Speaking of Precision Blog

Speaking of Precision

Speaking of Precision is a knowledge preservation and thought leadership blog covering the precision machining industry, its materials and services. With over 36 years of hands on experience in steelmaking, manufacturing, quality, and management, Miles Free (Milo) Director of Industry Research and Technology at PMPA helps answer "How?" "With what?" and occasionally "Really?"

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5-S Your Material Procurement Process

Posted November 23, 2010 8:45 AM by Milo

When its all about delivery, how many SKU's of raw material can your shop effectively manage?

Hey, I'm askin you a question here!

Precision machining shops have been applying 5-S principles in operations for a number of years.

PMPA's NATIONAL TECHNICAL CONFERENCE in 2003 featured a session on Lean setup's that focused on a 5-S approach.

But applicability of lean tools and 5-S isn't limited to only shop operations. The raw material procurement process seems like a great place to try to lean your system and improve your competitive advantage by saying "yes" quicker than the shop waiting for a specific size of barstock.

With materials markets and customer demand in a very confounding state, now is a great time to apply 5-S to your raw material procurement system.

Here's How:

Sort your material requirements into material grade and size categories. With today's prices and longer lead times, minimizing the number of specific sizes that you need per grade will get you to yes quicker than waiting for each particular starting size of bar stock. This will permit flexibility to make parts from the same grade in a similar size range from two or three stock sizes rather than having five or six item-specific sizes to order, inventory, track and expedite.

Straighten your existing materials inventory and orders to give you a clear view of your raw material on hand and on order. Can any of your "orphan items" be applied to make another product. You need to know your inventory.

Sweep your inventory and order book of unnecessary items and orders. Will having a material "tag sale" make sense on items that you are unlikely to use?

Standardize your material order procedures and quoting process. You want to consistently order materials that can be used for multiple-applications, in easier to find standard sizes. You are not well served by trying to manage multiple orders of long lead time-specific items. This is where engineering can add real value to your company! Create a team to determine your needs by reviewing order book and customer commitments as well as supplier lead times and flexibility.

Sustain the process. Now that you have done all you can to minimize waste in your system of excess material item counts, it's time to get customers to help you to further reduce the waste. Show your customers how you are standardizing stock sizes to minimize lead time and maximize your ability to say "yes." Ask for their assistance to help shrink the negative consequences by giving you firm commitments that reflect the material market's lead times. Then you and they can be more confident in your ability to meet their ever changing needs.

Applying the 5-S system to your material procurement system will create savings that should more than cover the increased yield loss of the additional stock removal:

  • It will also help you get a higher percentage of quotes, as you will be able to quote earlier delivery dates than someone who has to find a particular starting size in the market.
  • I think that when you see your customers accept your price for soonest delivery (based on an appropriate price that reflects the cost to whittle the part out from a larger-diameter "mother size") you will be convinced that it is delivery not price that is driving todays customers.
  • How much can you save if you reduce the number of raw material items on hand, increasing inventory turns? Less is more. What is the cost to place and follow up a purchase order? To hold multiple items in inventory? What are your current inventory turns? What should they be?

5-S your raw material procurement system. Everyone will thank you for it.

Even your accountant.

Original article

Editor's Note: CR4 would like to thank Milo for sharing this blog entry, which originally appeared here.

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#1

Re: 5-S Your Material Procurement Process

11/24/2010 10:10 AM

Milo, thank you for another great article to discuss at our staff meeting!

The FISH acronym (First In, Still Here) is finally catching on around here, and there is even some momentum to reduce the trend of increasing our FISH inventory (which is IMMENSE).

It is often difficult for the newer guy to suggest methods other than the entrenched methods of inventory acquisition/tracking/disposition. I only have a few followers of the SP/OP/OQ (Stock Point/Order Point/Order Quantity) method! Newfangled ideas from that new guy... who does he think he is?

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Re: 5-S Your Material Procurement Process

11/24/2010 10:31 AM

Thanks Doorman.

I have been helping my members with this idea as lead times continue to get farther and farther out.

While the nominal subject here is 5S procurement, the real result is more agile performance more positive Quoting, and seriously reduced costs.

The guys who order the 57 /64ths to minimize chip loss on their machines (and waiting 14 weeks for order to roll) are now getting their clock cleaned by the guys who know that they can turn it out of 1 inch material that they have on the shelf or at their favorite service center for soonest delivery to customer. The cycle time won't be affected (because the drill or tap is probably limiting tool so who cares about OD machining time?) And because the setup time is less than half (because you don't have to change anything from the collets back...) they can run smaller lot s at less fixed cost.

Its win win win baby, and the procurement savings trickle down through every process right to the bottom line.

Glad you are making progress on your FISH...

Milo

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#3
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Re: 5-S Your Material Procurement Process

11/24/2010 1:05 PM

Yep, thanks Milo, I will continue to preach this concept to my associates.

And, I like your new pic with the calculator and all.

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Re: 5-S Your Material Procurement Process

11/24/2010 1:32 PM

HA!

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