I often tell Clients “Manufacturing is simple: you buy stuff, you put stuff together and you ship stuff.” Often, their response to this is “We’re different” – mostly based on the complexity of their technology or manufacturing process. But regardless of the technology, the process, insourced or outsourced manufacturing, onshore or offshore production or the volume of activity, at the highest level the fundamentals are the same – they buy stuff, they put stuff together and they ship stuff.
One of the biggest challenges (and source of headaches) for manufacturing companies is Inventory Management and Control – or “Where’s my stuff?” There are several layers to this issue
- Where’s my stuff?
- Is it the right stuff?
- Do I have enough stuff?
- Is my stuff still good?
- Did I order the stuff I need?
- When will my stuff get here?
Manufacturing companies struggle with these issues every day. And while the Procurement, Inventory Management and Finance teams want to control “the stuff”, Manufacturing teams are laser-focused on just putting stuff together and shipping it, until stuff is missing; then, the Procurement, Inventory Control and Finance teams messed up, even though Manufacturing may have caused their own problems by not tracking or transacting their stuff.
At the third session of the Sunrise Sip Club, sponsored by Expandable Software and Mirador Software Group, on July 18th, 2024, Raj Vora of VAS Engineering, Inc. shared his experience and views on Inventory Management.
VAS Engineering is located in San Diego, California, and has provided quality contract manufacturing services for the electronics industry since 1987. This is a significant challenge in itself; manufacturing in the United States in general and in California in particular is a highly competitive industry, and much of this work has been moved offshore to be cost competitive.
A Call To Action
When Raj joined VAS in the Spring of 2018, he quickly found that one of the biggest losses in productivity (and increases in cost) was generated by the lack of Inventory control and visibility – they routinely could not find their stuff and it took expensive senior resources to find it, while production personnel potentially sat idle.
Raj tackled this problem with his passion as a technology enthusiast and the creativity and vision to transform innovative and disruptive ideas into process improvements and profitability.
Leveraging Expandable
Raj and the VAS team took a bold step and began to create middleware apps leveraging Expandables’ Sequel database. The first step was to create an optical scanning app that scanned every item coming into the factory, assigned a lot or serial number to each and updated Expandable. Now they knew every bit of stuff that had been received and where the stuff was located. This significantly simplified the kitting process (which is still manual).
The next step was to create another, similar app in the Work in Process area. Many of the components used in VAS’ products come on reels, and those reels are loaded on printed circuit board (PCB) stuffing machines. The second ap optically scanned and counted every component utilized and applied it to the appropriate job/workorder. Now they knew exactly how much stuff was used. Inventory accuracy in both the warehouse and the production floor improved dramatically. After production is completed, the stuff is moved to Finished Goods for shipping and Expandable is updated.
What about ROI?
You’re probably wondering about the cost of hardware, programming and software to create the new middleware. For Raj and his team, the Return on Investment (ROI) was high, and the payback period was short. Looking at the amount of time saved by senior team members looking for stuff and correcting errors on stuff as well as the elimination of production downtime waiting for stuff showed that the investment was more than justified.
The Fundamentals Still Apply
Fundamental Inventory Management systems and processes still apply. Material Requirements Planning (MRP) is still utilized. Variance Reporting, Cycle Counting and Excess/Slow Moving/Obsolete Inventory Analyses are still employed, although with the warehouse and WIP well under control and working to firm backlog and orders it makes these controls important but less critical.
Next Steps
Raj and his team are not done working on their systems and processes. It’s a little bit like Disneyland – it will never be finished and there will always be room for improvement. Automating the kitting process and WIP Completions and Shipping are still on the horizon, and the use of AI has implications across the board. But one step at a time…
Conclusion
The methodologies employed by Raj and the VAS Engineering team may not be applicable for every manufacturing operation, but it gives us an existence theorem that with vision and creativity Inventory Management can be achieved and manufacturing in the United States can still be viable.
Jeff Osorio is a Consulting CFO with over 30 years of experience in operationally oriented companies ranging from pre-Revenue to $4B with 40 ERP implementations in his portfolio. He is also an Adjunct Professor in the MBA program of the Leavey School of Business at Santa Clara University.