A Practical Guide to Managing Material Cost Impact

Inovaxe’s InoAuto smart cart.

By Ben Khoshnood, President, Inovaxe Corp.

Many years ago, I ran a high-mix, low- to mid-volume EMS business. Like everyone else, surprise shortages were driving the million dollar SMT lines to screeching halts.

Often the familiar sound of “cha-ching” would stop, and everyone scrambled to find the part that was supposed to be in the factory, but was nowhere to be found. The program managers, material staff, purchasing, production staff, and I got hourly calls from the customer who wanted desperately to know the status of their job. We looked everywhere, and no one had the answer. My purchasing manager would raise her right hand and swear that she brought the part in. Meanwhile, the SMT line was completely down, and waiting.

In one instance, we finally found the missing part. It had been placed on top of a shelf because it needed to go directly to the floor when it arrived, and there was no specific bin assigned for it. Sound familiar? By the time we discovered the part, reordered it, and paid for an overnight shipment, we were late on the customer’s order and had to work overtime to get the assemblies out. To top it off, my management team was meeting a high-speed SMT equipment manufacturer to order another line, so that we could meet customer demands! Several thoughts occurred; “What if we never had surprise shortages? What if we could pull the kits instantly and accurately? What if the feeder set-up crew could find parts in seconds?

“The InoAuto illuminates reel slots for easy part identification.”

The solution to this dilemma was painful, yet enlightening. We needed a fresh look at how we deal with material kits and inventory. When the Six Sigma revolution began improving quality in the 1980s, we were not setting goals to improve by 10 percent. Drastic change was required, not small incremental improvements. Today, this means that the traditional shelves and bins need to go. Metro carts and Home Depot shelving are no longer the best way to store parts. Close your eyes and envision a factory where the right amount of material arrives when you need it, and is placed so that in seconds it can be picked up and loaded into a feeder. 

Improving Material Operation

In a stockroom with bins and shelves, pulling a kit from stock using a pick list can take anywhere from 4 to 10 minutes per component. Many different methods have been jury-rigged to help find parts more quickly, or to make the reordering process faster. These include Kanban, dual-bin systems, weighing parts, folder style reel holders, reels in bags hanging from racks, etc. There are also many contraptions that have been put together to hold the reels in a kit, and make them easy to identify when moved to the feeder loading station.

Recently, a number of products have been introduced to help automate stocking and kitting processes. Typically, these systems are large, robotic and have low reel storage per cubic foot — an expensive elephant in the room. These robotic systems retrieve one reel at a time, taking up to 30 seconds per reel.

Inovaxe has a solution to this problem. InoAuto is a non-robotic system which can detect the presence and absence of a reel. It is a single-location storage system with the ability to light up the location of a part, making it easy to find. It is fast, easy to use, mobile, and has a high cubic foot density for reel storage.

The InoAuto can hold over 1,100 reels in a 44 x 15 x 64in (111.75 x 38 x 162.5cm) space. Using this system can reduce kitting time to seconds.

Feeder Setup

The feeder setup operation is another area which involves wasted labor. The operator generates a feeder setup sheet, goes through the stacks of reels the stockroom has put together, and tries to find the right parts in the right order. If you think about it, when the stockroom creates a kit, they take a relatively organized group of parts and put them in a disorganized pile for the operator to sort out. Now the operator has to sort through the parts one by one and be sure not to mistake the one Ohm resistor for the 100 Ohm resistor. 

There are several reasons why companies keep parts in a separate stockroom. It makes sense to want to ensure the parts are there, and that the stockroom parts match the system inventory. However, simply locking parts in another room will not miraculously guarantee accurate part counts. Some of the parts can be quite expensive, which is a reason for locking them away, but regardless, in each company there are only a handful of parts that should be completely locked up. Keeping the parts behind a door keeps them far away from the SMT area. Companies justify this because they carry too much inventory and traditional shelves waste too much space when set next to a production line. This kind of storage creates extra work, which is prone to human error and mistakes.Inovaxe also offers a smart MSD cart to protect sensitive components.

Metro racks and standard shelving cannot do much to streamline the process of loading and reloading feeders. The robotic systems and the InoAuto system can eliminate many tedious processes, such as generating and printing a set-up sheet, locating reels, and recording inventory changes. The challenge with robotic equipment is the size of the units, which makes it impractical to place stock next to the machines for which they are needed.

The Inovaxe smart carts are well-suited for point-of-use inventory storage, as they can hold over 3,300 reels in 11 x 1.25 x 5.3ft (3.35 x 0.38 x 1.62m) space. One of the InoAuto’s clever features is that it identifies the parts needed in the right order. I can also identify parts needed before a reel runs out. This type of automation can pay back the original investment in less than six months, in many cases. The product is designed to substantially improve the efficiency and throughput of the feeder system and running an SMT line.

Returning Parts to Stock

Returning parts to stock often causes the most problems. Typically, the job is finished, the pressure of meeting demand has reduced, and returning the parts has to wait until the material people are not busy. Counting parts and finding bin locations is a time-consuming process for the usual bin and shelf operation. In the case of using carousel storage systems, the problem is the bottleneck. The input and output is generally through one person and the bottleneck backs up returns. It takes anywhere from four to 10 minutes per reel to count inventory correctly, find the location, and place the parts in the bin.

The problem starts here, as the parts that are not returned may be needed on another job, and in some cases, they are all in a pile. Finding a particular part number in the pile is like finding a needle in a haystack. This part of the operation often gets the least attention because everyone switches to new jobs. This is also the time in which, depending on the way WIP is accounted for, you may buy the same part already in a pile, because it’s needed for a new job and the MRP has lost track of it.

This also affects the accounting process, as the operation has to buy more material, juggle the vanishing cash due to the increase in inventory, and process more invoices. And the line has been sitting idle all of this time waiting for the parts to arrive.

The robotic storage system can provide a decent solution for the part return process, as long as travel time and size are not important. The InoAuto smart cart is an extremely effective tool for this process as well. Returning parts to bins takes less than three seconds; in many cases part counts can be adjusted automatically by the machine’s software. 

Streamlined Material Handling

Material handling is one of the messiest aspects of the manufacturing process. Simple “big box store” shelving and Metro carts are no longer the best ways to store inventory. The traditional system is rife with inefficiency. The way to bring those wasted dollars to the bottom line is to use 21st century equipment, which will streamline the process.

In an efficient system, reels should be stored at the point of use in a smart cart, such as the InoAuto system. Upload a pick list or BOM to the smart cart computer and it will light up the location of each part in the kit. They can be retrieved in a matter of seconds, in picking order, one at a time. The system’s LED blinks and indicates a location for each of the feeders. After the job is done, the reel can be removed from the feeder, scanned, and placed in an empty part of the cart. 

Managing material is one of the most important aspects of the manufacturing process. Human error, material bottlenecks and inventory inaccuracies will have a broad effect on the health of a business. The impact of problems in the material department is felt in the areas of customer and employee satisfaction, cash flow, revenue growth, and profitability.

Before you send out the blackbelt lean ninjas to fight the material challenge, make sure they are familiar with the latest material handling systems, or you may end up with more jury-rigged contraptions.