Client Situation

A major global electronics manufacturing firm was spending approximately $8.5 million annually on MRO/OEM materials in one of their U.S. facilities. The value of the storeroom inventory was in excess of $11.5 million, with half the inventory identified with movement within a 12-month span. Production ran 24 hours, seven days a week, with storeroom coverage the same.

Each facility employed its own unique part-numbering system with no commonality or discipline around naming structure. Because of this, cross-utilization of inventories and identification of duplication was impossible. With an inadequate inventory tracking system, slippage was estimated at 12% annually.

The Challenge

The client needed to implement a plan that would reduce the total cost of ownership for their materials, while streamlining processes and developing a solution that could be repeated across more of their facilities in the U.S. and Mexico for an even broader impact. A Request for Proposal was issued in search of a solution to their needs.

SDI Solution

SDI participated in the RFP process and gathered information through site surveys, data analysis, and client meetings to gain a full understanding of the current situation. After submitting a proposed solution in response to the RFP, the client awarded SDI the business.

An In-Plant Store® program was implemented at two of the client’s U.S. facilities that provided two-shift coverage to work jointly with the facility’s union personnel in the storeroom. Scope of work included providing all sourcing activities, inventory management, and data management necessary to run the storeroom, as well as bringing a technical support and productivity program to support operations and bringing additional savings opportunities to the table.

Results

Utilizing its In-Site® system, SDI established a database of stocked materials that provided standard naming of all parts. This process enabled SDI to begin identifying duplication of parts across and within the facilities. The storeroom layout was redesigned for efficient flow of personnel and product; moving high-volume items closest to the issue window, and in some instances, out at point of use.

In the first year of the program, SDI reduced total inventory for the customer by nearly 20% through a combination of inventory ownership for high-use items and returning excess inventory to suppliers. Material price savings added an additional 3% savings.

SDI’s productivity savings program (PROS) achieved 0.5% savings on approved and implemented projects, with an additional 4.5% savings identified and in various stages of testing and analysis.

Add savings realized through transaction consolidation by having SDI as its sole supplier and provider of consolidated billing, plus savings through personnel cost reductions, and SDI brought a total cost savings in excess of 35% to the client in the first year.