Making one small change in the supply chain, such as switch from a “push” to a “pull” system, can lead to significant operational improvements for original equipment manufacturers. OEMs across the country are moving toward lean manufacturing as a way to streamline operations as well as to reduce spend and production downtime. Reexamining inventory processes is a great way to free up funding and physical space on the factory floor. The whole idea behind lean manufacturing is to reduce waste, whether it be in manual labor, inventory or lead time. When an OEM opts to set up a pull system with its supplier, it is a major step in the right direction toward lean manufacturing.
Downsides of push systems
Traditionally, OEMs rely on push systems to replenish their stock of fasteners and class C components. However, this involves estimating just how much of each part will be needed for the coming weeks or months. If demand suddenly increases or drops off, the inventory won’t support demand. In this case, parts can be saved and used at a later date, but they will still consume capital and take up valuable space in the meantime. When production needs to speed up to complete orders and OEMs run out of the parts they need, they could hit a serious road block. They’ll need to order more of the components, which can take days or weeks that would be better spent producing their goods or services. In turn, this can skew delivery dates and create tension with customers. It may also cost more to order particular parts and have them rush delivered, eating into the budget.
Pull provides advantageous alternative
Rather than forecasting what an OEM’s demand will be for the near future and risking inaccurate inventories, OEMs can adopt a pull system to obtain the parts necessary to complete builds. This replenishes components upon use, and replenishment activity adjusts to the level of demand. Say a business experiences a month where production slows considerably, the budget will likely be tighter, but it won’t go to waste on excess parts. When orders pick back up, it’s easy to simply bring more parts and fasteners in as needed. Replenishing inventory based on actual usage instead of a forecast keeps stock levels aligned with actual demand. At the same time, this creates a smoother production process, which means your products are produced to meet customer demand.
Save space and money with pull systems
Two of the major benefits of using a pull system to stock inventory are financial and physical. With a vendor managed inventory (VMI) program, OEMs receive only what they need, nothing more or less, to fulfill orders. This ensures there will be enough on hand to keep work moving at a steady pace, and less of the OEM’s budget is tied up in physical goods. At the same time, less space is needed to store stock, which also means fewer resources are devoted to storage costs. With more space and a bigger budget, OEMs can find alternative ways to improve lean manufacturing, such as dedicating now unused storage space to other projects and reinvesting funds into maintenance and repairs necessary to keep operations running smoothly.
Pull systems streamline inventory delivery, so OEMs never have to worry about running out of supplies to create their products. The ability to quickly adjust the volume of orders creates greater flexibility to adapt to changing demands, which in turn gives OEMs more control over their budgets.