In addition, the system allowed DePuy to automate its purchasing process for the supplies dispensed through the point-of-use system: The company shared usage reports with its suppliers through the Web-enabled link to the system, and an individual supplier would receive electronic messages indicating the restock status of all items they provide. As items reached re-order levels, replenishment quantities could be shipped, and DePuy put in place a payment process with suppliers to cover all replenishment items, with individual blanket orders triggering the payment process for all items shipped.
At the end of the evaluation period, a review of the results of the pilot found that the point-of-use system had effectively reduced required inventory of consumable supplies from three-and-a-half months (and $119,000) to two months (and $81,000). In addition, downtime for machinery fell from eight hours per week to 1.9 hours per week, and shortage adjustments dropped from an average of 625 per week to just 76 per week. "The test unit implementation outperformed expectations," Perry says, adding, "Any skepticism as to whether the point-of-use cabinets could make a real difference faded after less than two months of actual use."
Rolling out the Cabinets
Following the pilot program, DePuy opted to deploy the point-of-use cabinets in the five remaining business units, rolling the implementation out for the remainder of 2003 and through July 2004.
DePuy rigorously tracked the results of the project, and by the end of 2004 the company estimated that the point-of-use systems initiative had resulted in inventory reductions totaling nearly half-a-million dollars, while savings on the company's tool spend amount to a quarter million dollars. Downtime savings added up to $145,000, according to DePuy's calculations, while additional savings from shortage adjustments, new efficiencies in requisitioning and purchasing (in part through vendor consolidation), and the elimination of the tool cribs (with the attendant overhead) amounted to nearly $150,000 in additional savings.
Perry also notes that prior to the deployment of the cabinets the company had an attendant manning the tool cribs on the first and second shifts only, while operators on the third shift would end up relying on a supervisor or lead individual to withdraw their supplies. With the point-of-use solution in place the attendants were no longer necessary, and, moreover, all shifts were given equal access to the supplies.
On an ongoing basis, Perry credits the project with six-figure annual savings on top of the return on investment of several times what the company expected. Those results include the reduction of total on-hand inventory at the plant to one to two weeks, down from three to five months, and a reduction in machine downtime from eight to 21 hours per week to 0.089 hours a week for the plant as a whole.
The success of the automated point-of-use dispensing units prompted DePuy to supplement the initial implementation with three "virtual cribs" to manage less-expensive, low-volume items. These secure areas allow users to enter the locked crib door by swiping their badge. Once inside, a user logs into a handheld scanner to dispense or return supplies, and upon completion of the transactions, the user returns the scanner to its docking station and exits the crib. The virtual cribs provide the same reporting data as the point-of-use cabinets.
The Bottom Line
Asked about the implications that the point of use solution has had for DePuy, Perry said the reduction in machine downtime and the resultant higher productivity had an impact where it counted most for the company's executives. "The bottom line reductions in supply expenses made it easier for management to meet or beat their financials," Perry concludes.