DPA Helps Supplier Resolve Inventory and Return to Vendor Issues

DPA Helps Supplier Resolve Inventory and Return to Vendor Issues

A fast-growing supplier of tankless water heaters experienced a high rate of inventory errors. DPA supported the work of a kaizen team within the company to identify and solve process gaps to improve the accuracy of inventory counts and its Return to Vendor (RTV) process.

The Goal
The supplier needed to increase the capacity for inventory transactions by 45% by dramatically reducing inventory errors through the identification of and improvement of component receipt, inspection, identification and handling issues within all steps of the sourcing, receiving, manufacturing and return cycles.

The Challenge
Many of the inventory errors stemmed from problems in the company’s process to return components to vendors for repair and for credit. These errors reduced the team’s capacity for inventory transactions and affected the company’s growth.

With the help of DPA’s senior consultant and kaizen expert, the company’s kaizen team quickly realized that the real challenge was not just to improve the RTV process and inventory accuracy. They also needed to find a way to capture component data and information. These actions would drive a new company initiative to eliminate the need to return components to the vendors.

The team identified and mapped the facility’s three different RTV processes: Receiving damage, incoming inspection failure, and floor failure or damage. Because these processes were not documented, it often took weeks for a bad part to be returned to the vendor. The kaizen team also recognized and documented a special process for returning circuit boards to one specific supplier. From there, the team collected and analyzed data from RTV, credit for scrapped parts, and the daily cycle counts to identify problem parts/areas.

The team hypothesized that multiple touchpoints in the return process – between identification and scrap/RTV – were leading to inventory errors. In reviewing records, they discovered that vendors sometimes disagreed with damaged parts claims, found errors on part number tags or received parts that they did not make.

Action Steps
Based on their analysis, the team generated 33 improvement ideas, including many for a, revamp of the component return process. They integrated the company’s purchasing, operations, engineering, and quality departments into the return process. A team review of components to be returned also generated data for use in identifying problem components and which vendor needed to be worked with.

DPA worked with the company’s Kaizen team to more accurately identify problem components by making it easier to identify RTV, scrap, and cycle count data within the data capture system. The team developed new protocols to pull RTV/scrap components out of inventory as quickly as possible. They adjusted storage locations to minimize the distance that components to be returned travel around the facility. Parts are now sorted into appropriate storage bins right during the RTV review so as not to damage them further.

Problem components are now targets of a documented corrective action/preventive action (CAPA) process.

By eliminating steps, wait time in the process, and company-caused damage to components, the streamlined RTV process was 2/3 more effective. By eliminating circuit board problems and second assembly tests on some heaters, the team also boosted testing process efficiency by 5%. Because the company’s test rigs are among the largest users of power, additional power savings will come from not needing to test heater products more than once.

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