The supermarket method of controlling inventory can simplify scheduling, eliminate waste and cut costs.

For the last two months, I have discussed Supply Chain Management and how just in time (JIT) or the “supermarket” method of stock replenishment has valid applications in our industry. This month, we expand this look at how such a system can be used within your factory to simplify the scheduling of specific processes.

 Factory Supply Chain

Within your plant, you have a supply chain in motion whereby one department is providing parts or sub-assemblies to another department. Within those departments, there is a series of machines and operations performing value-added work on parts that will be moved from machine to machine. All of this is the value stream (VS) by which components flow through your plant and out as a finished product.

Each subsequent machine or station in this process is the customer of the previous operation. Conversely, each previous activity that adds value is the supplier (or vendor) to the subsequent activity. Every time one operation processes a part for the next, the first is serving the second as if it were a customer. Thus, the panel saw operator is producing parts for his customer — the edgebanding operation, or the CNC machine center or any subsequent operation. Look at your value stream as a series of vendors serving customers — a continuation of the supply chain of your company.

Satisfy the Customer

Many of you who are successful in your market would say, “The customer is always right,” or “The customer comes first.” The reality is that this attitude is not considered applicable to internal customers within a manufacturing plant. Considering your fellow workers as vendors and customers will result in your products moving down your VS in such a way as to minimize delays and maximize productivity.

The conventional way of supplying product to the next operation in the VS is to build what the order calls for and “push” it on to the next station. Unfortunately, more product than is needed is often made and pushed forward to avoid additional setups when similar orders come through.

If the main focus is to keep machines busy and to push products forward, the real goal of satisfying the customer is lost. The result is a build-up of inventory within the plant, bottlenecks and a loss of focus on completing orders on time.

JIT and Continuous Flow

The marketplace of the 21st Century demands quality and service with short lead times. Everyone wants their needs met JIT — not too early or too late. Today, that also means short deliver times from you.

When an order is received, it should trigger a specific shipping date to satisfy the customer and then drive a production schedule to accomplish an on-time shipment. Working backward, this schedule begins with loading the truck on a date to ensure prompt delivery, and moves up the value stream with instructions and specifications on how to meet all of the customer’s requirements — not too early and not too late.

The best way to accomplish on-time delivery is to start the process according to the schedule and keep the components and assemblies moving down the value stream without delay.

For example, one of the most common items in the cabinet, millwork and furniture industries is the drawer box. Some manufacturers have a wide variety of sizes but still make their own drawers to keep control of the processing. Others outsource. In either case, this item is often a constraint to continuous flow or is a bottleneck in the plant or shop. Either the parts or assemblies do not arrive on time, or the in-house suppliers of the parts do not get them ready JIT, which results in an interruption in the product flow and eventually a missed delivery date.

If you read the July installment of Management Matters, you will remember my relating how a Japanese production guru was in a U.S. Mini-Mart many years ago and was confounded by the huge traffic of customers buying items off the shelves and the small amount of inventory the store kept on hand. When asked how he handled this, the store manager explained how a bread truck would come early the next morning and re-stock his shelves with fresh products to the desired inventory level. He would use visual inspection and shelf product counting to determine the amount of product he left.

This experience reportedly led to the eventual KanBan and pull systems used in world-class factories today. A KanBan is the name for a card or ticket that serves as the re-order document for an item in the value stream. 

When a VS customer (a machine or assembly station) in your factory runs low on a particular part needed from a VS vendor (another machine or assembly station) in order to complete a customer’s requirements, this KanBan is sent to that vendor to replenish the “shelf” as in the Mini-Mart.

Let’s say that you are a custom cabinet shop and that while you may have several standard drawer configurations, there are a large number of combinations of widths, lengths and depths of your drawers. Let’s also assume that you outsource your drawer box sides, fronts, backs and bottoms.

Traditionally, most manufacturers make a list of drawer requirements based on a projected shipping schedule of orders and send this list to the “drawer department,” which then makes the boxes based on the shipping dates. Typically, the department would build enough boxes for a minimum of a day’s production. Thus, a huge stack of boxes would sit and await assembly in the plant, causing a blockage and stoppage within the value stream.

World-class manufacturers, interested in continuous flow, low inventories and JIT, handle drawers in a different way. Where the completed drawers are needed, the company has a drawer cell containing all of the machinery required to build the drawer boxes, including cutting custom sizes, machining, sanding and assembly. Or, it may take pre-machined parts that were outsourced or machined in another cell and just do the required assembly.

Pulling Products from the Supermarket

With the supermarket concept, either type of drawer cell has parts available to make the drawer boxes. These parts may be partially or completely machined at this location where an inventory of parts is kept in an orderly set of bins (the supermarket shelves) and the parts are sorted by kind and size.

The goal is to manage this inventory so that the material needed for a drawer requirement is always available on demand (JIT), without keeping an excessive amount on the shelves. Whenever a drawer is needed, the cell picks the parts and makes the drawer — just in time. The simplest way to make sure there is a supply of parts available at all times is to replenish the stock similar to what was done in the Mini-Mart. However, what happens if there is an unexpected run on bread and the inventory is depleted?

Unlike the Mini-Mart, the drawer cell is set up so that when the inventory of each part reaches a pre-determined level, a KanBan card ordering replacements is sent to the proper in-house or outside vendor. This order pulls product from the vendor in such a way that the replacements will arrive before the last item is removed from the shelf.

This simple system can be used to schedule the vendor and avoid too much too early or not enough too late. This concept can be utilized in many places within your factory or shop so that you do not have to “push” product ahead, guessing how much you will need when. The KanBan card tells you how many are needed to re-stock the shelves and when. The vendor (in-house or out) will use the same concept to re-stock his shelves.

Consider using this concept in your plant or small shop. It can simplify production scheduling for your value-stream vendors and customers within your company and eliminate waste and cut costs.

Tom Dossenbach is the managing partner of Dossenbach Associates LLC, a Sanford, NC-based international consulting and research firm. Contact him at (919) 775-5017 or e-mail [email protected]. Visit his Web site at www.dossenbach.com. Past Management Matters columns are archived on www.iswonline.com.