Wayfarer Consulting, LLC

The Challenge:

Transform a small company serving the life science research community with multiple, independently managed product lines into a growth company.

The Impact:

Complete rethinking of business processes to position the company for growth.

The Outcome:

Improved customer service by increasing in-stock levels of key products from about 80% to 95%.

Background:

The original business was to buy bulk chemicals (bulk could mean 100’s of milligrams to 100’s of kilograms) then repack into sizes convenient for researchers, anything from 1 milligram to 100 kilograms.  The various pack sizes accounted for the majority of the products in the catalog.  In addition to the chemicals, there were five additional product lines for cell growth media, DNA/RNA extraction, food safety, and diagnostics (FDA regulated).

The company culture reflected management’s can-do free-wheeling style.  Employees took great pride in doing what it took to get orders out the door; if procedure got in the way of getting the order out, procedure was suspended, and everything would get cleaned up eventually.

The owner announced a new vision.  He wanted to take the basic operation for chemicals from a make-to-order to a make-to-stock model.  His goal was to position the company for growth; this meant improving inventory planning and control. 

Inventory control was weak. Material planning and production scheduling were ad hoc and fully manual. Significant changes were needed to fulfill the owner’s vision.  Being new to the company, the first task was to quickly understand the company and its products.  With many needs and few resources, I knew I could either attack big problems or problems that were solvable with the resources available.  Knowing that this new vision required new ways of working for most of the fulfillment staff, I chose to work on problems that were solvable quickly to build momentum.

I developed the following plan

• Improve Inventory accuracy and control as this was critical for data integrity
• Utilize more of the capabilities of the existing ERP and
• Implement MRP 

The plan required adjustment within months as the owner invested in automated storage and retrieval systems. This caused a refocus to integrate these machines into the order fulfillment process. It was a hindrance to improving inventory accuracy because it took resources and time, but it also provided the opportunity to make significant chances that ultimately improved inventory accuracy. Thus, so a new element was added to the plan (discussed in another case study).

• Incorporate automated storage and retrieval systems into the stocking and picking processes.

Improve inventory accuracy and control.

A simple paper-based system of customer orders yielded requests to weigh bulk material to specific pack sizes for shipment.  This paper-based system drove production.   If no stock was found, the weigh requestwas turned into a purchase request, regardless of the ordered amount and overall sales for that chemical.  Some manual planning was done to ensure stock of known high selling products.  The various product lines operated independently under one roof.  So sometimes the same exact item was ordered under different part numbers with different costs due to quantities ordered.

The initial plan for improving inventory accuracy and control:

• Improve transaction integrity
•  Develop more functional location control
•  Bar coding to drive inventory accuracy
• Create tools where needed to improve efficiency and accuracy
• Increase ERP utilization

Improve Transaction Integrity

To address basic inventory control issues, we trained both inventory control and operations personnel on the importance of inventory accuracy and what we all needed to do to be accurate. We restricted employees’ access to adjustment transactions.  People were well-intentioned to help Inventory Control, but not cognizant of the bigger picture and made many mistakes.  We looked for leaks in transaction processing, particularly related to yield variances and scrap.  Initially inventory control was a manual process; transactions were recorded on sheets for eventual data entry.  The long-range goal was to do transactions, other than adjustments, in real-time as much as possible.

Develop more functional location control

Location control was crude, at best.   With the change to make-to-stock, new shelving was erected prior to the new storage and retrieval machines being purchased. Stock locations established for finished goods. As product lines were added to the finished goods area, locator systems proliferated, with product line groups able to choose their own systems There were 5 different locator naming conventions in room temperature finished goods locations. Eventually I established a single naming convention that was easily extendable.  The impact was immediate.  Picking for orders became less specialized, more streamlined, and staff requirements were reduced by 20%.

Bar coding to drive inventory accuracy

Other projects provided opportunities to improve inventory control. Part of the growth strategy included automated storage and retrieval systems. Accuracy is key when depending heavily on automation.  This opened up an opportunity to introduce bar codes.

Bar coding became a big part of the inventory accuracy improvement strategy.  All locations in the warehouse got bar codes.  Products were bar coded when they were received into the system (including lot number).  Finished goods all had 2D, DATMATRIX bar codes with product and lot number.  As part of the integration of the storage and retrieval systems into the picking process (automation), finished goods put away and picking required the user to read both the location and product bar codes which were verified for accuracy vs. the directed transaction. Finished goods inventory accuracy went from about 85% to greater than 95% in 18 months.

Use of bar-coded transactions in the bulk area, recently implemented, is completing the vision for bar coded transactions. Hand-helds allow material handlers to load products onto a virtual cart to be transferred to a production location in the system. Any remaining bulk is transferred back to a bulk storage location when the weighing is completed. These real-time transactions, coupled with a new effort to provide tare weights for bulk will allow cycle counting of raw materials as well as finished goods.

Create tools where needed to improve efficiency and accuracy

The process of getting a chemical packed to the correct size (aside from the few A items that got a monthly manual review) started with a review of incoming orders.  Paper pick tickets were printed for all new orders.  These were manually reviewed by the picking supervisor who would check the system (and often the shelves) for stock.  If material needed to be weighed, she would fill out a “weigh ticket.” This was the equivalent to a work order.  Unfortunately, there was no visibility for that order.  If another order came in the next day, she might fill out another weigh ticket.  Someone would go to pull the bulk, not find it, and fill out a cycle count request when the material was actually in Weighing.  There would be a requisition more material, though someone would possibly find the original material doubling stock.  

I created an MS ACCESS database to track the review so she would know if she had just created a weigh ticket.  That definitely helped, but the lack of visibility meant tickets were still lost with no check until a customer called looking for his/her material.  This is when I started selling the idea of work orders through our ERP system because we would have greater visibility of problem orders (see below under Increasing ERP utilization). 

I took advantage of opportunities for positive change wherever I found pain points that could be remedied by the resources available.  This often took the form of a procedural change or a coding change.

We had an issue with products not allocating properly for customer orders.  They are a first-in-first-out operation.  The system will allocate products based on expiration date first (which really wasn’t used initially), then by lot number.   While everyone understood the sequence of the lot numbering system, it was not computer friendly.  I proposed a change to the lot numbering system to remedy the problem.

I made sure to discuss this with all parties, Operations, Quality Control, and Customer Service. I sought out long-time and influential employees to make sure I had buy-in, and I coordinated timing on this change.  We communicated with employees before it happened and made sure we explained it to other sites around the world.  We made a very smooth transition.

Increase ERP utilization

Another opportunity for a big improvement in inventory control came when an old server running a legacy ERP system for production died.   The production group had used that software to create work orders while doing manual transactions in main ERP for inventory control.  I had been able to extract their bills of material before the server died, so I was equipped to help them.

 Implementing work orders had been an early priority, but much set up was required.  That effort lasted over 3 years as I made database changes when I had the resources.  The change for the production group was fairly transparent since they were already using the concept.  The chemical packaging area was a different story.

I spent the effort on education and training before we implemented the work order system.  My Inventory control team was enthusiastic (particularly the woman who reviewed the pick tickets) and became ambassadors to the rest of the operation and helped them understand how the system worked. With all that background and the ease of use, the introduction went fairly smoothly. 

Outcome

The company culture was transformed over time as employees began to think and talk in the language of work orders, locations, and bar codes.  The pickers would get upset when they encountered bad bar codes, since it hurt their productivity. Employees learned to trust the system for accurate inventory and supply status. The ERP system became a means for departments to communicate status as all departments received training in understanding the functions and inquiries available in the ERP system.