Supplier Controlled Line-Side Stock Replenishment

Overcoming The Delivery Issues

Just In time ordering, processing and delivery seems to pull constantly on small businesses. You feel you should implement JIT (Just in time), of course you want to, but is it something you can implement with your current control system? Pushing this question a little further, how about foregoing componenet storage for many of your smaller or “C” class lineside items altogether and implementing supplier lead replenishment directly to the point of manufacture?

If you’ve seen as many implementations of inventory control as I have over the years, it soon becomes apparent that, of the number of manufacturing facilities that would benefit from line side deliveries, very few actually implement it. If pressed, many of the prime candidates for this who have not grasped the opportunity will reply with the same concern. One word.

Stock Replenishment Out Of Your Hands Requires Trust

This reticence comes itself in various forms but can be summed up pretty neatly with;

Confidence that the supply chain will not be interrupted.

This is the most common trust issue. Manufacturers, while understanding the cost of holding excess inventory on one hand, are also often privately happy, or at least like the feeling of security that holding  a few hours, days or weeks of “C” class stock and sundry items in the warehouse for “just in case” gives them.
Just in case the supplier has a hitch with delivery, just in case they need to change manufacturing focus at short notice and the new B.O.M calls for a different part – in which case – nice to have some in stock.

All well and good, but the win here is that line-side stock replenishment (component delivery) doesn’t rule out contingency, it just needs to be formalised. Opportunities to enter partnership lead contracts that allow for contingency to be handled in a more cost effective manner.

Slick efficient systems revolving around supplier created invoices which automatically trigger works orders at the suppliers plant. Actioned after being checked by a production planner and reconciled against a shared and updated production plan.
This again relies on trust as it works best with the relevant bill of material tied to the production plan being embedded in the suppliers manufacture control system.
So we have the opportunity for live demand updates always available to the supplier live on their own inventory control or MRP system.

As a slight aside, the biggest potential win I’ve seen in this becomes apparent very early on in the process where, almost without fail a good supplier will offer alternatives and create opportunities by being an embedded part of the process. How often have I heard;
“So why do you have two different lengths of” (for example) “M6 bolts that only vary by 4mm”
A reconciliation between production, design and quality departments then shows that only one size is needed, often saving a SKU and almost invariably providing a stock cost saving in the process.

The technicalities of design aside (an opaque process if you ask designers directly, a much simpler one if you refer purely to form and function) there are often opportunities to standardize many components, often at a cost saving.

The Big Picture

The bigger picture though is the need for line side supply contracts to be set up with contingency in mind and for the administrative system that oversees the contracts to be configured to make the control and visibility of this as simple as possible.
Here’s a fact. Where I’ve seen a concerted effort to implement supplier partnerships of this kind I’ve always seen a gradual standardization sub-assembly and component parts and this rationalization reflected in time throughout the stock management and MRP systems.

Give your supplier credit for, in most cases, understanding the items they manufacture better than you do. Then allow yourself to benefit from that.

Also, I should add that when implemented with a full commitment, these arrangements have, in my experience, always worked, and always with a quantifiable, and often sizable cost saving. Added to the initial aim of a reduction in inventory and administration. The positive effect rolls down from design through inventory right onto the shop floor and is reflected in the balance sheet in due course.

Business trust in the supplier. Enabling supply partnerships of this kind in stock replenishment can raise a few hairs when it comes to fiscal trust.

“How de we know we are not being over charged?” and
“What do we do if we get a failed batch delivered?”

While these are real concerns, and in my experience will always be raised by someone in the decision chain, effective and easily manageable solutions are easily found.
Simple 2 bin replenishment methods offer a transparent solution to the actual delivery while trained line side operatives who perform a sample check with the help of your QA staff overcome all but the most disguised of quality issues (which would occur whether direct to line-side deliveries were implemented or not in most cases) and a reconciliation of supplier invoices againt a total of BOM usage  and measured scrap at the end of an agreeed period clears up the under/over delivery questions. It sometimes reveals some waste issues line-side which, while hard news at first, offer yet more opportunities for savings if acted upon. Kaizan anyone?

Yes, there is a little more to it than that. The devil is sometimes in the detail. Then so is the advantage of putting a little effort in. It works. Trust me.

Have a read of these papers on the issue;
http://www.researchgate.net/publication/228785828_Three_Alternative_Approaches_of_Material_Supply_in_Assembly_Line_A_Comparative_Study

http://www.assemblymag.com/articles/91943-gm-rethinks-line-side-parts-delivery

It might be worth considering as a first step to reduce inventory with the added bonus of building better partnerships with your supply chain and enabling your own employees in the process.

Done right, everyone is a winner.

Author: Miss Inventory

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  1. David Pugh - You hit the nail on the head. The biggest obstacle to getting something like this implemented is having trust in…

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