Left to Right: Team members Dee Xiong, Mike Smith, Alex Cross, Jeff Clark, Eddie Nelson, Bud Souvannaraj.
They started out looking for ways to reduce forklift traffic in an attempt to streamline operations, but they ended up with a comprehensive inventory control plan that has seen huge reductions in overtime, improved labour productivity and a massive drop in expenses.
As one of the world’s 20 largest suppliers and a development partner to the automotive industry, MAHLE Filter Systems makes filter modules for fuel, oil, and air filtration as well as cabin air filters, along with air intake modules for gasoline and diesel engines, cylinder head covers, oil pump systems, oil coolers for engine and transmission applications, and activated carbon canister modules for tank ventilation.
To help meet its growth targets, MAHLE needed to increase its competitive edge by deploying a logistics excellence program across four manufacturing plants around the world. The goal was to improve the flow, quality, and availability of parts to and from the production lines, while minimizing lead-time, inventory, and cost across the business.
Develop the capability within
MAHLE knew early on that new standards for ordering and material replenishment would require major changes in the way its team operated.
Weary of stereotypical “pushy” consultant approaches, the manufacturer sought a partner that could teach the engineering and thinking behind logistics excellence in order to build capabilities within its own teams. After reviewing its options, MAHLE partnered with supply chain and transportation management company, LeanCor Supply Chain Group, for its practical, people-oriented approach.
“When we started our logistics excellence journey, we spent a year finding out what we didn’t know,” said Eddie Nelson, logistics excellence specialist at MAHLE’s Murfeesboro, Tennessee plant. At that time we were just focused on reducing forklift traffic. We attended industry shows like ProMat to help guide us in the right direction, but needed help understanding our baseline for overall improvement. LeanCor helped us get us on the right track.”
A holistic approach
Together, the manufacturer and consultant developed a deployment approach to assess and transform key processes in four of MAHLE’s plants through projects and training workshops. The structure for these projects and workshops centred on a Plan For Every Part methodology, or “PFEP.”
A PFEP is a material flow plan that includes specific data on every part number coming from suppliers and every finished-good SKU going to customers. It contains all the information necessary to make informed decisions about transportation, packaging, inventory, placement, ordering quantities, and handling.
It is essentially the DNA of all material that moves through a manufacturing plant, and it stimulates an environment of doing the right thing first. A PFEP ensures delivering the right part, at the right time, in the right quantity.
For MAHLE, it became the foundation for planning inventory levels, packaging, storage, delivery frequency, routes, cell and equipment layout.
“Systematically, the PFEP approach works its way backwards from customer all the way to supplier. Because of this, we decided to nickname the process for developing a PFEP the moonwalk approach,” said Ana Bailey, consulting director at LeanCor.
The thinking and work behind the moonwalk (named for the famous 1980’s dance) involves the team working backwards from the production line to collect PFEP data and determine strategies for each part, such as:
Finished goods inventory and fulfillment strategies
Material quantity at the line and presentation
Material replenishment and conveyance
Raw material ordering and storage strategies
Supplier sourcing and inbound logistics
The PFEP workshops and projects led to significant returns on investment at all four plants. For the plant in Murfreesboro the results were quick and remarkable.
To begin the transition to PFEP in a manageable way, Murfeesboro chose one production line for its pilot projects—line “130” that makes a carbon canister for a major automotive manufacturer. They chose line 130 due to its consistent customer requirements and low part number complexity.
Each part on the Bill of Materials was assigned a PFEP part number. By analyzing 90 days of customer consumption data, as well as using the replenishment rate of one time per shift and a service level of 98 percent, they determined optimal buffer, safety and cycle stock levels to right size their inventory.
Simply by right-sizing line-side inventory levels, they freed up 160 square feet of floor space and reduced shop floor inventory by 54 percent.
Too much inventory.
Before the pilot projects, the production team had ordered whatever materials they wanted, when they wanted them—without a plan and in constant fear of running out of inventory. Material was disorganized and not standardly presented to the point of use on the production line. To solve this problem, the team designed line-side material racking to hold the right amount of inventory for optimal replenishment levels.
“We also noticed the packaging coming in from suppliers was too large,” said Jeff Clark, operational excellence manager at MAHLE. “Some boxes contained 9,000 pieces per box, when only 900 were needed per shift. We made the decision to pack these pieces in smaller bins to save space and to match our desired replenishment frequencies.”
Thanks to these small improvements, the racking now holds what the team needs for replenishment intervals, a visual tag has PFEP information, and new colour-coded collapsible bins keep them organized. The team now presents the right amount of material to the line at the operator’s point of use. With better container management, the line has seen no downtime for lack of components, and performance has improved over five consecutive months.
Right-sized inventory with new racking.
“Once we completed the pilots, we knew it was a game changer for everyone,” Clark said. We’re seeing dramatic results.”
Every key metric for the one production line has improved. The team has seen an estimated annual savings of $365,000 thus far. Labour efficiency has increased by 17 percent. Overtime has been cut in half.
Bumps in the road
To understand how the operational changes were affecting the team, project leaders conducted “gemba” (observational) walks on the floor and interviewed key cross-functional team members for feedback and suggestions. Most team members were excited about the improved efficiency in material flow.
“One team member liked the fixed replenishment frequency, but was nervous about running out of inventory with lower stock levels,” said Clark. “He is gaining confidence in this new system each day.”
But some feedback wasn’t so positive.
“When you’re accustomed to a certain culture, it’s hard to transition to a new way of doing things, said Nelson. “Making that shift is hard.”
The receiving warehouse team felt left behind with all the changes, as most of the efforts had been focused on production line efficiency. The newly implemented kitting process of moving products from large cardboard boxes to smaller bins had quickly expanded to many parts of the operation but no additional warehouse labour had been added.
This was starting to impact the normal daily work of the warehouse employees. They lacked a designated storage location for Line 130 components and didn’t have a standard process for the new kitting expectations. Picking time for the line replenishment process was long and inefficient.
To solve this problem, immediate action was taken during a gemba walk to balance workload in this area and a cross-functional kaizen event was scheduled to improve upon and create standard work for this new process. A kaizen event is attended by the owners and operators of a process to make improvements to that process within their scope of their responsibilities.
“Today, our team talks about material in a different way. We’re working to keep non-value added functions away from the production employees,” said Nelson. “We talk about defects every day and discuss the root causes and possible countermeasures. Hearing people speak about that terminology is rewarding. People feel respected and have buy-in.”
“LeanCor gave us the tools in a practical manner,” said Clark. “By having LeanCor come in with the moonwalk approach, we’ve all learned a lot and the people in our plant are now becoming mentors and coaches. It’s been exciting to see the transformation.