Dan Floen, President, Professional Materials Management (PM2), www.pm2online.com

In the first blog of this series, we talked about the value of a Standardized Master Catalog and the valuable data assets that stem from it. 

As a review, PM2 defines a standardized master catalog as:

In the previous blog we covered the value of a standardized inventory database.  This week we will focus on another key data asset that stems from a Standardized Master Catalog; a Standardized Purchasing Database.  

From a supply chain management standpoint, a standardized purchasing database is a fundamental cornerstone to optimizing your supply base. 

With a standardized purchasing database, a company can:

• Streamline item ordering to suppliers
• Eliminate redundant buying
• Consolidate purchase orders
• Effectively manage market baskets for competitive bidding
• Leverage purchasing spend across suppliers.

Let’s take a closer look at each of these benefits:

Streamline Item Ordering To Suppliers
All too often, the purchasing department is left with very sketchy, often handwritten information with which to source and purchase a product.  Poor information on a purchase order request inevitably leads to return calls to both the requester and the supplier.  In this scenario, the percentage of returned product is very high.  Companies that use a standardized purchasing catalog see tremendous process cost savings and decrease their item returns significantly,

Eliminate Redundant Buying
As in the case above, if item information is sketchy, the risk of buying duplicate items with similar item information is greatly increased.  Most likely, one of the items is going to be returned and a new PO will be issued for a different part.  This rework can be avoided with a standardized purchasing database.  

Consolidate Purchase Orders
In the same way that duplicate purchases can be eliminated, a standard purchasing database will drive consistency in item purchase information on a day-to-day basis, so the opportunity to consolidate purchase orders for like items increases significantly.

Effectively Manage Market Baskets
Many purchasing managers will periodically send out market baskets or entire commodity lists for bid among its supplier community.  Without a high quality standard purchasing database in place, this will become a daunting task for suppliers to respond.  Suppliers often come back with vastly different pricing because they may be unsure of exactly which item they should be pricing.  Many times, suppliers will simply “no bid” on your market basket because the time investment would be too great when weighed against the possibility of winning the bid.  If suppliers aren’t even responding to your request for quote for the lack of quality data, it makes it hard to compare pricing across your supplier base.  It behooves you to make this process as painless as possible for your suppliers.

Leverage Purchasing Spend Across Suppliers.
A quality standard purchasing catalog will enable your suppliers to cross-reference a larger percentage of their products, thereby enabling you to exercise your negotiating and buying power among your key suppliers. 

As you can see, a standardized purchasing database can have a tremendously positive impact on your business and I hope you’ll seriously consider embarking on this path.  When in doubt, call in the experts.  PM2 builds high quality standardized purchasing databases for a living. 

As always, if you have questions or need help, Professional Materials Management (PM2) stands ready to assist.  Give us a call at (813) 249-0834 or visit us at www.PM2online.com.

Dan Floen, President, Professional Materials Management (PM2), www.pm2online.com

In recent blogs, we have discussed ways to improve your inventory management operation and reduce costs by first, defining your total cost of inventory management, second, identifying and quantifying improvement opportunities, and third, implementing those changes.  In all this, the key ingredient to success is quality data; more specifically, a standardized master catalog. 

So, what is a standardized master catalog anyway and why is it so important?  To answer the first question here is how PM2 defines a standardized master catalog:

Now let’s take a look at the valuable things that are born out of a standardized master catalog of all materials management data.  They are;

1. A standardized inventory database
2. A streamlined purchasing database
3. A complete print catalog database
4. A high quality e-procurement database
5. A sales database

Today, we will explore the value of having a standardized inventory database.

Operationally, one the most important things that you can do to enable cost savings and streamline your daily efforts, is to invest in a standardized inventory database.

With a standardized inventory database, a company can:

1. Reduce item “look up” time
2. Enable inventory sharing across the enterprise
3. Eliminate item duplications
4. Reduce on-hand inventory investment costs
5. Streamline inventory management projects

But, how do you build quality content into your master data in order to get quality inventory data back out of it?  We suggest the following data scheme to help drive consistency and richness into your data:

In order to drive consistency and richness into your data, it is very important that your database development people have a high degree of product knowledge.  When in doubt, call in the experts.  PM2 builds high quality standardized inventory databases for a living. 

As always, if you have questions or need help, Professional Materials Management (PM2) stands ready to assist.  Give us a call at (813) 249-0834 or visit us at www.PM2online.com.

Dan Floen, President, Professional Materials Management (PM2), www.pm2online.com

In our last blog, we began a discussion about how applying three basic principles to the management of your MRO inventory can directly affect your bottom line - Today and Tomorrow. 

The three principles are;

Rule #1 - Increase Your Income

Rule #2 - Spend Less

Rule #3 - Control More 

Today, we will explore Rule #3 – Control More.  

Rule #3 Applied - How can better control of your MRO inventory directly affect your company’s bottom line?   

We all know that you can’t expect what you don’t inspect.  The simple act of paying attention to an activity or process can lead to improvement, but how can we know what to inspect where it will have the biggest impact?  How can we be more intentional about applying this rule? 

There are probably hundreds of inventory measures you could choose to pay attention to, but if you focus on these five, you will go a long way toward having the biggest impact to the bottom line of your company. 

When someone comes to the storeroom with a list of parts that they need to complete a job and they are able to leave with all of those items, your service level is 100%.  If ten people come to the stockroom a day, each with a list of needed items to complete a job and you have all of the items for 8 of the requests, but you are missing parts on two others, you have an 80% service level.  In effect, you are measuring if users can get what they need to complete the job; yes or no.

In this measurement, items are tracked to the item level.  If ten people come to the storeroom, each needing two parts, and 10 of those parts are not in stock, you have a 50% stock out level. 

In this measurement, you start with a total amount of dollars in inventory and then track it as it moves up or down.  The name of this game is to use the inventory you already own.

If you track these three items, you will hopefully see your service levels and stock out rates improve over time as excess inventory is burned off.  At some point, you will see service levels going down and stock out levels going up.  If this trend continues, you will have reached the point where you have burned off all of the excess of your commonly used items and you will need to reassess the usage and min/max numbers for these items. 

Tracking the number of purchase orders issued and the number of PO’s per vendor will:

• Help you identify opportunities to consolidate vendors which will put you in a better position to negotiate volume discounts and value added perks
• Reduce the number of PO’s (and the costs associated with generating, processing, and receiving them) which will lead to process cost savings
• Give you an indication of where you are spending your money so you can better identify other savings opportunities. 

Track Inventory Turns

Inventory turns looks at your total dollars issued versus inventory dollars on hand. (Inventory Turns = Issue Dollars / Avg Inventory Dollars)   For example, if your inventory issues are $10,000 and your average inventory is $20,000, you inventory turn equals is 0.5   Don’t get discouraged when you first measure this number if it comes out to be an average of 1 turn or less.  It is not unusual for us to see this in a plant that has not been proactively managing their inventory.  The goal is to get rid of what you don’t use and burn-off the excess of what you do use. This combination will get you on track to increase your turns and contribute to your bottom line savings.  

Track Downtime Costs 

Most companies recognize that downtime comes at a significant cost, but few measure this because it can be cumbersome and sometimes difficult to measure.  It is, however, recommended that you measure it, even if in the most rudimentary way.  Having a base figure in mind of how much it costs per hour, day, or minute (whatever is most appropriate for your business) to be down along with how often you are down, and for how long is a very important management tool.  It can be used to assess whether your inventory levels need adjustment, search times reduced, whether a preventative maintenance project should be implemented, and many more inventory management decisions. 

As you adopt the inventory controls mentioned above, you will find that management issues bubble to the top and that you have the information to help you make sound management decisions about your inventory.  Most importantly, you will find your business’ bottom line improving.  The more quickly you are able to implement these control processes, the more quickly you will be able to reap the rewards.  The longer it takes to implement, the more money is lost and cannot be recovered. 

As always, if you have questions or need help with implementing these (or any) improvements to your inventory management processes, Professional Materials Management (PM2) stands ready to assist.  Give us a call at (813) 249-0834 or visit us at www.PM2online.com.

Dan Floen, President, Professional Materials Management (PM2), www.pm2online.com

In our last blog, we began a discussion about how applying three basic principles to the management of your MRO inventory can directly affect your bottom line - Today and Tomorrow.  The three principles are;

Rule #1 - Increase Your Income

Rule #2 - Spend Less

Rule #3 - Control More 

Today, we will explore Rule #2 – Spend Less. 

MRO costs can come from several different sources in your facility.  Getting a handle on the excesses in one area will affect the others. 

Controlling Inventory Costs - Excess inventory costs often come from poorly defined or poorly enforced processes or from not having proper measurements in place to manage the inventory.  For example; 

Obsolete inventory happens when there is no purging process (or no purging process exercised on a regular basis).   Get rid of excess and obsolete inventory (see previous blog for recommendations).

Special projects create excess inventory when there is no process to restock items not used on the project (so they get dumped somewhere and are no longer accounted for in the inventory).  Almost every facility has that “scary warehouse” or storage area that no one really wants to go into to search for things.  Legends are told about people who go in but don’t come out…  Implement a policy of checking items out of stock and also checking unused items back into stock rather than just dumping them in a corner somewhere.

Overstocking of inventory occurs when no one is measuring usage.  No one really knows how much of a product is needed, so they order on a “gut feel.”  Another cause derives from no one checking inventory before they order more product.  Instill a policy of checking stock before EVERY purchase.  (In order to check stock, you must have an accurate and rich inventory database.  We will discuss that further in the next blog - Rule #3 - Control More).  Keep track of what is used and how much is used.  Base ordering on usage figures rather than “gut feel”.

“Buying around the inventory” is the most common result of not knowing or not being able to find what you have in stock.  In other words - it’s easier to just buy it than to find it.  Establish controls around the processes contributing to these “buy around” habits and make it easier to do the right thing than it is to do the wrong thing. 

Process Costs - In addition to gaining control of the purging and restocking processes mentioned above, you should also consider reviewing the following processes as sources of increased costs and also potential savings.  

Item search time - Search time costs money in both labor (time for the search) and in downtime (time not producing while you are searching).  Minimizing this time through clean up and organization of your storeroom saves big money. 

PO processing time - Processing multiple PO’s to the same vendor saps cost from your company.  Consolidating vendors and purchases reduces the amount of time spent generating, processing, and receiving orders. 

Travel time - With inventory located all over the plant, your technicians spend more time than you know traveling from location to location collecting the parts they need to complete a job.  In addition to the time spent traveling, it is also a convenient way to get “lost” and have an extra break along the way.  Quantify this time into labor hours (and dollars) and you will be stunned.  Reduce this time by consolidating and organizing your inventory.   

Downtime - Downtime is often the biggest source of money escaping from any facility, but it is rarely measured completely or accurately.  Whether you choose to measure it or not, you know that this cost must be contained and eliminated whenever and wherever possible.  

Purchase Costs - When I mention purchase costs, most people think I am going to talk about how well they negotiate their pricing with their vendors, but that isn’t my focus here.  I’m looking at the bigger picture. 

Fragmented Supplier Base - This is where I like to apply the 80/20 rule.  If you are buying less than 80% of your product from your top 10 vendors, you probably have an opportunity to gain significant savings through supplier consolidation.

“Just In Case” Buying” - As you have had to cut back people, you probably built some safety net redundancy into your buying.  You aren’t sure what you are going to need and the person who does know isn’t here anymore, so lets get 3 of that item, just in case it’s hard to get if you ever need them later.  Restricting yourself to buying only what you need, based on usage rather than “gut feel” can reduce costs significantly and move you toward the control of inventory and dollars that you need. 

“Buying Around the Inventory” - Buying around the inventory (going around any of the buying processes) , as in some of the examples mentioned above, is a result of it being easier to buy new product than it is to find the product you already own.  If you don’t know what you have or if you can’t find what you have, you will probably have people buying around the inventory.  It will result in buying more product than you need, paying more than the negotiated price (spot buys almost always cost more than planned purchases), and paying a higher procurement cost in both PO process cost and in travel/shipping costs.  These cost creep up on your bottom line pretty quickly, so it is best to address this ASAP.  

As the above steps are implemented, you will find your bottom line improving.  The more quickly you are able to implement the changes, the more quickly you will be able to reap the rewards.  The longer it takes to implement, the more money is lost and can not be recovered. 

As always, if you have questions or need help with implementing these (or other) improvements to your inventory management processes, Professional Materials Management (PM2) stands ready to assist.  We are fast, easy, and affordable.  More importantly, we bring decades of inventory expertise to address your needs.  Give us a call at (813) 249-0834. Or visit our website: www.PM2online.com

OK, so I’ve been talking about how better management of your MRO inventory can help you survive the economy for months now.  Let’s get down to “brass tacks”.  The bottom line is that what you do today has to affect the bottom line today or you won’t be here to experience the effects produced tomorrow.   All of the rules have changed, but the base principles are the same.   Consider these three time honored rules and how they might be applied to your MRO inventory today.    

Rule #1 - Increase Your Income

Rule #2 - Spend Less

Rule #3 - Control More 

So, for today, let’s explore Rule #1. 

Rule #1 - How can your managing your MRO inventory increase your income? - You have to take what you have that has value and turn it into cash.   

How much inventory do you own but don’t need or use?  
 

Sell, Salvage, Barter, or Return   

1. Look and see what is in your “attic” or “hidey holes”.  We recently worked for a client that had old obsolete door knobs and door knockers stored in an attic.  When we pulled them down, we found that they were brass and worth over $12,000 to a metal recycler.  Would $12,000 of “found” money be helpful to your company right now?  What else might be lurking in those unexplored places of your facility?  Copper wire?  Excess piping (What is it made of?)?  What about all of those small, but expensive, electrical parts? 

2. When you are looking for your “Buyer”, be creative.  You might sell to your current customer, but you might also sell to a new customer, or a salvage company, or a vendor.  

3. Consider bartering for goods and services. 

4. Return or sell your excess inventory.  It not at all unusual for us to discover that a client has a year or more of inventory on hand.  There are many causes to how and why this happens, which we have explored, and will explore again, but for today’s purposes, think of this excess inventory as money sitting on your shelves that you can be using to make your payroll.  How much do you really need to stock?  Turn the rest into cash. 

5. Look to that old office equipment at the back of the warehouse as a source of income.  Do you have desks, old phone systems, copy machines, binding equipment, etc… back there?  We often see companies that buy a new machine as an old one becomes obsolete, but they can’t quite bear to part with the old one.  They hold onto it because it may still have value, or no one has time to figure out how to sell it, or they keep it as a backup , in case the new one breaks down, or whatever, whatever, whatever…  It’s time to let them go.  Even if you only get a small price for them, it’s more than you have now and storage space also costs money.  Every item has to earn its right to stay in your inventory, otherwise, it is a $1 bill (or worse a $50 or $100 bill) just sitting on your shelf collecting dust and being devalued by the minute.     

OK, so getting cash in your hands is the crucial Rule #1.  In upcoming weeks, I will address Rule #2 - Spend Less, and Rule #3 - Control More.  In the meantime, if you have questions or need help with any of these or other inventory related questions, Professional Materials Management (PM2) stands ready to assist you.  Feel free to call us at (813) 249-0834. Or visit our website: www.PM2online.com

In part two of this series, we uncover still more ways to make your excess MRO inventory work for you.

 Dan Floen, President, Professional Materials Management (PM2),  www.pm2online.com

In our last blog, we considered the fact that maintenance, repair, and operating (MRO) inventory is often overlooked as a source of cost cutting and increased savings that could have a positive influence on your company’s bottom line.  So, how can your inventory help you survive in these economic times? 

Your inventory costs money and if you begin to look at your inventory as if it were cash lying on your shelf, you will begin to view it is a tool to manipulate that can increase cash flow and free up dollars that can be used to pay for other priority items within the company.  For example; would you rather have your money tied up in six electric motors that you have used one of in the last year and that cost  $150 each (6 x $150 = $ 900) or would you rather have $900 to repair that air conditioner you’ve been limping along for the past year? 

Excess inventory usually occurs over time through a variety of insidious processes, which we discussed in our last blog.  The two questions today are;

• How do you determine what is excess inventory and what isn’t?
• How do you quantify the excess inventory that you have? 

There are four pieces of information that will help you determine what excess inventory you have.  They are;

Usage - Do you track usage?  Issuance of parts? If you are tracking your usage, you are well on your way to determining what is excess and what is not.  If you have issued a part only one time in the past year (and you trust that your information is accurate), chances are, you do not need to stock it. I will caution you to make sure that the same part is not listed in the inventory database under several different descriptions or numbers.  I would also advise you to make sure that your workers are not pulling from “private stock” inventories or “hidey holes” of product that are not represented in your inventory system at all.   

Turns -  Annual Inventory Turns is a measurement of how many times in a year you use a particular item.  For example, an inventory turn of “2” means that you use that item two times a year.  In this example, if you have 6 of this item on the shelf, you have too much inventory of that item.  It is not unusual for a company to have over half of their inventory with turns of less than 2 per year.  Wouldn’t it be nice to have the money represented by these items available to use on other priorities?   

Criticality - Criticality of a part has to do with whether the part is critical to your plant/facility to keep it running.  For example, if the motor that runs your production line fails and you do not have a spare on hand immediately, how much does it cost you per hour that the plant is not running?  The answer to this question will determine if the part is critical or not?  Part 2 of this question is this; How fast can your supplier get it to you, and can you get them to agree to keep the part on hand all of the time so you don’t have to? If a part is critical, but you can get the part to your facility immediately via will-call pick up or courier, you don’t need to stock it.   

“Dust Factor” - If you are like many companies out there, you aren’t measuring your inventory turns and you can’t really rely on the accuracy of your database, but all is not lost.  When all else fails, use the “dust factor” to help you make a decision.  First, look at how much dust there is on the box?  Second, go to your Plant Engineer and ask if the part is critical to keeping the company running.  If not, it is excess inventory. 

There are three pieces of information you must have in order to quantify your inventory value.  They are;

         Accurate inventory - Do you have an inventory master list? Is everything on it? Are you sure?  How many times is a part listed (in other words, are there duplicates)?

         Dollar value of each item - Do you know how much each item is worth?

         Quantity of each item - Do you know how much of each item that you have?  Are you sure?  Again, check the “hidey holes and locked closets.  These items may not be represented in your inventory system.     

Once you have determined the value of you inventory and how much of it is excess, it is time to determine how to convert this excess inventory into hard cash that directly hits your bottom line.  Excess product can be repaired, salvaged for parts, sold, or returned to the vendor that sold it to you. 

Your excess inventory brings with it benefits in the form of “burn off” opportunities for usable product, repaired items, and equipment that has been cannibalized for parts. These all present the chance to avoid spending and bring in company savings.  Cash opportunities come from excess product sold to salvage companies and product that is returned to vendors.  All of these opportunities drive increased cash flow and go directly to the bottom line where they can get to work for your company.  That is how your excess inventory becomes the hero that can help you survive in today’s tough economic environment. 

Dan Floen, President, Professional Materials Management (PM2), www.pm2online.com

In today’s economic environment, it’s a pretty safe bet that your company is looking to find and exploit every cost cutting and cost saving measure that can be identified.  In fact, I would be surprised if you haven’t been doing this for quite some time and are now beginning to run out of places to look.  The fat has been trimmed and many companies are now faced with cutting into the muscle, however there is one place that may have been skimmed over or not explored at all, and that is the maintenance, repair and operating (MRO) inventory.  Often ignored until something fails, the MRO inventory now has the chance to be the “hero” in this new economic scenario.

So, how can managing your MRO inventory help you survive?  You have to look at this inventory in a new way; see dollar signs on every spare part and piece of equipment.  Take a walk through your tool crib or storage facility with this new view and you will see your inventory in a whole new light.  If you knew the value of those twelve parts sitting on the shelf covered with dust was $90 a piece, would you want to find out the value of the twenty pieces of another item sitting next to them on the shelf?    

• How did this happen?
• How much money do you have tied up in excess inventory? 
• How can it be fixed? 
• How can you make “lemonade” out of this “lemon” of a situation? 

As you can imagine, we at PM2 can tell you a lot about managing your MRO inventory while addressing each of these questions in the next few blogs.  To begin, let’s explore how this happened.  

How did this happen?  Don’t feel like you are alone out there.  This is more common than not.    Here are some very common situations we see every day that answer this question.

Bought it in case quantities - It came in a case of 12, you used 2 and have 10 left. They have been there for a year.

“Hidey holes” - Your workers know this item is often out of stock, so they keep 2-3 on hand, just in case.  Multiply this by several workers and 5-10 items (or more) and you have an inventory problem. 

“Project dumps” - Parts get checked out (again, just in case they need it - and it is so much easier to check it all out at one time) but not all of it is used on the project.  When the project is completed, they either dump it in an “excess/overstock” warehouse or a closet (“hidey hole”).  That is so much easier and less time consuming than checking it back in. 

“Graveyards” - These products are broken, have been replaced, or outgrown their usefulness in your company.  Someone has decided to keep them so they can be raided for parts, because didn’t know what to do with it, or, again, “just in case”. 

Bought it on Sale - Yes, we have all fallen for this one at some time.  Summer is on the way and you know you are going to need air conditioner filters.  If you buy 4 cases of them now, you can save 10%.  Who knew that every building needed a different sized filter?  Five years later, you still have 3 cases of air conditioner filters for each building. 

Didn’t know you had it  - Because it is hidden in the “hidey holes” or dumped on the wrong location on the shelves, you didn’t know you had it, so you just kept ordering more.  Now you have a lot of it in multiple locations.

Didn’t know you had it - Part II - You had it in the Tulsa location but you didn’t know it.  The inventories aren’t on an enterprise system so you can’t see what the other plant has and you buy it again. 

Didn’t know you had it  - Part III - You have a system where you can check inventory at all of your locations.  You searched for “1/4 HP Motor” and found nothing.  Little did you know they had it entered as “motor, single phase, 1/4 hp”.  They had 20 of them and you ordered 4 more because they are often out of stock and are on sale today.

Backordered/Slow to ship/receive  - For three week when out of stocks are reported, you are told that you are out of “150 AMP S Time delay fuse holder code 1-13/16  FUSE DIA”, so for three weeks, you order more.  They all arrive at the same time, a month later.  

If you need help sooner than that, PM2 is always ready to assist with the solutions to these or any of your inventory issues.  We are just an e-mail (floen.d@pm2online.com) or a phone call away.  (813) 249-0834. Or visit us at www.pm2online.com

Dan Floen, President, Professional Materials Management (PM2), www.pm2online.com

Today, we will explore the last 3 S’s; Shine, Standardize, and Sustain.   

Shine/Sweep - How are you going to maintain this so you don’t have to do it again next year?  Cleaning up will only produce the desired results if the process is maintained.  Schedule time to maintain the product, the facility, and the processes (which we will talk about in more detail below).  

Revisit this project regularly - “Don’t expect what you don’t inspect”.  Remember the old “Management by Walking Around” advice that was prevalent in the 80’s? (OK, maybe I’m showing my age here.  Look it up if you don’t remember it or if you weren’t born, yet).  This is a good time to dust that one off and use it.  If you aren’t holding everyone in the building accountable for this program, it will not succeed and your efforts will be in vain.

Build an inventory database - Build an inventory of what you have so you can manage it as you go along.  Sometimes, people think of this step first.  They decide they want to gain control of their inventory so they buy an inventory management software package, only to realize that they have no data (or incomplete/unreliable data) to feed into that system.  You have to have standardized and complete item descriptions.  (Is a “GE 3/4HP MOTOR” the same thing as “MOTOR, 3/4HP”?  They won’t come up in the search as the same thing.)  

Schedule routine maintenance - Schedule time to maintain and repair the product, the facility, and the processes (which we will talk about in more detail below).

• Physical Product - Make a schedule of when you will clean. I’m not just talking about emptying the trash cans, although that is part of it.  I am suggesting that you straighten the shelves once a day, set a schedule for maintaining the cleanliness of the physical inventory.
• Inspect and Repair - Make a schedule to inspect the tools and the facility for safety and repair needs.
• Retrofits, Calibration, and Maintenance Program - This step would include a maintenance program for the machines in the facility (including bill of materials), as well as retrofits for lighting, batteries, retagging of inventory, calibration of tools, repainting the facility, etc….     

Standardize - In the step above (Shine/Sweep), we talked about how you would maintain the work you have done.  One of the steps to achieving this is to set up processes to support your efforts.  In this “Standardize” step, take a look at your processes.  Do they support good work habits?  Are they efficient or are extra steps required?  Is your inventory database standardized or do you continually find parts listed in some way other than the way you thought to look them up (or in multiple places)?  Do you have to go find a pen every time a shipment needs to be signed for?  Does the tape dispenser walk away from the work area two and three times per day?  Do people continually leave a work area to get a tool they need to do the job?   

The challenge here is that people tend to avoid change and embrace that which is familiar.  People will naturally fall back into the old, more familiar processes.  The goal in this step is to design and establish new processes that are efficient and that make it easier to do the “right thing” than it is to do the “wrong thing” and then reinforce them.   

Utilize reminders -

• Labels - Label everything!  This makes things easier to find and easier to put back.  Label tools, pipes, electrical wires, and chords.  Label what machine that critical spare part goes to (and include the exploded drawing or page number in manual if you can).   Label drawers and cabinets (on the outside - I know - seems obvious, but…) so you don’t have to open them all to find what you are looking for.   Make sure that you are using labels that will stand up to whatever your facility is going to put them through (Hot? Cold? Fork lifts? Water? Floor cleaner?).
• Outline - Outline product and tools.  As I mentioned in the previous blog, nothing screams “put that tool back here” better than outlining the product that goes there.  Outline areas and boundaries for areas (ex: outline area for saw blades or outline an area on the floor where large bulk pallet items like toilet paper is to be stored). Outline areas for processes, such as a staging area for shipping, etc…
• Signs/Banners - People don’t always appreciate being reminded to do something, but if they aren’t reminded, they may not successfully make the change from the old to the new processes that are required in this process.  Reminders in a form that is not a human being standing there telling them what to do are recommended.  You’ve probably seen the sign many companies use, usually in their break room that says, “Your mother doesn’t work here, so clean up after yourself”.   In this same vein, signs can be used to reinforce your message in a humorous or positive way.  Your posters can include cartoons, pictures, or only words, whatever it takes to get the message across.

o    Use humor - People always remember the message better when you use humor.  Sometimes it may seem hokey, but that is OK if it drives the behavior we are looking for. 

o    Keep it positive - State things in a positive way.  Assume that people are capable and willing to make the right choices and state it from that vantage point.  (“Where does this go?” versus “This doesn’t go here!”)

o    Contest or Incentive - Offer an incentive for everyone who produces a sign to use somewhere in the facility (Leave 1 hour early or free pizza for lunch, etc…).  You could even have a prize for one or two of the favorites, but use all of them (if inappropriate, have them revise it).  Getting them involved in the implementation will drive better compliance and ownership of the process.   Here are a couple of ideas to get them started;

o    Where does this go? Person holds up a tool (or a toilet?) and has an outline of the tool on the wall behind him?

o    Guy holds up a toaster in a workroom and says, “Why is this toaster in my toolbox?”

o    Picture of a guy up to his neck in unorganized chaos of a workroom yelling, “Mommy!”

o    Make a cartoon-

                                    - first frame worker puts tool down in wrong place

                                    - second frame - worker tiptoes away

                                    - third frame - tool starts screaming, “Hey! Come back!  

Don’t leave me!  I don’t belong here!”

One final thought; don’t underestimate the power of peer pressure. Once you get some people “on board” with the program, they will influence the behaviors of the others.

Sustain - To sustain is to continue to maintain.  This is not the “flavor of the month”.  It will not go away with time.  We must continue to maintain it after the dust has settled.  We must continue to “hold the line”. 

• Make parts earn the right to stay.  To stay in your inventory a part MUST turning regularly.  If a part is turning less than 2 times per year, you should consider if it really is an item you need to keep on hand.
• Make every new part earn its way. Do you need to stock this new item?  How quickly would it be needed?  How quickly could you get it from your local supplier?  Is there a price advantage to buying it in bulk or now?  Is that price advantage enough to cover the expense of carrying it in inventory for any length of time?  When you are adding a new part to your inventory, seriously consider what can/should be removed to make a space for it.            
• Continue to educate - Talk to the people involved in the process.  Continue to educate   them about the advantages.  Have them provide the input on where tune-ups are needed.  Make it a standing agenda item in weekly/monthly staff meetings.            
• Change signs and posters - Keep it fresh.  After a sign has been in place for a while, people seem not notice it anymore.  Move signs around.  Make fresh ones as the old ones become tattered.  One of the advantages of having the sign contest/incentive is that you have a collection of signs that can be rotated.               
• Report progress - Again, getting the people that will be “living” this process involved in its implementation will instill ownership of the program and its results, so share all of this with them.  Set goals and report their success in attaining those goals.  Celebrate the milestones.

So, there it is.  To 5S or Not to 5S?  That is the question.  Are you committed enough to get it implemented in your facility?  If so, it won’t be easy and it won’t happen overnight, but it will be rewarding and it will pay dividends for as long as you remain committed to the program. 

If you have decided that this is right for you, but you need help, remember, PM2 stands ready to assist you.  We are not a company that gives advice and leaves you to get the job done.  We will roll up our sleeves and plow through it with you every step of the way, if you want us to.  If you would like to find out more, please feel free to give us a call at (813) 249-0834.  Or e-mail me at floen.d@pm2online.com.   Visit our website at www.pm2online.com

Sort The first “S” in the 5S Method is “Sort”.  While this may seem self-explanatory, it may have differing layers of depth associated for different readers.   You can basically divide things into two categories; “Use it” and “Lose it”. This is a painful, but critical, step in the process.  You’ve heard me say it before, most of the companies that we see have twice as much inventory as they need (defined by a product moving less than one time per year or product they didn’t even know they had).  If you haven’t used it in the last 12 months, you need to take a good long look at the item to decide if you really need it.  This item is turning less than 1 time per year in your inventory.  How easy would it be to replace it? Does it belong to a machine that was disposed of five years ago?  Do you really need 500 of an item that is only used once a year?  Consider the dust factor.  In this step, you must be brutal.  Getting the obsolete inventory identified and removed will bring a huge sense of freedom, once you get it out of your way.               

Use it - If it is something you use, how often do you use it?

All of the time - An item that is used all of the time should be very easy to get to and return to its assigned space.  You may also want to designate an area for its use somewhere near the storage location.  (ex: a log book could be placed at the point where someone would do the logging and have a place to open the book up and lay it down to write in it).     

Sometimes - Items that are sometimes used can be stored in the back or in a harder to reach location, since they aren’t used that often. (ex: Old records can be stored on a mezzanine, OEM parts that are determined to be “critical spares can be stored on the shelf toward the back of the storage area or the top/bottom shelves)

I would use it, except it doesn’t work - Separate these items from the others.  Determine if they can be repaired and at what cost, then decide to fix it or how it will be disposed of (more on that below). 

Sell it - You can sell it to a buyer on the open market (think e-Bay), or to a recycling company.  Any way you look at it, this inventory is making more money for you being sold, than it did sitting on your shelves (for the last twelve years!). 

Donate it - Donating items that have value can support your local community, perhaps be of a tremendous value to a smaller company or vendor that could potentially become a great business, and brings a tax write off. 

Trash it - When all else fails, don’t be afraid to bring in a big dumpster and throw it out.  Your accountant probably amortized this item twenty years ago, anyway.  (Have a contest to see who can get the product in the dumpster the most times, who can hit it from the farthest distance, and who can make the loudest noise.  Just kidding!)

Set In Order - Remember the old adage, “A place for everything and everything in its place”?  That’s what this step is about.   

The Product - Consider the following when you set your product in order;  

Group the products  - Group products the way they are used (ex: family or commodity grouping) or the way people think about them (ex: tools vs. parts or Building A vs. Building B, etc…). 

Room for growth - As you designate your spaces, be sure to leave room for    controlled expansion of items, since some items will be added into inventory as adjustments are made, just as others will be removed.  

Labeled - You must label it with clean and easy-to-understand labels (that will stay affixed through anything your warehouse is likely to do to them) so the product can be easily found. 

So, you can see that this is a big job, but imagine how good it will feel to walk into your work with a renewed sense of freedom, knowing that you don’t have to remember where everything is  (it’s all accounted for and labeled), that you won’t be spending time searching for stuff all day (that isn’t what you signed up for in this job), or live with the fear that you forgot to do something and it’s going to cause the entire company to come to a grinding halt.  Everything is clean, organized, scheduled, and maintained.  This can happen for you!

As always, PM2 stands ready to help you meet you materials management challenges (even this one!).  If you have questions, feel free to call us at (813) 249-0834 or e-mail me at floen.d@pm2online.com.

Dan Floen, President, Professional Materials Management (PM2), www.pm2online.com

Any quick search of the internet will invariably lead companies to the 5S method of organizing their inventory, but what is it?  Who benefits from it?  How does it get done? A scan of the program sounds so logical and so simple that any savvy manager is going to question; “Is it too good to be true?  Where’s the catch?”   

They would be right.  The 5S method is beautiful in its logic and simplicity, but without forethought, planning, and a full understanding of your business (or your team’s understanding), it can develop into a quagmire of questions and hard decisions as one delves deeper and deeper into the process.  On the other hand, the complications do not come from a lack of understanding the concept, but in sustaining the focus to plan, execute, and maintain an effective 5S program.  What I am saying is it is only right for you if you fully commit yourself and your staff to its principles, its implementation, and its continuation.  Once you have made that commitment, stick to it and you will find yourself in a workplace reflecting not only organization, but visual order, cleanliness, and standardization.  The benefits to you come in the form of improved efficiencies, profitability, service levels, safety, and morale.  In my book, an effective 5S program offers a pretty good list of payoffs.   

What is it? In a nutshell, a 5S program is a method for organizing and maintaining the physical inventory, physical environment, and processes of a workplace.  The idea follows the old adage, “A place for everything, and everything in its place”.  Time spent searching for a part is eliminated.  Visually, things are orderly, clean, and standardized.  It is quickly apparent when anything is out of its designated spot.  Reviews of processes, checkpoints for accountability (and redirection, if needed) and maintenance are established and followed.  If well implemented, it is easier to be in compliance with the program than it is to not be in compliance with the program.  

What do the 5 S’s stand for?

·         Sort

·         Set In order

·         Shine/Sweep

·         Standardize

·         Sustain

I will give a more in-depth explanation along with tips for their execution in my next blog, but for today, I will simply work on getting familiar with the program.   

OK, so Who is this good for? To answer this question, let me take you back to an example from your childhood.  Did your mother ever ask you to clean your room?  If your answer is “no”- then this program is for you.  If your answer is “yes” - then this program is also for you. Let me explain. Whether you are the person who relegates the time it takes to organize down to the bottom of your priority list so you can get your work done or if you are the person frustrated (and yes, stressed) by working in such an inefficient and unorganized environment, the fact is, we all have to work together in the same work space.  There has to be a way to get our work done in a timely manner and still keep the work environment efficient, organized, safe, and profitable.  

These same issues can be found in manufacturing facilities, hospitals, retail stores, and schools.  No matter what industry you work in or what level within that industry you have aspired to, you can benefit from this program, as long as you are committed to it (and have the same “buy in” from others in the organization).  

So, is 5S right for you, your company, or your industry?  The answer is probably.  

Is it hard to do? The answer, again, is probably…if you try to do it alone.  

Is it worth doing?  The answer is a resounding “Yes”, if you take the time to do it right from the start, get the “buy in” from those in management both above and below you in the organization, and you embrace it completely enough to not make it a “flavor of the week” program.   

PM2 is ready to assist you with the implementation of a 5S program, whether from a consultation or advice standpoint, program implementation, or a redirection after the fact.  This is one of the many inventory related services we offer.  If you would like to learn more about PM2, please feel free to consult our website www.pm2online.com or if you prefer to discuss your unique situation in person, call us anytime at (813) 249-0834.