A Company Shanghai Plant Inventory Management Practices

For most of manufacturing plants the inventory management is one of the most important aspects in the daily management, it not only influences the operation capital turnover directly but also is critical to meets end customer need. How to manage inventory economically and efficiently (try best to reduce inventory under the condition of meet customer need) is always an important subject to investigate and practice from both theoretical academician and also business world. The assignment of inventory management is to maximize the system service level, minimize the overall inventory cost, and try best to enhance the company market competitive power.As an American public listed corporation A company is always focus on providing research equipment and related consumable for the world life science and medicine industry since its foundation in 1983, silicon valley, California. In 2006 the company made a strategic decision to transfer one of its manufacturing centers from North America to China, Shanghai plant set up accordingly. In the beginning the Shanghai plant main mission was transfer the products and related inventory, among them make those products from pilot run to mass production smoothly was the core target, so management did not pay much attention to the plant inventory management, that caused the inventory level goes up and up in the following 3 years. Although management would try their best to take any action possible to drive inventory down when quarterly or yearly finance close is coming, but the result was always terrible, plant would confront material shortage at the beginning of next quarter or the new fiscal year, then inventory went up again, everything back at one.A company went through an acquisition at the beginning of 2010, then joined medical technology section of D group. D group is always run business according to TPS (Toyota Production System) and developed its own business system through many years practice on the TPS basis. Shanghai plant started to introduce this system fully very soon after the deal closed, we began to reform from basics just like 5S, VSM (value stream mapping), SW (standard work), VRK (variance reduction kaizen), Kanban management. Among them we introduced Kanban management mechanism on the inventory management:First, moved the most of materials from warehouse to production line, then set up Kanban for the easy use accordingly; then analyze the warehouse remain materials one by one to decide whether keep it continually for the potential use or scrap at once. Second, Kanban operation is also based on the principle of continual improving, under the condition of ABC classification management for all direct materials we are keeping to evaluate the important parameters just like lead time, daily usage, etc to drive the inventory down and optimize it. Third, through standard work and variance reduction kaizen we try hard to improve production first pass yield so as to reduce the WIP (work piece in process). Fourth, through expedite raw material localization to realize nearby supply and compress lead time significantly so as to drive inventory down. Fifth, through introduce VMI (vendor management inventory) process to the local key supplier so as compress inventory further.Through about 6 months hard work Shanghai plant average inventory down to 30 millions against original 55 millions, inventory turnover up to 11.61 against original 6.32 and on time delivery reached to 95% at the same time.