[NEXT LEVEL BLOG]

Before jumping into implementing a custom VMI program that will undoubtedly result in improvements to your current supply chain management, there’s another important opportunity to improve efficiencies that’s often overlooked. That’s to conduct an engineering and design review of the products that drive the depth, breadth, and complexity of a company’s parts requirements. This is a rigorous examination of the key design elements of products, looking for practical ways to reduce parts inventory SKUs and potentially simplify the manufacture and assembly of these same products.

Working closely with our customers’ engineers, we search for parts redundancies that can be eliminated with simple design or drawings modifications. Manufacturers with exhaustive product offerings who haven’t gone through a disciplined parts consolidation process will almost always have a surprising number of redundancies uncovered, for no other reason than that in most new product design and engineering efforts, designers are not limited to current parts inventory. 

The motivation behind implementing a vendor managed inventory (VMI) program is to streamline your supply chain in ways that ultimately save you space, time and money (in labor, inventory, energy). But too often we see VMI programs that aren’t focused explicitly enough on directly accomplishing these things. 

The best VMI programs are aligned with – and contribute to – an organization’s overall Lean journey and consider where the organization is on the journey.

This is part 2 of a 2-part series looking at how a custom VMI program can and should result in significant reductions in working capital. The first post looked at Supply Technologies’ proprietary approach to assessing each customer’s current situation, what we do with that assessment, and the roles that forecasting and production planning play as a custom program is implemented.

Part 2 looks at inventory management, inventory ownership & distribution, and technology & systems as areas that can contribute to working capital reduction with an implemented program.

There are a number of factors that contribute to a successful custom VMI program, but perhaps the most critical in achieving the program’s goal of reducing operating cost and working capital is a thoughtfully designed and well-executed implementation plan – one that includes:

• Parts Requirements: An understanding of the projected parts consumption and the current supplier inventory pipeline
• Sourcing Plan: A practical strategy for sourcing parts, both imported and domestic, with long lead-times
• Quality Plan: An agreement on the quality requirements and inspection of parts, and the Production Part Approval Process (PPAP)
• Transition Plan: An agreement on the program takeover strategy – what’s best for you: “flipping the switch” to the new program or a gradual transition from the existing program?

At its core, our comprehensive implementation process is designed to seamlessly transition your current operations to the new program with the fewest number of interruptions. In fact, the primary goal at launch is that your program is completely ready to improve efficiency on the very first day of operation. Our programs consistently deliver parts and materials to the production floor – on time and on budget – managing process change and deploying without production interruption. Further, teams of our senior people from every department are on-site and in place to provide the structured training to ensure the program’s success.

With this kind of process in place we’re able to successfully implement custom VMI programs even in highly complex situations, like these two examples, both of which resulted in timely startups at all plants involved: