Magazine article Industrial Management

Create and Sustain a Continuous Improvement Culture

Magazine article Industrial Management

Create and Sustain a Continuous Improvement Culture

Article excerpt

Every industry is becoming more competitive. Maintaining your edge requires keeping up with technology advancements, higher regulatory hurdles, increasing research and development costs and new competition. More risks include a disengaged workforce, lack of innovation, unsafe environment, lengthy product changeovers, an overabundance of production parts and maintenance supplies - or, conversely, frantic searches for the same.

To drive sustainable and profitable growth, businesses must seek ways to reduce costs, shorten cycle times and improve quality. Only companies that consistently challenge the status quo, create new and different ways of doing things and improve on current processes will survive in todays globally competitive environment. Businesses must do so while maintaining a productive and safe working environment. And they must do so by engaging employees with responsibility, accountability and a sense of ownership.

A few years ago, Lawson Products, which distributes maintenance and repair products, used an integrated and systemic perspective to make major adjustments to the company's business model. Moves included consolidating facilities, investing in a new enterprise resource system, opening a new distribution center in McCook, Illinois, in suburban Chicago, and adopting lean Six Sigma methodology and tools to improve operational efficiency in all areas of the organization.

Evaluating the supply and value chain

Lawson's optimized inventory management approach aimed to reduce or eliminate production downtime by ensuring product availability at the instant the item is needed. Optimized inventory management minimizes inventory costs associated with justin-case inventory by monitoring consumption on a weekly or biweekly basis, improving both asset time utilization and the productivity of skilled workers.

Putting this expertise in the forefront of its own operations, improvement teams re-evaluated the company's supply and value chains when planning the construction of its new distribution center in McCook, Illinois. This evaluation required vigilance, as improvement teams did not want to fall into the trap of optimizing one process, cost or activity while causing additional work or cost in another process. For example, it would be counterproductive to reduce inventory on hand to a very low level to improve inventory turns only to increase purchasing and receiving costs. Therefore, carrying 30 to 60 days of inventory might be a better option than carrying little or none at all.

Another example is the cost added every time a product is handled in a distribution center. The fewer touches, number of packaging jobs and replenishments in the distribution center, the better. The key is keeping inventory turns at an acceptable level, not creating backlogs of product queued in any area or turning an entire distribution center into a primary pick location, which would result in increased time to process orders.

The company's improvement teams aimed to balance the cost of handling throughout the supply chain by understanding the cost of every product and also any products with short lifespans (i.e., those with expiration dates). If an item is expensive, such as hydraulic hoses and fittings, workers know to handle and turn it more so it optimizes the value of its inventory in relation to handling costs.

Items with very low values, such as flat washers and fasteners, are transacted on and touched fewer times to balance overall costs. The goal for Lawson and any other company is never to be out of any item, whether it is low in value or expensive. Looking closely at handling and transaction costs by SKU allows the company to treat each SKU in the most efficient manner.

Often, lean manufacturing initiatives seek to convert push models to pull models. However, Lawson's supply chain evaluation and construction of its new distribution center uncovered that a 100 percent push or a 100 percent pull model for inventory was not right for Lawsons business. …

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