Big Squeeze Spend Saving Tips

Take A Walk!

Quentin Samelson at Nokia Siemens, previously Motorola, contributed this spend savings tip to The Big Squeeze, Ten Ways to Cut 10% of Your Company's Expenses Right Now! TO ORDER CLICK HERE: BOOKSTORE

Conduct an inspection tour of the stockroom, receiving doc, etc. One of the things that experienced operations people do is a walk-through, looking for:

* stacks of FedEx (or other airfreight) labels. If many are found in the stockroom, airfreight is probably being used inappropriately 0r too much. This can be an easy way to cut operating costs quickly.

I observed this at two different jobs... unopened boxes, still with their airfreight label, sitting in the raw materials warehouse. Once in a while it could happen because of a last-minute schedule change (what was urgent yesterday is suddenly not urgent today), but if you see very many instances like this it may be due to:

Either a buyer or a supplier mistakenly applying airfreight as the standard shipping method, because one-shipment last year (of that part number, or from that supplier) was urgent and had to be sent via airfreight. All it takes is for the buyer to tell a distributor "Make sure you ship it airfreight" one time, and the customer service person at the supplier may code it as the default shipping method.

Buyer/planners sometimes get hooked on the fact that airfreight is easy to track. It gets tiresome when people ask ' Where's that shipment?' and you can't answer. So they may tend toward air freight just to get the easy tracking. However, it's really not very hard to get tracking service with small parcel shipment these days. So you don't have to go all the way to air freight to be able to track a shipment.

Conflict of metrics... The Buyer maybe measured only on part cost, which may push him or her to somewhat less reliable supplier. The cost of freight often ends up on the manufacturing line, or at least is not part of the buyer’s scorecard. It can get even worse if the buyer is measured on his or her suppliers' on time performance. Then the buyer is incented to bring in the cheapest parts, on schedule.... but doesn't get penalized if freight costs too high!

Unrealistic manufacturing schedules in the MRP system. This happens when you have multiple people trying to use the same (limited) resources. They'll drive materials in so that materials shortages can't stop production, but they're all scheduling a constrained resource so the pars just sit. This can also be caused by out-of-control sales commitment s or customer service people jockeying for position for their customers.

* Dusty, boxes, period, in the stockroom. If materials are sitting around long enough to gather dust, there's something wrong with the way they are being brought in. Even in those cases where it made economic sense to buy a large lot of parts, dusty boxes indicate lack of activity. If you see dusty boxes on the main thoroughfare of your stockroom, you have slow-moving material interfering with the efficient operation of the stockroom consolidate them and move them someplace away from the action - or get rid of them.

* Storage methods. Are they efficient? Is there the possibility of losing parts (which often occurs when parts are stored in part-number sequence, or with multiple part numbers in the same location)?

Working at smaller operations, I observed that it was perfectly understandable to start out storing parts in part -number sequence. But if the operation grows very much, that becomes completely inappropriate. It seems like this is very much like the "how to boil a frog" story. People just don't notice that things are getting out of control because they're not using random storage. At one company, people would force additional containers of a part number into position when there really wasn't any room left. Other containers would get shoved to the shelf behind. Parts would "wander" up and down the length of the shelving, and of cause they could never be found when they were needed. So we'd buy more - and then have to write off the "lost" part when they were found again!

How far materials move from the dock door to the receiving area to the stockroom, and how they move (by hand, by conveyor, etc.) I've been in some areas that would curdle your blood.

At the last plant where I was actually a materials manager, we originally had lift trucks picking up pallets of materials and moving them all over the warehouse to put them away. Even with RF barcode equipment and random stores, it was inefficient. We replaced that with a conveyor system that moved all he small boxes automatically to three different areas, based on the velocity of the parts. Fast-moving parts went to a set of flow racks, slow-moving pars went to an area where we could rally pack parts in densely, and medium-moving parts went to a set of shelves. The bulky items that had to be moved by lift trucks were put the closest to the receiving dock. That meant that the guys running the lift trucks were able to operate much more efficiently. They just moved full pallets of bulky items, instead of trying to move boxes, etc. I visited a facility (that had actually been featured the cover of Modern Maeralieras Handling!) Where the stores area was down a long, long, long aisle from the dock door and they didn't even use lift trucks. Every shipment that was received had to be moved by hand, at least the length of a football Field. It just made my blood boil! These were parts that were very inexpensive to manufacture (in Asia), but the U.S. distributor was expending expensive American labor just to put them away.

A lot of the most progressive ideas can be applied nearly everywhere, but it's often not practical to push them to the limit. (Of course, pushing them to the limit is what people often expect, based on popular concepts of zero inventory or JIT, or lean manufacturing.) Running a facility in south Texas, far from the suppliers of electronic components and the manufacturers of mechanical parts, It is foolhardy to run a plant on zero inventory I found out – the hard way – that it wasn’t even smart to keep two days’ worth of parts in the stockroom during the winter, because a good winter storm could shut down transportation for half a week. But we still were able to apply the concepts of JIT and zero inventory to our situation. S o with each idea you have to look at the underlying concept & decide how it can be applied, and how far it should be applied, in a particular situation. We absolutely had a locked stockroom in Austin, TX, (inside a larger stores area) because the parts were so valuable that we were robbed once at gunpoint. (Another time thre was an attempted burglary that was foiled by the cage!).

I’ve seen line-side storage implemented well, and I’ve also see it used without much discipline on the shop floor, resulting in poor control, terrible inventory accuracy, and other issues. So I think you have to fit the solution to the problem and to the characteristics of the facility/operation. Line-side deliveries (and supplier-operated inventory hubs) are a great idea for the customer, but they cost the suppliers real money, don’t they? So the supplier has to be able to cost-justify them based on the volume of business they do with the customer. Al these ideas need to pass the commonsense test.

It’s really easy to get seduced by a particular idea of tool whether it is JIT or SPC or Six Sigma, and forget that they are all just tools, they are not the goal. The goal is profits, or lower costs, or improved productivity – and a good supply chain or materials manager will evaluate how various tools can be applied to achieve the goal. We’ve all seen the results when people start to treat the tool or technique as the goal! (In the early 90s, it seem like I had a visit or call at least once a month from a distributor who wanted to give me near-infinite inventory turns – at a cost adder of 5 – 8%. It sounded attractive until I calculated that even going to 50 or 100 turns would only save us 1.5 – 2%. (This is where that inventory spreadsheet came from.) High inventory turns are wonderful, but in and of themselves they don’ produce a positive business result.

Quentin Samelson, Nokia Siemens (formerly with Motorola), qsamelson@gmail.com