The Importance of Lean Material Management
Lean manufacturing is the continuous process of improving productivity and reducing waste. Waste comes in many forms, including time, effort (labor), or other resources that are used in the production process. As part of lean manufacturing, materials management is an important aspect of keeping inventory low and maintaining the flow of products through your manufacturing facility. Having good inventory control systems in place is critical for manufacturers looking to operate lean and maintain profitability in the long run.
What Does Material Management Include?
Material management is the process of maintaining inventory levels. Manufacturers strive to reduce inventory as much as possible without jeopardizing their ability to meet customers’ expectations. Excess inventory is a form of waste, and reducing it can improve profitability by lowering the cost of goods sold (COGS).
Inventory can be expensive to maintain and store. In some cases, it can also pose safety or security hazards. In addition to these costs associated with holding on to the extra stock, there are other costs associated with managing that inventory. Manufacturers have to consider the time spent managing an inventory system and employee hours spent handling items or collecting information about them – like taking pictures or entering data.
An important aspect of materials management is getting raw materials into production as quickly as possible. The longer it takes to get a part into production, the more money you lose and the less productive your team becomes.
Lean Material Management
A critical part of achieving lean manufacturing is lean material management – reducing the amount of time it takes to turn raw materials into finished products. In order for this to happen, you need a reliable way to manage your raw materials inventory and flow through your factory so that there’s no delay in the production process. It’s also important that you’re able to track how much inventory you have on hand at any given time—and know when it’s time to order more supplies. This way you’ll be prepared for any possible delays in production or unexpected surges in demand. Reducing raw material lead time eliminates the need for inventory and increases flexibility in responding to market changes. In addition, reducing inventory helps reduce costs related to storage and labor.
One way to reduce lead times is to source materials from suppliers close to your facility. Shorter shipping distances mean less time and money spent on shipping costs, which translates into lower costs per unit. Shortened delivery times also mean it’s easier to match production schedules with demand, especially when you’re trying to avoid waste (i.e., having too much inventory). When materials have shorter distances to travel, there is a reduced risk of damage during transportation. This means less maintenance and repair needed in the future as well as less time spent inspecting damaged goods before they’re put on the shelf or shipped off-site for repair.
Another way to reduce lead times on raw materials is with blanket purchase orders (BPOs) or consignment agreements. These allow manufacturers to quickly secure products from a supplier without having to use an RFQ every time, which can be a lengthy process. However, BPOs are not as useful for low-volume, high-variety materials because suppliers may not be able to accommodate your specific needs in such an arrangement. Additionally, if demand for your product isn’t high enough, a supplier may not want to offer you an attractive price point. In general, BPOs are best suited for high-volume and low-variety items, as they ensure a quick flow of raw material into your manufacturing facility. BPOs can help reduce lead times, inventory levels, and costs and increase flexibility.
How to Operate Using Lean Material Management
Materials management is a critical part of manufacturing, and using a lean approach to this management means raw materials are available when they are needed but inventory levels are kept low to avoid excess costs of storage and material handling and maintenance. Operating with a reduced lead time decreases inventory costs, increases flexibility to respond to market fluctuations, and increases responsiveness to customer demands and deadlines.
Achieving lean material management and inventory balance can seem like a daunting process. However, implementing the proper inventory management system is a great first step. The OptiPoint software from IMCO allows manufacturers to easily gain control of inventory so that they may create and implement inventory and supply policies that utilize critical data surrounding sales and consumption.
OptiPoint makes it easy to establish relative priority among several factors, including supply reliability, lead time, and customer expectations. This poises manufacturers to meet targets without a large surplus or inventory deficit. Through its integration capabilities with a number of energy resource planning (ERP) solutions, OptiPoint formulates inventory and supply policies to allow for continued balance when it comes to inventory. For those looking to clearly see the impact of a certain service level on working capital tied up in inventory, OptiPoint lets you configure those service selections and modify them to see the impact from various levels.
Overall, the OptiPoint software allows manufacturers to formulate optimal inventory and supply policies based on hard data – both surrounding consumption and sales. Overall, organizations implementing the solution have seen:
- A 27% improvement in annual inventory
- A 25% reduction in Work-in-Progress (WIP)
Integrating OptiPoint with an ERP system creates a robust and responsive approach to achieving inventory balance within manufacturing operations. If you’d like to learn more about OptiPoint or other IMCO Software solutions, contact us today.
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