Facility-Wide Kanban & Inventory Transformation — $1.7M Saved
A global OEM machinery manufacturer with 43,000 SKUs across 442 suppliers was hemorrhaging money — assembly lines shutting down from missing parts despite excess inventory everywhere. We implemented facility-wide kanban, PFEP, and visual management systems that tripled inventory turns and saved $1.7M annually.
The Challenge
Assembly lines were shutting down because parts were missing — yet the facility was drowning in excess inventory. The ERP system flushed inventories incorrectly when product was produced, making system counts unreliable. Supplier on-time delivery metrics did not exist, and quality was accepted regardless of condition because parts were not arriving on time.
The facility managed $88M+ in total annual spend across 43,000 part SKUs from 442 suppliers sourcing from France, Italy, US, China, Taiwan, Indonesia, and Japan. Products required 8,000-12,000 components per build with extreme diversity.
Purchase orders were issued late, inventories were unknown and incorrect in the ERP system. The system flushed inventories incorrectly when product was produced, compounding the inaccuracy.
No metrics existed for supplier OTD — and quality was accepted regardless of condition because parts were chronically late. The shortage list exceeded 200+ parts at any given time.
Materials were delivered but no one knew where they went. There were no barcode labels, no location systems, no visual management. Bought material, received it, lost it.
Each product used 8,000-12,000 components per build across 5 assembly lines and a fabrication area in a 175,000 SF facility with 225 employees.
Our Approach
We built a war room with whiteboards on every wall to make the crisis visible, then systematically implemented PFEP, kanban, RFID, visual management, and a disciplined supplier management framework across the entire facility.
Phase 1: War Room & PFEP Development (Months 1-3)
Installed whiteboards on every wall of the war room — lined out to visually confirm late deliveries and when components would arrive. Developed metrics to track OTD and quality for the first time. Built a Plan For Every Part (PFEP) across all 43,000 SKUs to understand every component — where it came from, who supplied it, and how many per unit. This was a massive undertaking given the extreme part diversity.
Phase 2: Kanban, RFID & Location Systems (Months 3-8)
Established cycle counts for all components. Implemented VMI for repetitive components (wire, wiring, fasteners). Everything was put on barcode labels for location — suppliers were required to barcode label inbound shipments. Critical parts were identified at receiving and routed directly to point-of-use locations. Implemented RFID kanban purchasing system that signaled new POs in real-time as material was pulled.
Phase 3: Supplier Rationalization (Months 6-12)
Reduced the supply base from 442 to 127 strategic suppliers using a Partner/Maintain/Develop/Exit strategy. Established non-negotiable delivery windows: 0 days late, 2 days early maximum. Suppliers who refused to hold kanban inventory went on the exit strategy. Every part got a minimum and maximum order quantity based on calculated lead time, transit time, PO timing, and inventory in transit.
Phase 4: Standard Work & Sustainability (Months 12-18)
Developed standard work across the entire materials group — strictly monitored and enforced. Supervisors and managers monitored lines closely. Established distribution points for strategically critical long-lead components from notoriously late suppliers. Negotiated 3 suppliers to co-locate distribution facilities within 1 mile of the plant with VMI and multiple daily deliveries.
Results & Impact
The shortage list went from 200+ parts to 10 (all NPD-related), inventory turns tripled from 9 to 25, and the facility saved $1.7M annually. The supply base was reduced 26% while delivery performance was transformed.
Nearly tripled through kanban, PFEP, cycle counts, and disciplined min/max management
Through inventory reduction, VMI implementation, and material flow improvements
From 442 to 127 strategic suppliers through Partner/Maintain/Develop/Exit framework
Remaining 10 were exclusively NPD items with unknown lead times and volumes
Additional Outcomes
“When he arrived, we had 200+ parts short every day and assembly lines sitting idle with millions of dollars of inventory on the floor. Within months, the shortage list was down to 10 parts — and those were all new product introduction items. The transformation was visible to everyone who walked the floor.”
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