Reducing Lead Time and Inventory Investment
Wolf Robotics, located in Fort Collins, Colorado, specializes in solutions for metalworking automation with arch welding systems, cutting systems, material handling systems, and laser cladding systems to the mining, construction, agricultural, and energy industries. Founded in 2003, Wolf Robotics offers quality automation products and systems along with a wealth of experience, outstanding customer service, and a large support network.
“This is the most effective program and practical approach to driving competitive advantage I have seen in years!” – Kent Sorenson, Senior Supply Specialist, Wolf Robotics
Wolf’s customers require cost effective automation solutions to help them create or improve their manufacturing processes. On time arrival is extremely important as the systems from Wolf need to be installed according to tight schedules that could involve a facility shutdown or coincide with the start-up of a new operation.
Dealing with lead times between 16 to 24 weeks for critical materials and components was making it very difficult to manage costs and meet on time arrival requirements. Maintaining a large inventory of raw materials and components might help with meeting customer orders, but that implies you could actually forecast what might be ordered in an environment where almost every customer requirement is unique. The alternative is to quote long leads that customers can live with and will cause them to order from the competition.
After trying both options – high inventory causing high carrying costs and long lead times causing lost business, the leadership team for Wolf was searching for a better alternative.
To find that better approach, the leadership team challenged Kent Sorenson to leverage lean techniques to reduce customer lead times without having to make speculative and risky inventory investments.
Kent Sorenson enrolled in the Certified Lean Master (CLM) program offered by Transformance Advisors in collaboration with APICS Northern Colorado. Through this course, Kent was provided knowledge in lean transformations and coaching in the application of this knowledge while he ran a lean improvement project to address the lead times issues at Wolf.
Kent began by specifying customer value and creating a value stream map of Wolf’s current state. In doing so, he enabled his team at Wolf to see the waste in their value stream, with an emphasis on the impact of long lead times and excess inventory.
Using the current state value steam map, Kent and his team were able to identify the best opportunities to eliminate waste. An big opportunity involved working with suppliers to create a more collaborative relationship. This integration of lean improvement techniques with best practices in supply chain management is one of the competitive advantages of the CLM program.
Kent and his team were able to work with suppliers to create a future state map that showed how to create flow and leverage pull so as to have all components delivered to the point of use at the beginning of the final assembly process.
Wolf’s lean implementation took a value stream with lead times which ranged from 16 to 24 weeks and reduced them to 8 weeks. This reduction allowed purchasing to leverage pull by waiting for firm customer orders before they had to place orders with suppliers and also eliminate the need to carry $250,000 in speculative inventory.
The reduction in inventory is great, but the most rewarding benefit is how the improvements have allowed Wolf to quote shorter lead times and win more business. Very soon after the shorter lead times were used on customer quotes, the company gained $2,500,000 in business that would have, in the past, gone to the competition.