The type of panic that can only occur on a manufacturing floor is when one realizes that a crucial raw material is missing just during the process of manufacture. Operations are suddenly brought to a grinding halt, with people idle, while customer care must make the difficult task of informing customers about delays. The classic method of dealing with such a situation has been having excess inventory. Thus, locking down funds in the warehouse full of parts ‘just in case.’ There is a better way to safeguard against such a situation; it’s having production visibility. With production visibility, everything going on the shop floor becomes known instantly.
The True Cost of the Manufacturing “Blind Spot”
Why does there occur a shortage despite having an inventory management system? The answer often comes down to the deadly misalignment between what your system thinks is available and what is really taking place on the shop floor. This is a manufacturing blind spot. As long as your inventory and production data remain siloed, there will be a constant risk of “phantom inventory”. For instance, an operator may scrap a part due to defects or use a little more of the raw material than the quoted amount, but if the usage is not captured in real time, the system still thinks it is available. Only when the purchasing team discovers the physical inventory does not match the system data, it’s too late to procure more stock.
Relating the BOM to the Shop Floor
Improved visibility can help close this loop by connecting your BOM directly to work orders. Rather than just reviewing your inventory at the end of the day. You precisely know the materials needs on the basis of day to day work. As soon as the work order starts, the required raw materials are allocated automatically. Thus, you won’t be viewing the overall warehouse inventory but will be viewing the inventory left after meeting the current job material needs. This helps avoid the classic problem of allocating the same material to several jobs.
Reactive Firefighting to Proactive Planning
Visibility will transform your business from the reactive mode of firefighting to proactive mode of planning. With full visibility into the production process, the procurement manager can forecast material needs days or even weeks ahead. If any essential part is getting exhausted, then the system alerts you about it before it turns into a crisis. This way, you can take advantage of lead times, negotiate on price, and save yourself from paying hefty shipping charges. In addition to that, this eliminates the cash flow issue of over ordering. With full visibility, you won’t be stock piling inventory anymore.
Visibility without all the Frills
A million-dollar enterprise ERP system is not needed for achieving such levels of visibility. With the help of a modern mid-market manufacturing solution, you have access to real-time dashboards that will monitor the status of work orders, material usage and inventory in one go. The trick lies in avoiding any kind of duplicate data entries. When actions taken in the shop-floor result in updating your inventory counts that are in turn synchronized with the accounting software that you use, you get one single indisputable point of reference.
Conclusion
Shortages of raw materials do not have to be part and parcel of running your business. By eliminating the silos of the shopfloor, the warehouse and purchasing departments, you can make sure that such problems never occur. Production processes visibility allows to buy whatever is required when it is needed.
