Project Name: Inventory Reduction

Zircon International Corporation, Inc.

Position: Buyer (2-Year Temp Position)

Product Description: Electronic Measurement Instruments for Professional Construction and Do-It-Yourselfers

Objective (Results):
Reduce average on-hand inventory (78%)
Reduce stop-work due to material issues (Eliminated)

Statistics Beginning:
Upon arrival On-hand inventory: $ 1.6 M Average
Monthly Stop-Work: 2-times a month

Statistics Completion:
On-hand inventory: $ 350 K
Stop-work: Eliminated

Time required to completion: 4-months

Overview:

On-hand inventory value averaged $1,600,000 and needed to be reduced as much as possible.

Average weekly usage value approximately $400K. The material was packaging, displays, injection molded clamshells, instructions and backing cards as well as injection molded outer shells, metal housings and assorted hardware. The inventory moved quickly but corporate executives wanted to reduce the on-hand investment and increase turns.

Manufacturing facility was in Ensenada, Mexico and procurement was in US. All computer data was kept current and highly accurate.

Upon completion average on-hand was $350K for a 87% reduction. Stop-work days: eliminated.




Details:

Situation: Reduce on-hand inventory.
Task: Created vendor Kan-Ban system for top 6-vendors.

· Negotiated annual contracts and used a card-release system that was executed in-house by stock clerks and planners.
· Vendor clerks executed activity at the other end.
· On-hand material value was reduced as follows: least amount 3-days on-hand; greatest amount 9-days on-hand.
· Vendor carried a minimum of 1-months average usage and we only were responsible for up-to 3-months average usage.
· We decreased costs through large PO’s for quantities that supported annual usage.
· Vendor increased profits by using our orders to level their schedule or by running an annual amount with a single set-up and holding inventory until demanded.
· Advantage: Once management set-up the system it ran automatically by low-level workers, thereby reducing management interface to a single annual PO negotiation.



Method:

* Cards were inserted into pre-determined batches that typically represented 3-days average usage.
* When the carton or pallet was opened by the stock clerk a component-specific card would be located and dispatched to a mailbox that was visited twice daily by planners to pickup cards.
* These cards were faxed to the vendor and a new batch would be dispatched either the next-day or per predetermined weekly deliveries.
* “Unexpected-Demand” cards were used by the planning department for spike demand.


Situation: Stop work caused by stock-out situations
Task: The above top scenario eliminated stock-out situations


Situation: Reduce cost of individual components.
Task: $27K reduction in annual costs for 2 multi-million-lot components. Procure material by consignment. Negotiated the costs from $.11 to $.06 on a screw & from $.08 to .05 a washer, both purchased in multi-million-piece lots.