BY TOM KNIGHT, DONNA RUDER AND XING GUAN
INDUSTRIAL ENGINEER – MARCH 2013; VOLUME 45; NUMBER 3
Revamp using kanban reduced inventory nearly 50 percent, saved millions
Today’s manufacturing landscape is being transformed due to these supply chain challenges from a high-volume world into a high-mix world. This means a broader product mix, with more demand variability, more equipment changeovers and a much more complex global supply network.
Lean Manufacturing has begun to take root as a way for U.S. manufacturers to optimize their processes while reducing non-value-added wastes. The five principles of lean are: specify value, identify and manage value streams, make value flow, let customers pull and pursue perfection.
The case study will detail how the manufacturer’s cross-functional team right-sized inventory levels and transformed the company’s planning process form a forecast-driven push approach to a demand-driven pull approach. With pull established and the support of electronic kanban software, the team was able to reduce inventory by 49 percent while maintaining high customer service levels.
The following topics will be discussed:
- New techniques for implementing pull in high-mix manufacturing environments.
- New methods to optimize the trade-off between inventory, customer service and changeover costs
- How to build organizational consensus on the best pull design and a compelling business case for converting to pull
The large number of stock-keeping units (SKUs) produced at the Altanta facility along with fluctuating demand for each SKU caused the common problem found in high-mix manufacturing. This negatively affected customer service levels and drove up inventory, increasing the need for precious working capital.
So the company decided to convert from the problem-plagued forecast-driven push approach into a demand-driven pull approach, and the Atlanta team leveraged electronic kanban software to help achieve sustainable results in less than six months.
The team went through three phases to implement the new pull methods:
- Design: The Atlanta team built its business case and design how to use pull in the high-mix business.
- Pilot: The team implemented the design for one product family. Team members used electronic kanban software to calculate the appropriate inventory levels for every SKU in the product family and replenish inventory using pull.
- Scale and sustain: Team members expanded pull to additional product families and incorporated the pull methods into their monthly planning process.
The full version of the article is available in IIE Laboratory. It is also readable online for IIE member through accessing the iienet.org website. Contact Maya (President of IIE BINUS University Chapter) at firstname.lastname@example.org for more information on the IIE membership
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