Kit operations help streamline processes
By Staff -- Purchasing, 11/18/1999
When Patrick Hargarten, corporate logistics manager, Tennant Company, watched employees separate stacks of invoices, inventory hundreds of industrial sweeper components, and run back and forth between the production line and storage bins to grab parts, he searched for a better, smarter way of handling inventory.And when Tim Sehnert, engineering/purchasing manager, set out to market a new outdoor industrial sweeper in only seven months, he too needed to streamline manufacturing and minimize inventory.
Both Hargarten and Sehnert pursued a new material-support process. What they found not only helped improve the company's material handling operations, it also cut assembly time and inventory costs and increased available warehouse space.
The old systems
Based in Minneapolis, Tennant Co. manufactures industrial floor-cleaning machines, sweepers, and scrubbers for the industrial, warehousing, government, and military markets.
Historically, all material needed to build a sweeper's hydraulic system was obtained by issuing a purchase order and processing an invoice for each part number, whether it was a $50 hose assembly or a 50¢ fitting.
In order to identify and improve material handling problems, Hargarten, who works at Tennant's Golden Valley, Minn., plant, began by viewing the parts used on the Model 355 sweeper. He counted a total of 75 different components used on the sweeper's hydraulic system. This meant 75 purchase orders, 75 invoices, and 75 part numbers for each sweeper for the hydraulic system alone.
Because of the large amount of parts used in the sweeper's hydraulic system, Tennant incurred high expediting costs for preparing purchase orders, processing invoices, and stocking inventory. In addition, some of Tennant's warehouse storage space had to be committed to these parts.
At the same time, Sehnert, located at the company's New Hope, Minn., plant, was assigned the task of getting the Tennant Model 830 outdoor sweeper to market in a cost-efficient, timely manner.
Just seven months before the introduction of the Model 830 sweeper, Sehnert and his six-member team lacked manpower: Company engineers were busy with other projects, and the necessary resources for designing and building hydraulic plumbing for the Model 830 sweeper simply were not available.
In addition, each sweeper would require some 300 hydraulic connector components and, therefore, hundreds of POs, invoices, and plenty of storage space.
Finding suppliers for help
The team met and decided to surround themselves with trustworthy suppliers in order to get the sweeper to market on time. Plus, they wanted a supplier to engineer the sweeper's hydraulic system and supply the necessary parts.
Both Hargarten and Sehnert needed a way to streamline operations--reducing procurement steps and manufacturing time and minimizing inventory and warehouse space requirements.
After evaluating various options, Hargarten and Sehnert elected to use Parker Hannifin's pre-assembled hydraulic kits from its kit operation in Toledo, Ohio.
Parker kits consolidate operations of OEMs and aftermarket distributors by pre-assembling and packaging connectors and related components into a kit that ships and invoices as one unit.
Parker works directly with company engineers to create kits--and even sub-kits--that meet customers' precise needs. In addition, the company packages the kits in containers that can be recycled. They are refilled at one of 11 regional service centers and shipped back to the manufacturer.
Pre-assembled kits address such design features as: type of engineered product; handling requirements/material flow; bill of materials--all Parker or special purchases, special packs and parts assembled, container--cardboard, reusable wood, size; instructions.
Basic cost considerations for kits include POs, receivables, payables, expediting, storage, and product movement. For customers, benefits of the kits are one part number to track, one PO, one receipt, one invoice, less handling, and less storage.
Because Tennant's application requires multiple connector products including fittings, hose assemblies, tubing, brackets, couplers, and a few specialty products, a Parker representative worked directly with Hargarten's and Sehnert's bill of materials to develop a kit that meets their specific engineering design.
Once design features were determined, Parker's kit operation in Toledo developed a quote and packaging schematic, allowing the single-unit kit to be built at the company's regional service center in Lakeville, Minn., which is closest to the customer's manufacturing plant.
For Hargarten, the days of placing 75 POs, processing 75 invoices, and pulling 75 different hydraulic components from the inventory bins in order to build one Model 355 sweeper are over. "Parker's kit operations solved our inventory problems," he says. "Now, we have one invoice per kit, instead of per part number."
Today, the Golden Valley plant purchases one kit containing three carts that include all sub-kits needed to build the hydraulic system on the sweeper. Warehouse employees pull each of the three carts to a line location for assembly, rather than run back and forth about 25 times grabbing components from bins.
In addition, kits have helped alleviate space constraints. By rotating the three carts between the plant and the Parker Regional service center in Lakeville, Hargarten's inventory concerns have been eliminated.
Although the plant continues to stock individual parts for repair items, single orders are considerably less frequent.
Sehnert, too, has eliminated non-value-added steps by using pre-assembled kits for the Tennant Model 830 sweeper. With the help of Tennant engineers, Parker designed nine different hydraulic connector subkits for Sehnert's project. The kits include: steering, left frame side, right side, frame, vacuum fan, hopper, main brush, propelling, and engine. Parker engineers all nine, each delivered in a single package with a single invoice. "Without kits, we'd be handling 300 different part numbers for the sweeper's hydraulic system," he says. "Instead we place one PO per machine rather than hundreds."
Parker delivers three kits in a JIT manner from the Lakeville facility, which is less than one hour away from Tennant's manufacturing site--helping save warehouse space.
The nine kits are packaged in individual cardboard boxes, stacked on a pallet in the order they will be used, and put next to the machine they will be used on. "The person working on the machine goes over and grabs a kit instead of going to the inventory bins many times and grabbing separate components," says Sehnert.
"When we brought our new sweeper to market in just a few short months, Parker played a critical role in our success," he says. "They designed the hydraulic plumbing, assuring us the lowest cost and the highest performance. Our engineering time was nil. By creating connector kits, Parker helped us reduce assembly time and inventory costs."
Analysis of the kitting program revealed that for each kit, Tennant saved several thousand dollars in soft costs including $2,440 in reduced material handling, $3,500 in reduced PO processing, and $4,184 in reduced warehouse space requirements for total savings of $10,124.
However, purchasing kits rather than individual connector parts increased hard dollar costs by $3,740. Yet when combined with total soft dollar savings of $10,124, Tennant achieved a net savings of $6,384 per kit, per year.
"Although the dollar amount of purchasing a pre-assembled kit is higher than the dollar amount of purchasing individual parts, the real savings come from activity time," adds Hargarten. "If you put a value on the hard costs of material handling and soft costs of invoicing, expediting, and warehouse space, it greatly outweighs some added cost for 'kitting' the parts."
Because of the success Tennant has had with Parker's pre-assembled kits, the company plans to expand the kit program, using it on new Tennant sweepers. Pursuing plans to market a Series II Model 830 sweeper, Tennant is working with Parker to design the hydraulic plumbing and manufacture kits for the new sweeper. "It's going quite well," says Sehnert. "Parker is supporting us every step of the way to getting the kits ready for the new sweeper."
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