Original Date: 02/19/2007
Revision Date: / /
Information : Inventory Management
An active and proactive inventory management system has allowed Raytheon’s Network Centric Systems Manufacturing Center in Largo, Florida,, to realize the benefits of both inventory and cycle time reduction, product quality process improvement, improved supplier relationships and cash flow, and reduced overhead costs.
In early 2006 Raytheon Network Centric Systems (NCS) Manufacturing Center in Largo, Florida, began an aggressive effort to gain control of material inventory, reduce inventory on hand, increase yearly inventory turns, and drive down the cost of the products built at the facility. The company characterized/stratified total inventory in four actionable categories: Lean/Outgoing, Incoming/Early Receipts, Business Case Analysis Tools, and Surplus Materials. Four individual teams and subteams were established to focus on both systemic process improvements and programs with process leaders and business area leaders (Figure 3-1). Tools were developed to set process improvement initiatives in motion and direct these initiatives to the appropriate focus area.
With its focus on Incoming/Early receipts to reduce or eliminate suppliers’ shipping materials to the company prior to the manufacturing need-date, Raytheon Largo sent a letter to all its suppliers notifying them that the company would no longer accept any material deliveries prior to the purchase order contract delivery date without prior written approval from Raytheon. The suppliers were further advised that any early deliveries would be blocked at the dock at the Largo facility and may be returned to the supplier at the supplier’s expense. This action contributed to increased inventory turns of 93% during 2006, which improved cash flow for the Largo facility. The policy also stopped $2.8M of the totals identified as “early receipts” totaling $4.4M in the first 50 days of implementation. Four months into the process, teams diverted $10.1M dollars of supplied material and aligned it to manufacturing need- date.
Building upon the success of its 2006 initiatives, Raytheon Largo has refined its inventory management strategies for 2007 with an overall goal of increasing inventory turns from 2.05 to 3.12 turns per year. Cross-functional teams have been established and inventory reduction strategies developed for each of the three action teams (Figure 3-2). Major inventory improvement initiatives for 2007 include accelerating lean processes across the Largo value streams to synchronize the entire supply chain and actively attack non-value-added inventory drivers. Accomplishing these two initiatives alone will reduce inventory carrying cost significantly and contribute to increased inventory turns.
Figure 3-1. Inventory Management Focus Area Chart
Figure 3-2. 2007 Inventory Management Strategies
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