Lean Inventory Management Program Reduces Costs for Production Environment
The high costs of managing cleanroom consumables inventory were dragging down the overall profit and efficiency for a medical diagnostics manufacturer, who turned to Avantor Services for assistance in understanding and overcoming this common obstacle. Our Lean Six Sigma Process Consultant assessed their current-state processes, including warehouse management, requisitioning, procurement, receiving, and cleanroom supply, and discovered the management issues surrounding the cleanroom areas represented more than $33,000 in non-value added activity or expense. This high cost was, in part, the result of:
- Using a paper-based requisitioning system
- Redundant processes for determining reorder quantities
- Unnecessary order reviews and approvals
- Warehouse pallet positions for raw materials used in manufacturing
- Receiving and issuing from the warehouse management system, resulting in additional non-value added labor.
What could be done to reduce these high costs of cleanroom management?
Our consultant developed an optimized future state to demonstrate how a lean inventory management process could eliminate non-value added activities. The goal was to maintain quality, control the procurement process, improve end-user satisfaction, and reduce the cost by streamlining requisition to inventory to product use.
The new process eliminated the receiving labor costs of data entry into the ERP system. Direct delivery to the point-of-use locations bypassed the receiving departments process of storing material in their warehouse and the associated work of inventory maintenance. The new process also eliminated a complex paper-based process of issuing out the warehouse and the associated system that was required. Avantor Services also improved organization at the stocking locations, leading to neater appearance and better functionality of the inventory point of use.
Streamlining the receiving and issuing processes has reduced the amount of time spent on inventory by more than 300 hours per year and resulted in direct labor savings of over $11,000 per year. The recovery of warehouse pallet positions saved $7,224 per year, and excess inventory valued at more that $14,000 was eliminated.