Even though many people find it hard to stick to the New Year's resolutions they make, the simple act of making one tells us two things about how people think. First, resolutions tell us people want to change for the better, improve their status and rise above certain adversities impacting their lives. Second, these yearly ultimatums demonstrate how focused on the future people can truly be.
Original equipment manufacturers (OEMs) would be wise to adopt a similar philosophy for their on-site operations. Many have already begun incorporating lean manufacturing practices and Six Sigma strategies into the mix, but unfortunately, a majority of these businesses have yet to apply the same sorts of intelligence to their procurement processes for Class C Components. This is where cost-effective efficiency measures really add up – even though fasteners, bolts, screws, washers and the like only make up about 5 percent of the total parts purchase for any given project, 9 out of every 10 production components are Class C.
"9 out of every 10 production components are Class C."
The logistical costs for these parts can also surpass the resources spent on the items themselves. While the price tag for 100,000 eighth-inch ogees might not be unreasonable, additional costs associated with shipping and order fulfillment may not only have OEMs shelling out more money than they should – an extra 50 to 70 percent over unit costs – but overextending company resources at the same time. At the end of the day, the total cost of ownership (TCO) for Class C Components warrants a much greater consideration than they might have received in the past.
Manufacturers should take a second to think about their futures and how vendor managed inventory programs could be the one New Year's resolution they carry out and enjoy, as they help create a more balanced and responsive system for parts procurement, saving OEMs money, time and grief.
Turning procurement into a team effort
To fill orders for specialty parts, OEMs may feel like they have to travel to the North Pole and back to gather the unique components they need for their builds. This method may not appear all that sustainable, but what's an OEM to do?
VMI programs connect manufacturers to the suppliers that work best for them and their needs. VMI programs work with both suppliers and OEMs to collaborate on a procurement strategy that benefits all parties. This may even involve consolidating parts procurement through a single provider, perhaps even one specializing in made-to-print parts (MPP). When VMI programs advocate on behalf of OEMs, these manufacturers won't feel pigeonholed by build specs. Instead, they can confidently establish a functional, risk-free procurement process that will add value to the business every day it operates.
Cutting down on inventory – and keeping it down
After New Year's Day has come and gone, many folks will be loosening their belts thanks to the deluge of delicious treats they've eaten during the holiday season. That's why so many people sign up for gym memberships in January.
Likewise, OEMs should slim down their bulkiest areas for greater control over their Class C Components, namely their inventories. Many manufacturers already utilize Just-in-Time (JIT) stocking practices and kitting services to promote lead time reduction and shrinking down their on-site inventory, but without an intelligent VMI program overseeing the process, these techniques could end up doing more harm than good.
For instance, JIT services will break up large-scale orders into smaller, more frequent deliveries. While this method can help streamline builds, it relies heavily on a fragile logistical network in order to fully benefit the manufacturer. Perhaps the only benefit to an overstocked inventory is, even if employees have to count out Class C Components for a build by hand, at least everything is on site. Should a JIT logistics network experience a hiccup – like, say, a winter storm affecting traffic, OEMs could suffer the downtime.
VMI programs draw from a massive amount of data from both suppliers, OEMs and elsewhere to ensure logistics partners fulfill deliveries as requested on time, every time. In doing so, they help manufacturers stick to their guns over cutting back on their inventories, as well as preserving a more innovative procurement strategy that supports the highest quality lean manufacturing endeavors.