Take Charge of Your Supply Chain, One Part at a Time

Supply chain disruptions continue to be an issue for the manufacturing industry. While there are many causes, taking an in-depth look at inventory and operations as a whole can be the key to dealing with problematic disruptions.

When lead times fluctuate, it is important to communicate frequently with suppliers and customers and adjust work as demand increases. But the most important thing to do is to have a plan in place for every part of operations—from raw materials to finished goods. Having an enterprise level plan will help achieve low inventory dollars and high customer on-time delivery. 

Gather Data on All Parts

If you don’t know there is an issue, you can’t make improvements. By taking a deep look at inventory and operations, a great deal can be learned about what might need to be tweaked. There are a few questions that it is important to answer when it comes to material supplies:

• What is the supplier’s lead time from order to arrival? Are they consistently on time?
• What is the normal and expedited transportation time?
• What are freight costs? How much does that vary with order quantity?
• What is the quality of the parts? If you reject some parts, what percentage?
• How does the supplier react to changes in the schedule? How agile are they? Do they demand agility from you?

The data that is gathered will be the foundation for developing the rest of the working plan.

Use the ABC System to Classify Inventory 

Inventory organization will be useful when mitigating supply chain disruptions. When using the ABC system, identify parts with the greatest impact as “A” parts, and those with the least impact as “C” parts. This is a simple yet effective system because the parts with the greatest impact in an operation need the greatest effort and attention in terms of lead time, inventory, pricing, and other business considerations. “A” items usually flow through the operation quickly and have the most value. Prioritize planning for those parts.

The next step in this inventory plan is to complete regular cycle counts to make sure inventory is accurate. Some surprises may be revealed during this step. Differences in inventory may be discovered that need to be addressed, as cycle counts can expose problems and provide an opportunity to address them before other issues arise. 

This doesn’t mean cycle counts must happen with the same frequency for all parts. The ABC system is a risk management tool to help users prioritize the various parts of their operations. For instance, “A” parts could be counted every month, “B” parts once a quarter, and “C” parts every six months. Once data is gathered, the frequency can be adjusted as needed. When issues are discovered, address them and take action immediately. 

Create Buffer Stock for Inventory

Once the parts in an operation are classified based on importance and the data is gathered on them, the next priority is to create buffers for stock. These buffers can be based on the importance of the part. You won’t approach a C part in the same way you would an A part. Buffers are also based on the reliability of the supplier. If they are not consistent in deliveries, a larger buffer will be needed. Buffers can be based on demand fluctuation. If there are large levels of fluctuation, a plan to be agile will be an asset to minimize disruption. 

Knowledge of economic order quality (EOQ) is important. EOQ is the optimal order quantity for minimizing total cost related to ordering, receiving and holding inventory. This information will be helpful when deciding how much to purchase any part and when to purchase it. Freight costs also play an important role in EOQ. 

Each Part Needs Minimum Inventory Quantities

While keeping in mind which parts are priorities, the next step is to look at any issues with inventory levels. Establish a minimum level of inventory for each part and identify inventory issues in real-time. Engage in a visual alert system, which will allow people within the operation to make notifications of any developing issues that they might see. 

Inventory can also be controlled by creating a space for small or key parts used in the operation. Some parts will be more easily managed closer to the operation and other smaller parts may need to go to the housing. Make sure that all minimum numbers of parts are clearly listed so that operators can see when supply is low and adjust. 

Track Parts Quality and Supplier Reliability

The final part of the inventory control plan is to score suppliers based on quality and reliability. This involves tracking delivery and quality and sharing this data with suppliers when it comes to defective parts. This way they will receive the exact examples and reasoning for rejecting parts.  Track delivery and quality. 

Changing suppliers can be extremely disruptive, so it makes sense to work with current suppliers on any issues to ensure the most fluid relationship. Sometimes a visit to see operations in progress can provide a boost to relationship building. Working together to ensure that each organization is benefitting from the relationship, is key to operational efficiency and trust in the outcomes for everyone. 

Controlling inventory is an important part of any organization’s operations. Taking the time to put together a solid plan, educating and training the workforce on that plan, and implementing and evaluating it regularly will help to ensure that your supply chain is running efficiently with minimal disruption.