Down with the Curtain

[From iSource Business, March 2001] General Electric assembles some of the world's most advanced jet aircraft engines at its Durham, N.C. facility. But until recently, when a worker at the plant needed a new pair of safety goggles or other shop supplies, the only way to get them was decidedly low-tech: hunting and gathering.

"We had an area in the back of one of the buildings we called 'behind the blue curtain,'" explains Thomas D. Mitchell, program improvement leader for the program to build the GE90 engine for the Boeing 777 at Durham. "When you needed something you went down there hunting for it, grabbed a handful, and brought it back to where you were working."

No more. GE has installed seven Internet-enabled, secure point-of-use cabinets from SupplyPro on the plant floor, which puts employees within easy reach of their MRO and office supplies. Beyond improving efficiency, the cabinets have helped GE slash indirect costs and eliminate stockouts.

Your Vending Machine Is Calling

Automated point-of-use dispensers are hardly new. San Diego, Calif.-based Pyxis Corp., a subsidiary of Cardinal Health, pioneered the machines for use in health-care facilities as early as 1987. It continues to supply POS cabinets to hospitals and other point-of-care locations for its 4,000-plus customers, with more than 70,000 of the machines sold to date. The idea is simple: keep drugs and medical supplies secure while providing medical staff and pharmacists easy, but controlled access to what they need, when they need it, where they need it.

For example the company's SUPPLYSTATION System 25 features see-through doors and bins, lighted cabinets, and slide-out shelves. Hospital staff members enter a personalized code on a built-in computer interface to unlock the cabinet, find what they need, register the products they are taking, and close the cabinet again. The cabinet captures information about what was taken and who took it, and the computer transmits reports to the hospital's backend inventory-tracking and billing systems.

SupplyPro CEO Bill Holmes, who had worked at Pyxis, was an M.B.A. student at San Diego University when he initially conceived of using the cabinets to manage indirect and onsite supplies. After collaborating on a joint thesis based on the idea, Holmes and a partner set up SupplyPro in 1997 and obtained an exclusive license for use of the Pyxis technology to manage office supplies, as well as a nonexclusive license for all other supplies, excluding medical supplies. SupplyPro also developed a Web-based automated inventory management tool called SupplyPort.

As with the Pyxis cabinets SupplyPro's machines come in different configurations, but they all provide users with controlled access to supplies. Employees swipe a magnetic card or ID badge, or they can enter a personal identification number on a keypad similar to that on a bank's automatic teller machine. This unlocks the cabinet and the employees take what they need, registering the items they remove by pushing buttons located directly on the shelf. The cabinet's computer brain keeps track of what is removed and transmits that data via the Internet to a secure, SupplyPro-hosted Web site that the company's managers can access to track supply usage and inventory. The SupplyPro software can also send replenishment orders directly to suppliers when stocks get low. The cabinets start at about $12,000, or can be leased for about $500 per month including service fees.

Pyxis and SupplyPro may have been the first-movers in their respective niches, but they are not alone. Palo Alto, Calif.-based Omnicell, established in 1992, offers Internet-enabled point-of-use storage cabinets for more than 1,300 customers in the health care industry. Three years after Holmes and Collins created SupplyPro, a company called DispenseSource, which was founded in January 2000 and based in Rancho Santa Margarita, Calif., announced in June 2000 an alliance under which it will distribute Omnicell's point-of-use dispensing systems for MRO and office supplies.

For its part, SupplyPro officially launched its line of cabinets, dubbed SupplyAgents, at the National Association of Purchasing Management's San Diego conference in May 1999. Since then, the company has installed the cabinets at such Fortune 500 corporations as BF Goodrich and Caterpillar (at its Solar Turbines division) and has conducted pilot programs at Cisco Systems and Ernst & Young, as well as General Electric.

Pulling Back the "Blue Curtain"

GE began its three-month pilot program for the SupplyPro cabinets in January 2000 at two jet engine plants, the Durham facility and a sister plant in Hooksett, N.H. The 200 GE employees and contractors at the Durham plant do the final assembly of 300 GE90 engines for Boeing's long-haul 777 jets every year. The engines, which have 10,000 parts and can produce more than 100,000 pounds of thrust, have such a good record that GE has the exclusive engine agreement for the new longer range 777-200/300 aircraft from Boeing.

With so many parts and so much riding on each engine (Durham supplies the engines for Air Force One, for example), GE has worked to make the Durham plant a model of clean, efficient manufacturing. But while every step of the assembly process is computer-monitored and performed in strict compliance with highly detailed specifications, the facility's system for managing its MRO and office supplies was still a sore spot, according to Mitchell.

GE maintained the "blue curtain" area where supplies were stored at the Durham plant because they had found that if they distributed an item around the facility's two production buildings they would very quickly lose track of what they had and where it was. But GE found that the "blue curtain" was far from an ideal solution. Not only did employees have to venture away from their work areas to get supplies, the storage area itself was not conducive to effective inventory management. "It was basically an area with a bunch of racks and bins," Mitchell explains. "It wasn't very well organized. There was really no control over it."

Enter SupplyPro. Under GE's pilot program the Durham facility received two SupplyAgent cabinets, one in each of the two production areas, in January 2000. The cabinets, positioned directly on the production floor, held indirect materials to support the assembly line and included such items as protective gloves, safety glasses, shop towels, paper towels, and the "common attire" worn by all GE employees at the Durham plant. Employees, after a limited amount of onsite training from SupplyPro or from peers, were able to access the supplies by swiping ID cards. GE had the cabinets configured in such a way that contractors at the plant had access to most of the supplies but not, for example, the common attire. The cabinets sent reports on outgoing supplies to a SupplyPro-hosted Web site, and a representative of GE's MRO supplier for the Durham facility, Ferguson Enterprises Inc., monitored inventory levels, reordered supplies when necessary, and stocked the cabinets.

At the end of the three-month pilot, Mitchell analyzed what GE had spent on the supplies kept in the cabinet during the trial and compared the figure to the same period of the previous year. While he declined to discuss the specifics, Mitchell pointed to "a definite productivity increase" and said that the return on the investment was sufficiently clear and GE moved ahead with a full-scale implementation. In May 2000 they installed an additional five cabinets and expanded the list of items kept in them to include office supplies.

Mitchell cites several benefits GE has seen from the cabinets, including the ability to distribute supplies throughout the facility to the different cabinets while at the same time being able to maintain control over inventory; the automatic notification of reorders, which prevent stockouts; and the tidiness of the solution. "We are a showcase facility for aircraft engines as a new, clean facility, and this application fits right into that," Mitchell says. He also says the cabinets have produced some soft savings since employees no longer need to spend time hunting down supplies, although GE has not tried to quantify those savings.

Reaction among employees was cautious at first. GE took pains to explain the purpose and benefits of the cabinets to avoid any "Big Brother" perceptions, that is, the perception that the company didn't trust employees to get their own pens and paper towels. The whole idea, after all, is to give employees better access to supplies, not to restrict access. Says Mitchell: "You don't want to send the wrong message with what you are trying to do. But once we have gotten through that and people understand it, they see that it really makes their jobs easier from an access perspective."

So much easier, in fact, that Mitchell notes the only issue that has arisen with the cabinets is that the plant's employees would like to keep everything they might need in the course of their jobs in the cabinets. "They really like it and they want the things in there, but there is only so much you can put in a cabinet," according to Mitchell. Currently GE is studying whether to expand the list of supplies stored in the cabinets to include some hand tools for use on the production line and maintenance items for some of their machines.

Overall Mitchell says the SupplyPro cabinets fit in well with GE's program improvement initiative to heighten the Durham plant's productivity by making the employees more efficient. "Anything that enhances their productivity and makes them more effective at getting the job done [contributes to] our productivity at this facility. This is just another way to get rid of the waste."

Andrew K. Reese is senior staff writer for iSource Business.

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