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Are your inventory practices regrinding your profit?

Written by CyFrame

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Your current inventory management practices might be hiding costs, grinding your profits and limiting your sales!

For plastic processors, managing inventory is a constant struggle. Issues range from encountering special material shortages like packaging and colorant, controlling regrind usage to limit this type of inventory at risk, internal procedures to properly track finished goods, expensive last minute purchases and cash flow pressures in over purchasing material that may even go unused.

So, how do we ensure that we never run out of required materials without overstocking to produce the right amount of finished goods?

Well we know for certain that production planning and forecasts constantly change and in fact any planning or scheduling system must take into consideration the tool/machine performance, standard production speeds while remaining highly flexible, to adjust recipes on the fly or to incorporate regrind components and adjust the schedule as priorities change. But how do these changes impact on material requirements? What other jobs require the same material allocation and may be put into jeopardy?

Also of utmost importance is the accurate recording of finished goods and rejects to track real material consumption but how does this information relate back to inventory on hand to avoid last minutes surprises that wreak havoc on planning and on-time delivery?

Some of the key factors to consider when looking at eliminating material shortages while taking downtime and rejects into account to control inventory costs and increase on-time deliveries are:

Real-Time Information

First you must commit to accurately recording production and that means both scrap and finished goods in either real time or at least at the end of every shift. Bar code solutions with touch screen interfaces work best as that data is compiled and used to update your raw material and finished goods inventory system on a daily basis. Even using inventory by location based systems can help to accurately control exactly how much inventory is on hand and specifically where it’s located either by warehouse of rack location.

Knowing exactly what you are consuming and what is on hand is the first step in ensuring that you make the right decisions in allocating what regrind mixes can and should be used for an optimized production run. Tracking and defining regrind quality is crucial in quickly establishing the right recipe mix that can be used to avoid potential rejects. A good example is to color tag by usable percentage each regrind material that can be used with different recipe alternatives. Nothing throws off a molding or extrusion production schedule like last minute realizations that any needed material is missing, from raw material and additives to packaging.

An all-encompassing, up-to-the-minute view of what’s in inventory in conjunction with what’s currently being consumed will provide you with the information to arrange your production intelligently and be proactive with respects to planning change overs and using substitute and alternative recipes.

Empowering Sales / Customer Service

What do your current processes involve when trying to confirm an order to provide a delivery date? Does it involve speaking to multiple sources including various production planning and inventory resources? How long before we can send a sales order confirmation?

Many plastics processors struggle to find the balance between trying to provide quick service and booking new business vs scrambling to meet optimistic delivery times often resulting in asking the customer for extensions. Sometime you might even provide longer than necessary timeframes to build in a margin for error. Client perception is everything and these practices negatively impact corporate image. It’s not about how fast you can produce everything; it’s about setting the right expectations time after time with a quality product being delivered.

Keys to resolving this struggle between front office and production involve empowering order entry and customer service with real time visibility into up to the minute production performance, scheduling and on hand material so they can they respond to clients request without being dependant on other resources using the latest most accurate information possible.

Optimized Purchasing

The focus is to provide your team with the tools they need to secure exactly the right amount of material to meet current and future demand. That means a Bill of Material built in your Information System that can used with an MRP forecast that will guide the purchasing managers in time to predict material needs so that he can focus on reducing costs, negotiating favorable prices, as opposed to merely handling the most urgent, time-critical orders and continuously fighting fires.

Systems need to be put in place to instantly alert what inventory-related issues will impact production and delay shipments, and what needs to be done in order to correct these issues. Bar-code scanners should provide immediate feedback for purchasing on current material usage by machine, by production work cell, by lot size and by product or job. They can then manage purchases and inventory counts according to this time-critical information.

Tracking material allocation and usage via work orders in conjunction with having shared visible real time production scheduling married to your MRP helps purchasing staff account for existing demand, anticipate material requirements for current and future sales while consideration average consumption, volume discounts and supplier lead times.

Real-time inventory in conjunction with production scheduling systems will enable you to free up capacity resulting in more sales throughput with the same resources. When inventory is missing, you end up not using the capacity available until you get the goods via a rushed expensive PO. Putting in an intelligent stock program with a committed forecast for key customers can also help to increase the capacity usage but your internal systems must be built to properly manage that situation.

Tracking Defects and Accounting for Rejects

A number of plastic producers get caught in a never-ending process of trying to adjust inventory to their customers’ cyclical demand. It’s a constant concern, one where low inventory leads to lost business and excess inventory leads to high carrying costs and lower profit. Not being able to account for defects and rejects in real-time just adds another cost-driver to the mix and another variable that purchasing must account for.

Recording critical product dimensions tolerances as well as the results of other QA tests on a touch screen when production is running can quickly alert customer service and the production managers that the reject rates are heading in the wrong direction and that immediate actions are taken to correct that situation.

Having molding and extrusion machines with programmable logic controllers (PLCs) further allows you to link existing work orders and customer orders by actual machine performance. This provides an additional layer of control that can instantly identify quality and performance related issues and react immediately. This can go a long way to avoiding excess usage of raw material while ensuring that orders do not need to be reproduced which will incur further costs and wreak potential havoc on other downstream scheduled production orders.

They key is in finding the balance between when we need the raw material, when we are going to consume it and when plastic products need to be delivered without incurring higher costs of raw material, late deliveries and avoidable delays in production. By leveraging real-time technology to drive reporting you can eliminate last minutes surprises and ensure that all departments work in unison to improve service, profits and on time delivery.