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How can I promote kanban procurement practices?

Written by: Jon Hansen

Article Overview: Member Question: How can I promote kanban procurement practices to single-source suppliers who have no incentive to increase their inventory (raw, WIP or FGDs)? Julian, Supply Chain Manager Houston

How can I promote kanban procurement practices?

You have to begin to view the world through the eyes of the supplier. This means thinking outside of the limited framework of Kanban and fully understanding the mechanisms that lead to a JIT "collective" outcome.

The following are excerpts from a 2001 Case Study that has and continues to stand the test of time. While the actual industry as well as the commodities being purchased (re Indirect MRO versus Direct Materials) likley differ, it is at the conceptual level where the most benefit will be gained.

Background

A National Service Provider turned to a leading Think Tank to develop processes and systems that would enable them to meet the demanding Service Level Agreement (SLA) stipulated in a contract with the New York City Transit Authority (NYCTA).

Challenges

The NYCTA contract established a target SLA of 90% same day (Pick-Up service within 1- hour, and On-Site service within 3-hours) for critical systems. 95% of all calls required the 1-hour Pick-Up service.

The NYCTA had 499 potential service sites throughout the 5 Burroughs of New York City. Of these sites, 50% of all service calls involved 2 Brooklyn locations, with another 30% involving an additional 12 locations.

Standard hours of operation were between 8:00 AM and 5:00 PM EST, during which time 99% of all service activity took place. Approximately 75% of all calls required the procurement of an out of warranty service part for systems which were 3 years and older.

The client employed 15 full time service technicians, and managed an inventory of 800 individual part SKU’s through a single central location . . .



. . . In an effort to effectively access inventory on a timely basis, Strategic Stocking Locations (SSL) were established which could be accessed through a central application known as the Interactive Parts Ordering System (IPOS). IPOS employed an advanced time zone algorithm which through a real-time polling capability was able to ascertain within seconds which SSL site was best suited geographically to meet the required SLA. This innovation combined with the PCF reduced the process handling time by approximately 95%, thereby addressing a significant bottleneck.

While the establishment of the SSL sites and the corresponding deployment of the IPOS model enabled the client to meet and even surpass the 90% SLA contractual requirement in the majority of instances, the challenges associated with service calls for which the required part a) had not previously been requested or b) where past requirements were infrequent or sporadic, a process was developed to establish and utilize Strategic Geographic Suppliers (SGS).

SGS Overview

The following will illustrate how the SGS process works.

A service organization had a contract to support a company’s centralized network server farm located in New York City. Critical to their day-to-day operations, the company demanded a minimum 3-hour response time. When an essential cooling device failed the organization attempted to obtain the part through normal channels including the Original Equipment Manufacturer (OEM). The best ETA received was 2 to 3 days (far beyond the 3-hour scope established in the contract with the company).

While the client had close to 300 overall possible sources in the U.S. alone, they had neglected to establish strategic sources within established hot zones, re centers in which the SLA requirement called for a same day or better response/resolution time. (Note: reference traditional cluster development strategies.)

Through the establishment and implementation of an SGS process, the very next time the requirement for a critical component arose, the organization was able to locate and satisfy the 3-hour response time from a selection of suppliers who maintained the needed inventory.

Has you organization effectively aligned its need with the right (and properly cultivated) supply base?

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Article Tags: 5 burroughs of new york, 5 burroughs of new york city, access inventory, burroughs of new york, burroughs of new york city, central application, city transit authority, collective outcome, conceptual level, direct materials, full time service, kanban, national service provider, new york city transit, new york city transit authority, nycta, target, warranty service, york city transit, york city transit authority



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