 Even your accountant.
Original article