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Thomas R. Cutler

Innovation

Moving From Manual to eKanban Creates Right-Sized Inventory

Streamline the kanban process and materials flow

Published: Wednesday, October 12, 2016 - 11:23

Manufacturers’ waste-reduction initiatives are rarely as effective as they could be. When reducing waste, inventory is often the main target. But how do you right-size inventory in an environment of constant variability? In a word: kanban.

Electronic kanban signals keep product moving throughout the manufacturing organization and its extended supply chain. These systems operate in real time to optimize inventory levels by instantly tracking lead and replenishment times.

Dynisco, a Roper Industries company in the plastics industry, was on a mission to enhance performance. This manufacturer of materials-testing solutions and extrusion-control instrumentation was ready to embark on a continuous improvement journey that would address operations in its Franklin, Massachusetts, facility, as well as in its subsidiaries Viatran, Alpha Technologies, DJ Instruments, and DVI. The program would include related regional and international facilities.

Like many manufacturers, the firm wanted to achieve greater control over operating profit and cash flow, enhance efficiency and productivity with existing resources, and improve transparency across its network of six plants. Additionally, the company was determined to reduce the cost of carrying inventory and the cost of new designs.

In collaboration with consultancy Macresco Edge, Dynisco devised a holistic continuous improvement program that during the course of four years assessed every performance lever in each facility’s production process. This effort took into account product mix and volume, management practices, and the implications of employee engagement. This analysis led to the creation of pilot cells that would become the model for future production companywide.

Improvements abound... except for inventory management

Applying design for manufacturing and assembly best practices, Dynisco was able to simplify new product designs, better understand related cost drivers, and standardize while maintaining flexibility. This in turn supported more strategic supplier management. When addressing lead times, process, and quality issues, however, inventory management surfaced as a bottleneck. Enhanced productivity was driving greater velocity of pull, taxing the supply base, and destabilizing the organization’s postponement strategy.

Implementing manual kanban and working with key suppliers eased material flow, improved client response times, and doubled revenue output at affected cells but was still prone to disruption. Dynisco still wanted to reduce replenishment inventory by 30 percent.

Quality results moving from manual to ekanban

Synchrono, maker of the ekanban software SyncKanban, proved an ideal fit for the complexity and variability of the Dynisco portfolio. Dynisco scaled its kanban process to include nearly 800 SKUs for products built in facilities at several locations by upgrading to SyncKanban and streamlining the kanban process from 66 to six steps while reporting accurate inventory and supplier data in real time.

Launched as a proof-of-concept test in one facility before being implemented across the enterprise, SyncKanban provided forecasting insight crucial to improving cost management and easily integrated into the company’s existing enterprise resource planning (ERP) system. The tool also provided the data required to support greater strategic oversight of supplier relationships.

Dynisco’s lean efforts led to dramatic improvements in performance and the bottom line. During 12 months of implementation, right-sizing inventory alone has yielded more than $985K in inventory cost savings.

Right-sized inventories

Only when inventory is reported in real time does a manufacturer have the ability to respond quickly to changes in demand and automate internal and external supplier replenishment. Because demand is dynamic, manufacturers must be able to address under- and over-supply situations due to demand changes—without straining their supermarkets (i.e., inventories at the end of a pull system) or suppliers.

The implications of this approach on factory performance for Dynisco lead to impressive results across the enterprise.
• At one manufacturing site, inventory was reduced 51 percent with nearly 94 percent of materials in the SyncKanban system. Inventory turns improved from 9.6 to 17.8 (91%); inventory reduction cost savings are 50 percent.
• At a second manufacturing site, lead times were reduced from 12 weeks to two weeks—increasing revenue by millions of dollars; simultaneously, there was a 55-percent reduction in inventory carrying costs.
• At a third manufacturing site, supply chain consolidation resulted in a 43-percent reduction in inventory costs.
• At a fourth manufacturing site, a 29-percent reduction in inventory costs was realized.

The company attributed the success of the program to four main factors:
1. Commitment and investment to continuous improvement from the C-suite to the plant floor
2. An upstream perspective on production costs
3. Dramatically resizing inventory by 40 percent (10% beyond the original goal)
4. More strategic supply chain management

An added benefit to ekanban systems is that automated inventory replenishment signals not only increase efficiency, but they eliminate mounds of administrative paperwork and errors during manual data entry. The new system frees supply managers and buyers from the replenishment loop, creating more time to focus on value-added responsibilities like new supply contracts and strategic sourcing.

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About The Author

Thomas R. Cutler’s picture

Thomas R. Cutler

Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler Inc., celebrating its 21st year. Cutler is the founder of the Manufacturing Media Consortium including more than 8000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. Cutler authors more than 1,000 feature articles annually regarding the manufacturing sector. More than 4,500 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com.