Original Date: 07/25/2005
Revision Date: 09/12/2006

Northrop Grumman Electronic Systems is saving more than $1 million annually through a Supplier-Managed Inventory Program for low dollar-value Ledger hardware materials. This program maintains current inventory levels for high-volume and low-cost items with a reduction in out-of-stocks. Reduced inventories of materials are placed in key areas on the shop floor, eliminating stocking. Administrative processes associated with ordering and receiving Ledger hardware materials have been eliminated.

In the past, Northrop Grumman Electronic Systems (NGES) completed approximately 6,000 procurement transactions yearly for low dollar-value Ledger Clerk hardware components comprised of screws, bolts, nuts, clips, and rivets. Each transaction averaged $150 in estimated cost, inventory was inaccurate, and shortages occurred in production that resulted in decreased efficiency.

Since 2002, NGES has used a Supplier-Managed Inventory (SMI) program following an in-depth analysis conducted by a team from Jay Cee Fasteners Corporation and NGES management to study internal processes to formalize a flow and devise the best SMI program to support NGES’ internal requirements.

Seven ES locations currently have service agreements in place with Jay Cee Fasteners. Jay Cee’s on-site account managers visit the sites three times weekly, servicing more than 1,200 parts in more than 8,000 locations. Jay Cee sets up a fastener kiosk by populating a database; creating appropriate labels, signs, and books; and assembling rotating carousels. Once a kiosk is ready, Jay Cee employees provide training to all NGES users in the area.

The carousels use a two-bag, single-bin system in which the front of a partitioned bin holds loose hardware for consumption, and a back-up bag of ready inventory sits in the back of the bin. The loose inventory belongs to NGES, and the back-up bags are Jay Cee’s ready inventory in place.

When the loose components are depleted, the NGES employee opens the back-up bag and pours it into the front of the bin, creating new loose available inventory. An externally visible red clip is attached to the bin to alert Jay Cee personnel that back-up stock must be replenished, which usually takes about three days. This operator-initiated visual signal is a Kanban system. High-use items are also identified by yellow tags on the bin fronts and are checked by Jay Cee personnel during each visit.

NGES’ Ledger Hardware Kiosk Program has eliminated the transactions associated with the procurement, delivery, internal transport, and consumption of fastener products. The requisition and purchase order system has been eliminated along with receiving and inspection since Jay Cee Fasteners is a certified distributor. Kitting of Ledger Clerk hardware material has also been eliminated, enabling NGES personnel to perform other activities. Accounts payable activities have been reduced to simple payments of total monthly deliveries based on detailed invoices in a summary format. Jay Cee Fasteners’ performance is measured by an out-of-stock report that is part of NGES’ Manufacturing Resource Planning system and is reviewed quarterly.

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