Case Study #53: The Cost of Not Having Visibility

Transforming constantly missed customer due dates, excess inventory
and “bird-dogging” production into massive savings

Project Description

The client was a major international producer of aerospace fasteners.

The company’s planning and scheduling difficulties caused them to continually reschedule due dates for customers. Personnel were unable to see what was needed to fulfill customer orders. As a result excess inventory was kept as a buffer.

The only way the company could have any confidence that a particular product would meet a due date would be to ‘bird-dog” the production, the Planning/Scheduling department constantly expediting material. Consequently this department was overstaffed from a best practices perspective.

The Information Technology department had put together various reports but because of the inconsistency of the data reports did not match, so the planners had difficulty making sense of the data. This also led to the general conclusion that the system data was incorrect, causing significant time spent on workarounds and manual processing.

Approach

CTI was called in by the Production Control Manager to bring some cohesion between the Planning and Scheduling functions. Upon investigation the underlying problem appeared – their planning system, MRP, was not functioning well enough to help them with the planning issues that they had.

The first step was to bring consistency to the reports, so that whether or not the data were not correct, at least everyone was looking at the same information.

The second step was to start looking at the MRP system inputs, particularly the Planning data and the inventory. This involved a complete review of safety stock levels, vendor and manufacturing lead times, lot sizes and minimum purchase quantities.

The next step was to ensure that MRP was running correctly and was producing the proper outputs, such as exception reports, that could now, for the first time, be used by the planners. With that output in place the company began to be able to see what visibility a working MRP system can bring to an organization.

Immediately the Purchasing department began to defer purchases as they could now see they were over-stocking inventory, and within two months the inventory level began to drop.

This MRP correction included APICS Basics of Supply Chain Management training for Production Control, Inventory Control, and Information Technology, as well as a management view of the planning system so that each manager could understand what changes were occurring and how their individual departments affected the planning and scheduling operation.

Result

The 4 month effort resulted in:

  • An inventory reduction of greater than $1 million, plus $250,000 per-year savings in overhead and risk cost (as estimated by UPS)
  • Added visibility which enabled better adherence to due dates
  • The Production Control department able to reallocate two people to other areas of the organization

The improvement in current processes and system data management also very positively impacted a pending merger/acquisition.

Success Story

(From the Production Control Manager)

Normally, I do not set aside the time to write a review on services provided; however, CTI (Corporate Training Institute LLC) is an exception. I am the production control manager at a very successful aerospace company… The average employee has been working here for over twenty years. At this point, habits have been developed. When I took over the position in January of 2013, I thought everything was satisfactory. It was not until we brought in CTI for APICS training that we understood the underlying issues. Some of these problems included inaccurate reporting, under-utilizing our ERP system, over compensation with personnel, etc.

One thing that CTI shed some light on was the process. The more I was able to work with them, the more I learned that we were 1) working much harder than we needed to, 2) carrying excessive inventory, and 3) working with individuals who were in denial or would simply] work around the problem.

I must admit, I too was in denial of our situation. I was also extremely skeptical with CTI promising the world and not delivering, just like other consultants. I am extremely pleased to say that this stereotype could not be further from the truth with CTI. Not only did they consult with us on how to fix these issues, they got into the trenches with us and explained, every step of the way, the how and why of what they were doing. They practiced what they preached, by wanting to make sure that when we fixed a problem (under our company guidelines) that we were able to sustain that new process.

When they showed me the factual data, it proved that in over four months of time, we had saved several million dollars in inventory alone. This blew me away! I couldn’t believe it. Remember, this aerospace company was the leading manufacturer of aerospace fasteners in the world. We were a benchmark for all aerospace suppliers; yet, they were able to save us money.

The way that CTI did this was by increasing the accuracy of planning data, educating us on proper implementation of ERP/MRP, stabilizing data by making the logic in all of our reports consistent and accurate, fixing our BOMs, and reducing unnecessary inventory. I can vouch that CTI has helped us in achieving our goals regardless of the amount of experience we had. If I were to do it all over again, I would, except I would get CTI much earlier!

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