How to Create a Lean VMI (Part II)
After completing our current state map (see Part I of this article series), it was clear that this diaper plant had huge improvement opportunities related to packaging inventory. The $1M of annual costs associated with obsolete packaging was justification enough to fund this project. So, that was our next step, to create a cross-function team of people who would work on creating and implementing a desired future state condition. Or in other words, find and implement the ideal system for managing our packaging inventories.
I was identified as the leader of this project and hence I was empowered to identify the resources that I needed to ensure success. So, after careful consideration, I decided on the members required for this project team and they included:
- Process Engineer and Six-Sigma Black Belt (Jim)
- Purchasing Manager (Jake)
- Buyer (Helen)
- Warehouse Supervisor (Michelle)
- Production Manager (Jeff)
- Production Planner (Lexi)
- Corporate Planner and Six-Sigma Green Belt (Neal)
We drafted a project charter and established some very aggressive goals for ourselves, such as zero packaging obsolescence and less than 7 days of onsite packaging inventory. Our first task was to develop our future state Value-Stream-Map (VSM). This future state VSM was to be our ideal. The great part about a VSM is that it helps you identify your factory’s velocity. How fast does your product flow through the factory from raw material, through conversion, into finished goods and out the door? In our case, it took over a year to complete the process and we wanted to improve on this situation.
Using the future state VSM tool, we wanted to identify how much we could improve our factory’s product velocity, in theory. So, by shifting our paradigms via creative thinking and a team brainstorming process, we made a breakthrough. Our future state VSM showed that we could create a new inventory management process that would reduce our on-site packaging inventory from one-year to only 24 hours! Our total packaging liability would be just 10 weeks! This meant that we could totally eliminate packaging obsolescence, because we could then “sell-through” our inventory whenever customers updated their packaging artwork. We even came up with a plan to reduce our finished good inventories (FGI).
To accomplish these results, we identified our action plans.
- We will create an electronic Kanban for our packaging inventory.
- We will develop a VMI program with our supplier.
- We will establish a daily Milk Run system with the supplier using carts instead of pallets.
- We will include supplier reps on the project team.
- We will order packaging daily.
- We will create blanket Purchase Orders to order against.
- We will create an electronic Kanban for finished goods.
On paper it all looked great. But will implementation go as smoothly as the paper version of the future state VSM? Find out more by reading Part III of this article series: How to Create a Successful Lean VMI.
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