Defense Contractor

Workstream

Supply Chain Operations

Problem

Inventory accuracy was 82%.  This was well below the industry average of 97%. Data indicated they had more inventory than they actually did. This resulted in excessive costs and long lead times for the required parts and equipment necessary to meet schedule deadlines and build rates.  Inventory inaccuracies, including lost inventory, or excessive use, caused significant material cost implications to the company.

What We Did

Analyzed current state of inventory processes. Developed processes and system related driven cycle counts.  Maximized the use of ERP system for inventory control and allocation.  Utilized system prioritization tools in ERP to minimize excess consumption by the team. Established reporting tools to determine proper inventory allocation.  Created Kanban locations to assist in identifying buffer stock to limit inventory shortages.  Outlined minimum and maximum allocations in the ERP system.  Created minimum and maximum buy relationships with vendors to reduce inventory costs and overlap.  Developed KPI’s to determine inventory planning and kitting operations to meet the cost performance index (CPI) and schedule performance index (SPI).

Results

Significantly improved inventory accuracy to 98.2%.  Reporting is now functional to determine inventory accuracy, consumption rates, and direct charge account activity.  Leaders now have a clear understanding of consumption rates and direct tie-in to the build schedule.  From identified improvement opportunities and process driven changes, reduced inventory costs by over $1M dollars.

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