Electronic Kanban Helps TRANE Stay Lean

TRANE Residential Systems, is a lean organization that knows about growth through innovation. In 1931, TRANE came up with the radical idea of using technology to provide relief from the summer heat. The 1938 launch of the Turbovac, the industry's first hermetic, centrifugal refrigeration machine, fundamentally changed the concept of air conditioning in large buildings. This was the beginning of a long chain of innovations that eventually led to TRANE's current CenTraVac, the industry standard for large commercial air conditioning systems. This energy-efficient system with its superior performance in minimizing refrigerant emissions, has earned TRANE the "Best of the Best Stratospheric Ozone Protection Award" from the U.S. Environmental Protection Agency. 

The lean metrics are impressive.

As part of a Six Sigma project, TRANE Residential identified Ultriva, a lean manufacturing software solution, as part of its control plan. TRANE has been using the software for more than a year, and the work-in-process (WIP) and the raw and in-process (RIP) inventory are down more than $4 million. More important, that improvement has been sustained. More than 80 percent of the firm’s purchasing is done online in real time with suppliers using Ultriva's electronic kanban [1] pull system. 

“The company now has total visibility of what's where—something I've never been able to do with any MRP [material requirement planning] system, and I've worked in many," says John Young, materials and supply chain leader of TRANE Residential Systems in Vidalia, Georgia. "All parts that go from our warehouse are kanban pull with manufacturing lines, and our entire fabricating department, where we make lots of stampings, is run off of this system—giving us tools such as capacity management as well as kanban pull.”

TRANE’s lean initiative

The lean initiative at this particular plant has been in process for about two years, says Young. "However we've had deep roots for more than ten years in demand flow technology and going so far as to have true mixed model flow production assembly lines during that time," he notes. "Our entire plant-level team is, by function, a lean leader, including the plant manager. From a corporate level within our division [TRANE Residential Systems]—it's mimicked similarly in that all functions are expected to be the lean leaders of our initiative. From a higher level of Ingersoll-Rand, even our CEO participates in two kaizen events a year at different plants, so it's becoming part of our culture for sure.”

In the past, TRANE used differing types of kanban systems with sporadic success across TRANE Residential locations. There was no standardization and in most cases the kanban systems would not run correctly. Cards were lost, there was no known way to resize efficiently, and there was no visibility of kanban being in process with suppliers. Ultriva became a solution because of the organization's desire to implement kanban.

“I wanted some technology enablers to allow us management tools as well,"  explains Young. "We came across Ultriva as a solution due to a Six Sigma project team I was helping lead on material planning improvements.”

Conditions needed improvement

TRANE was facing a variety of problems: there were too many stock outs, too much material, no parts visibility with suppliers, and no parts-in-transit visibility. There was also no ability to measure on-time delivery or have real-time receipts with suppliers.

"[TRANE Residential] needed poka-yoke [2] on receiving processes and material control needs," recalls Young. "We needed access to the data to address increases and decreases in demand for kanban systems, and there had to be a supplier portal to have visibility into our shop floor. All this was needed along with the ability to run MRP orders the same as kanban, but just as one-time orders.”

Several electronic kanban software programs were considered, including a home-written one that was being used for internal fabricated parts in the Tyler facility. “In the FMEA [failure mode effects analysis] of our Six Sigma project on material planning improvements, Ultriva was able to move almost all of our highest ranking issues to non-issues through poka-yoke or minimal issues through its superior methodology,” says Young. 

In April 2008, TRANE Residential streamlined its purchasing system as well as its internal management of the fabrication department, which made capacity management more visual. The company officially moved to consumption-based replenishment purchasing using real-time bar-coded receipts with poka-yoke (to prevent double ordering or double receiving). The company now has total closed-loop procurement internally and externally through kanban systems, producing a much cleaner value-stream mapping process. 

Specific benefits of consumption-based replenishment:

• $4.7 million in material savings through the successful implementation of the control plan for the companies Six Sigma project
• $243,000 savings in 90 days (pilot period)
• Increased turns from low single digits to 25+ and is on track to hit 33 by the year's end (measured as COGS)
• Stock-outs with no visibility as to why its gone
• When there is a stock-out, the company sees it coming and is certain as to the root cause after only minutes of data analysis.
• On-time-delivery metrics for suppliers are now available, none previously existed.
• Transit lead time metrics (impossible in other systems)

“We have a Fab Supermarket, too, that we manage through our electronic kanban system,” notes Young. "These parts have been reduced more than 50 percent in the past year. We have a true way to measure supplier on-time delivery. We never really could before. And this can be for any kanban loop. So even internally we can measure and adjust. Based on our running a successful pilot here in Vidalia more than a year ago, we chose this to be a solution at all Trane RS [Residential Systems] plants, and the other three sites are in process of implementing now."

Lean technology providing a competitive advantage

The electronic kanban system is utilized within the entire supply chain across the TRANE Residential division, and implemented in more than 85 percent of Vidalia's spending. All sites within TRANE Residential are expected to be on the system within the next year and a half. 

"This [system] provides a competitive advantage in that we are able to see down to very granular levels of details, what's happening in our supply chain," Young explains. "This analysis tool allows a manager to truly zero in on root cause and remove emotions from analysis, and drive data-driven decision making. Being able to have full visibility into our supply chain allows us to react to unforeseen circumstances better, react to demand shifts, minimize impact to our financial stakeholders, as well as give realistic expectations to internal and external customers."

Ultimately, this lean technology solution has become a major pillar of TRANE’s rapid improvements, both in the supply chain and in internal processes.

“The technology is an absolute enabler and makes improvement sustainable; and it allows us to more rapidly identify and execute on improvements, which of course is the key to lean: continuous improvement,” says Young.