Original Date: 11/13/1995
Revision Date: 01/18/2007

JLG, in partnership with one of its preferred suppliers, developed and implemented a system for procuring hydraulic hose kits used in the manufacture of JLG products. Each model and product family produced by JLG have a large number of hydraulic hoses in a mix of configurations. The new hose kitting system was developed to reduce the rapidly increasing cost of maintaining, handling, processing, and accounting for the large on-hand inventory of hoses.

Previously, hoses were ordered as individual parts from MRP system requirements. Purchase orders were generated, scheduling each hose as a line item for receipt. Stocking locations containing up to a two-week supply were maintained for each hose, requiring four layers of bins occupying 2,400 square feet of space. On receipt of a shipment of hoses, receiving personnel were required to open each box and count the hoses. Transactions were manually entered into purchase receipt files using the packing slips. The hoses were then moved to the stocking location and loaded individually into the stocking bins. Shipping and packing materials for the hoses had to be crushed and discarded. Typically, 15 skids of boxes of hoses were received at a time. For each final assembly, a stockkeeper was required to pull an average of 110 hoses out of stock. At least four hours were required each evening to pull hoses for the next day's assembly requirements.

To eliminate packaging requirements, reusable carts were designed to transport hoses from the supplier located nearby directly to the workcell where they are used. Hoses are kitted by the supplier and coded with a special commodity code. As weekly machine assembly orders are released for final assembly, hydraulic hose purchase orders are automatically generated for the supplier which detail hose demand by manufacturing assembly line, workcell where needed in final assembly, and the specific machine sales order number. These are printed weekly for machines scheduled three weeks in advance and are sent to the supplier with the appropriate number of empty carts. The supplier manufactures the required hoses, sorts them, and places them in the hose carts in the same sequence as they will be used in final assembly. Hoses are delivered twice a week in time to meet assembly requirements. Purchase order receipt, issue from stock, and payments are automatically processed based on scheduled delivery. The hose carts are delivered directly to the final assembly line on receipt and empty carts are returned to receiving for shipment back to the vendor.

Since implementing this system, hose inventories have been reduced from $86K to $8K. A safety stock of critical hoses is still maintained but is continuously being reduced. Planner involvement has been reduced from six hours per week to 30 minutes. Material handling has been decreased substantially, and warehousing space has been freed for more productive use. Currently the system handles approximately 330,000 hoses per week with a total value of $279K. There has been a dramatic drop in the dollar value of hoses stocked when the system was introduced in 1994 (Figure 2-3). The dollar value of hose inventory has been steadily reduced into 1995 (Figure 2-4).

To make the system work, JLG learned that the bill of material must be very accurate and the final assembly configuration for each machine must be frozen three weeks before final assembly. The supplier was involved throughout the entire development and implementation of the process. Supplier representatives made numerous trips to JLG's plant and walked the assembly line to learn exactly how the process would work. JLG is now looking at implementing this successful approach with other suppliers. The company is also examining Electronic Data Interchange to communicate order information.

For more information see the Point of Contact for this survey.