Lean Materials Management: How to Maximize Productivity While Minimizing Inventory


Deb Geiger, VP Global Marketing, Aegis Software

Lean Material Management
Lean Material Management

Are you wondering how to maximize productivity and minimize inventory? A truly efficient manufacturing process requires raw materials to arrive at the right location at the right time, enabling manufacturers to minimize the amount of inventory on hand, saving time and money. But without the proper MES in place, this kind of lean materials management may remain an elusive goal.

With the right MES solution, you can monitor and react automatically to material demand from the lines, manage line changeover, and ensure proper setups. It will also provide more granular material control, tactical production and material planning, and incoming quality control.

The ultimate benefit of lean materials management empowered by the right MES is increased efficiency across the entirety of operations, from the supplier to the production lines. This includes better inventory turns, less downtime, and precise ERP visibility to material quantities.

This blog post explores the benefits and challenges of lean materials management and how to minimize inventory.

The Benefits of Leaner & Smarter Materials Management

An efficient factory is focused on keeping production moving without disruption. The traditional approach—deemed "Push"—involved having as much material as possible to fulfill a particular order. However, this approach has been proven wasteful. It requires more space and more people, fewer turns, and an increased risk for materials aging. In a more efficient "Pull-Based" environment, the consumption points for that material are drawing and creating the demand. There may be an initial set of material distributed, but, as needed, the material is actively getting replenished. This pull-based approach allows for scenarios in which a production environment runs around the clock, but the warehouse is not.

One aspect that makes the pull-based method highly effective is using a unique ID. In addition to supporting material tracing and verification, a unique ID naturally enables inventory turns by identifying first in inventory for FIFO (first in, first out) and isolates wherever a given material is located—whether that is in the stock room or on the floor.

With Lean Materials Management comes big benefits. The measurable benefits of Lean Materials Management included:

  • Reduce Inventory Stock Investment: Reduce by 75%
  • Reduce Logistics Costs: Reduce by 30%
  • Increase Productivity: Decrease Downtime by 50%
  • Improve Quality: Reduce Defects by 25%
  • Increase Flexibility: Reaction Time Reduce 60%
  • Reduce Scrap / Obsolescence Cost: Reduce by 20%
  • Eliminate Needless Overhead Costs: Reduce by 80
  • Increase Capacity Per Square Meter: Increase by 30%

Asking the Right Questions & Identifying Improvement Opportunities to Minimize Inventory

Manufacturers should always be focused on spotting the next opportunity to improve their materials management practices. In determining areas for improvement, there are several essential questions manufacturers must ask themselves. Some of these include: How do we ensure the accuracy of received material?; How do we affirm incoming material inspection is sampling no more or less than required?; How do we label material?; How do we plan daily production?; and At what point do we learn of an order's material readiness?

It is vital that factories also look at strategies to minimize material allocations to the floor without impacting production. Questions in this area include: How efficient are material kitting processes?; Does replenishment happen proactively or reactively?; Where is material located on the floor?; and Are we operating in a pull or push material existence?

Mitigating Materials Management Challenges at a Customer Factory

Next, let's look at an applied example of lean materials management at work. A specific electronics manufacturing service provider caters to many industries, including commercial automotive lighting, and its manufacturing environment is medium to high volume. It has many departments in its operations, spanning from surface mount to chip on board insertion. Its upper-level assembly and surface mount technology have 14 production lines, and eight are dual-lane—all running around the clock with minimal downtime. However, the warehouse is only open about half the time, requiring the company to secure material coverage during closed periods.

With FactoryLogix, the organization made great strides in its operational efficiency strategy for both materials and production. Let's look at two key areas of improvement on maximizing manufacturing productivity:

Integrated Lean Materials Receiving Process: Aegis' FactoryLogix enabled the manufacturer to improve its lean material receiving process by ensuring seamless connections, implementing a "do-it-once and do-it-right" process, and enhancing synergy with the existing ERP. As a result, the company improved handling time and reduced documentation processing time between stocks. It also improved document management and reduced staff traveling.

Adaptive Planning, Kitting, & Delivery: FactoryLogix helped the company improve its adaptive planning, kitting, and delivery with a rationalized logistics operation and a "less (for materials) is more (for manufacturing)" approach. Improvements included more manageable working hours, optimized line stock handling, and optimized batch consumption.

Maximizing Productivity and Improving Lean Materials Management with FactoryLogix

Implementing a dynamic, Industry 4.0-enabled platform, like Aegis' FactoryLogix platform, can yield unparalleled returns for manufacturers looking to improve their lean materials management processes. FactoryLogix transforms your shop floor materials dispatch process to a lean 'pull-based' approach. It can do this because it is aware of where all the detailed lowest level of component delivery materials are at each location, and on each machine in the factory - knowing the real-time consumption data - not inferred or calculated consumption, and all the asset information and the predicted times of the jobs will be over. By taking all that data and also understanding the operating hours of the warehouse and how long it takes to get materials from the warehouse to local stores and out to the lines, FactoryLogix combines all that information, and it drives a pull model, ensuring that lines are never down for material shortage reasons. And yet, there's never any more material being pulled from the warehouse than is absolutely needed, so both finance and operations are satisfied.

With FactoryLogix, you can minimize materials inventory and maximize production uptime, enhance ERP with the demand-driven 'pull' model, and achieve many significant financial and agility benefits of lean materials management, as well as the flexibility needed for true Industry 4.0 operation. Learn more: Lean Materials Management.

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