Reducing Inventory Levels by 40%
Businesses understand the importance of capital, and are driven to ensure that this important resource is optimised. Managing inventory effectively can be key to unlock a significant amount of cash that can then be deployed in more productive ways.
The jewellery business, like anything else in fashion, is dependent on the latest collection being available in the store. Our Client faced issues with their inventory management at multiple levels, a great opportunity for a business process improvement initiative. The manufacturing lead-time (order release to goods reaching the finished goods store) was very high and hence the overall operating inventory in the manufacturing value chain was also high. Likewise, since there was no integration between the gold casting and diamond procurement, diamonds awaited casting, conversely cast items were held back as diamonds and other precious stones were still being procured – a case of inventory mismatch.
As business process improvement specialists, we initiated a transformation of the inventory management system with a measurement of the overall product flow, i.e. a current value stream mapping with clear timelines at each stage and process. We computed the inventory mismatch and introduced two new systems – the ‘Kit Marshal System’, and the ‘Cellular Manufacturing System’ or the ‘Future State Value Stream’. As per the new system, work orders were released to the diamond procurement team and based on the annual consumption, standard Kanban system was introduced at diamond bagging. Once diamonds were bagged basis the work order, the diamond bagging department moved the Kanban Card to the casting department for action within a day. The cast items and diamonds were matched at the Kit Marshal area and passed ahead for the downstream operations. We introduced the Cellular Manufacturing System in the downstream operations – Earlier this involved three different operations performed by three departments - We recommended the merger of the three departments. Now, once the kits (cast items and stones) are given to each cell, the final finished product will come out within a day instead of the earlier long lead times.
Our Client saw a reduction in inventory levels by ~40% as there was no mismatch in the gold cast items and diamonds. The overall lead time was brought down from an average of 30 days to just 7 days – i.e. from work order release to final product in the finished goods store. In the old process, the gold and diamonds travelled an average distance of 1100m within the shop floor before reaching the finished goods stores. After the introduction of Cellular Manufacturing System, the total travel was reduced to <100 meters within the shop floor. The Cellular Manufacturing System also improved the overall ownership among employees leading to an improvement in the quality metrics and a drop in the rejection rate from 3% to 0.2%. Overall, the business achieved significant cost reduction, while transforming the key business process to deliver service excellence.
- Multinational Corporations; Regional Businesses; Family Owned Groups
- Human Capital Solutions; Business Process Improvement; Cost Reduction; Service Excellence
- M K Moorthi