Golden Keys to Shortage-Proofing Materials

To put it simply, there are three main objectives for a Material Delivery system. First, don’t run out of anything. Stopping a production line or cell for lack of material has a dramatic negative impact on customer deliveries, operator productivity, and the overall work flow of the material management team that now has to fight another fire.

Second, don’t have too much material at the Points of Use. This sucks up Working Capital, floor space, forces workers to move more, and opens the door to quality and obsolescence problems.

Third, accomplish goals 1 and 2 in as low-cost a way as possible. Keep in mind that what is important for the organization is the total cost, so beware of a “silo” mentality that may reduce costs for one department while increasing it for another. Following is a checklist of the tools and methods that can help you to achieve these three goals.

Goal 1: Don’t Run Out

Use an MRP system well. Using MRP is not incompatible with a Lean approach to material management. Toyota uses an MRP system too, remember. This is the main repository for accurate Bills of Material, a Master Schedule, Supplier data and lead-times, and a time-phased procurement plan. MRP is not new, but it does require discipline, good data, training, and good execution. No matter how Lean you are, you will need to know what you need and when you need it, and that information comes from MRP. Needless to say: if you don’t have the material in-house because you didn’t buy it, you will have problems!

Maintain a Plan for Every Part. For every item that you need to manage, including internal manufactured items, you need to have a material management plan that we call PFEP. This database usually resides in a sometimes massive spreadsheet, linked to your MRP system, for ease of analysis and use. This is where you define in detail the procurement, conveyance, quantity, container, and signaling strategies for each item. This may sound like an impossible task, but parts fall naturally into families, so it’s not as daunting as you think.

Design a Delivery System. Here’s the “Golden Key”. Material needs to be delivered to the place where it will be used, the Points of Use. Think street car, not taxi, to accomplish this. Make sure that the street car (tugger cart, for example) runs on a frequent schedule. The tugger may be delivering Kanban bins, sequenced parts, and material kits, but it comes often. Probably more often than you’re used to. I’ll explain why this is so important below.

Replenish Carts from a Supermarket. Delivery carts are able to be refilled from an inventory location on the factory floor, in order to keep up with the frequent cycle. Remember that the inventory in the supermarket is not additional inventory. Think of it as a portion of the inventory that would be there anyway, but in a different location.

Goal 2: Manage Inventory Quantities

Set the amount of inventory, as measured in Hours of Consumption, to a small quantity. That usually means less than a day, possibly a shift’s worth. Having a small amount of material at the Points of Use is very helpful for operators and workstation design.

Standardize your containers. Keeping the containers limited in size and small is a great way to ensure that the quantities are controlled. Small containers are more ergonomic, and reduce the need for fork-truck transport.

Make sure that the inventory quantity planned at the Points of Use is a multiple (in Hours of Consumption) of the frequency of your delivery system. Target a factor of 4 to 8. For example, if your tugger carts come around every hour, plan for between 4 and 8 hours of material at the Point of Use. This is the “Golden Key”.

This will accomplish two goals: a small amount of material at the workstations, plus a delivery strategy that can routinely respond to variability in consumption, without expediting.

Goal 3: Manage Total Cost

A common response to the suggestion that you deliver material more often is: “This will drive up material handling costs, and since handling is an overhead function, we’re going in the wrong direction!”. Yes, it is true that more frequent deliveries will come at a cost, but take a look at the offsets: Less Inventory on the Factory Floor. Factory floor space is premium real-estate, and using it to store raw materials is a form of waste.

Improved Operator Productivity. Close observation of work at the workstations will usually show a large amount of time spent in part retrieval, selection, and staging. By giving the operators what they need, in front of them and in small quantities, productivity will go up.

The Shortage-Proof Factor:

In a Mixed Model line, material consumption is highly variable. An item may be consumed much more quickly than planned, based on the mix of products coming down the line on any day. Frequent deliveries, as suggested, will allow the system to run without any expediting or special actions required. The cost savings for this benefit alone are huge.Reduced part selection errors. Operators are less likely to select the wrong items if their choices and quantities are restricted.If these strategies make sense to you and you’d like to know more (and see these systems in action), join us in Columbus, Indiana in June at Toyota Material Handling. This is a deep-dive into Lean Material Management at one of North America’s best factories, where you’ll learn about and then see this system in action.

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