Inventory tracking is value-added service
By Staff -- Purchasing, 11/18/1999
Value is sometimes described as anything that is worthwhile to a company, such as a service that helps it grow by improving different areas within the company. Arrow Electronics provides value to Winland Electronics by helping its manufacturing team keep track of inventory, allowing the purchasing department to easily make changes to inventory orders and enabling the company to improve its cash flow.Winland Electronics, Mankato, Minn., is a full-service designer and manufacturer of custom electronic controls and assemblies. The company makes simple mechanical products as well as sophisticated microprocessor-based controls, sensors, and radios, which are used in such products as alarms, vehicle tracking systems, power metering controls, and consumer controls for the fishing and home bedding industry. Winland provides its customers with a range of services including product design, engineering, testing, warranty, and out-of-warranty repair service as well as order fulfillment.
Winland's plans for continued growth rely in part on efficient and cost-effective inventory management. As a result, Kim Kleinow, vice president of procurement and materials, began looking for a way to realize the company's goals of increasing customer service and manufacturing flexibility while reducing inventory and costs. Because Arrow Electronics, an electronics components distributor based in Melville, N.Y., has a long-standing relationship with Winland, the sales team considered themselves a partner dedicated to helping the company continue its successful ways and suggested the Arrow cares (Customer Automated Replenishment System) program.
Arrow cares is a user-friendly materials management system. Replenishment of components is achieved using a multiple-bin "kanban" or min/max method, which releases items in whole units or "bins." As soon as the first bin is empty, the operator scans the bar code on that bin. This prompts the system to generate a replenishment order that's automatically sent by fax or EDI to the supplier. Meanwhile, the operator uses inventory in the second bin. The first bin is replaced before the second bin is depleted.
What first attracted Kleinow to Arrow cares is the timesaving benefit it provides. "We were faced with constantly changing orders for customers, which required changing the purchase orders," she says. "Then the customers would change their schedules, and the next day we were changing POs again. That just got to be more than we could handle." cares automates the procurement and receiving process, reducing administrative tasks.
Another issue was controlling inventory levels. Because Winland was frequently changing POs, they couldn't easily prevent inventory from arriving at their facility. "We wanted to get our levels lower," says Kleinow.
"Keeping inventory levels low is a focus for any manufacturer," she says. Due to parts being ordered at point-of-use, instead of traditional forecasts, Winland effectively manages its inventory and keeps levels at a minimum. "Before Arrow cares, we were probably turning our inventory about once a month at best," she says. "Currently we are turning our Arrow cares inventory between four and 10 times each month."
Another benefit has been improved customer service. "In the past, we would have peaks in our business, and Arrow wasn't able to plan for that because we weren't providing them with a forecast," says Kleinow. Winland now provides Arrow with a forecast of its inventory needs. Arrow keeps a one- to two-month supply, or bond of inventory, on hand, and manages bond replenishment based upon Winland's forecast. The company builds-to-order for final assembly, with purchases based on orders and forecasts. "It's really improved our leadtimes and inventory levels," she says. "It also has helped our purchasing department. Online ordering saves a lot of time."
When Winland was considering Arrow cares, the company put together a team of quality, manufacturing, purchasing, and receiving personnel to evaluate the program. Kleinow led the team because "I wanted to give it priority and sell it to upper management." They started off slowly with 10 parts and tested the system for six months to make sure that everything was going well. "Arrow cares was an easy system to install," says Kleinow. "It was just having the personnel and giving it the priority it needed that was an issue for us. It took one year from the time we first evaluated it to have it firmly in place--to the point where we felt confident to add additional suppliers." Any time Winland had a question about Arrow cares, they called the Arrow team supporting the program. "They were able to answer any questions we had," she says.
Winland places high-volume or high-value components on the cares system. The company now orders from 13 suppliers and one-third of its inventory purchases through the program. Arrow cares is installed on 12 PCs at Winland with three used for ordering and the others used for receiving, reviewing reports, and inventory management. Because Arrow cares 6.0 operates in a network environment, multiple users are able to perform tasks simultaneously. For example, picking, receiving, reviewing reports, and database maintenance all can be accomplished at the same time, improving productivity and efficiency. This is an important feature for Winland. The company is also considering other services in order to expand the relationship.
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