Excess inventory of precious metals and stones is very expensive as jewellers lease them from banks

This company manufactures earrings for major retailers and hundreds of smaller retail jewellers. They usually have five days or less to ship orders.

The manufacturing process

1. Alloy 24 cwt gold,
2. Cnverts the alloy into rod, wire and tube stock
3. Convert these into components such as hoops and clasps,
4. Assemble earrings,
5. Carded and box the products,
6. Ship to customers' distribution centers.

Problems

Inventory management

Orders arrive by EDI from customers based on consolidated daily cash-register sales. This is not enough time to make the earrings from raw gold so the company has to maintain a significant inventory.

The company aims to keep most of its inventory at the WIP level. The demand for specific products varies substantially. As there are many common components the company assembles and packs on demand.

There were stock-outs and excess stock at the same time.

The problem was hoarding and lack of control. On one occasion a supervisor got into hot water for running out of a gold part for a critical job. His reaction was to make about a one and a half years supply of those components. Such incidents result in excess stock of some parts and stock-outs of others.

Tracking Materials

The high value of gold, silver and diamonds made it imperative to track the flow of materials and scrap at all times. Recording weights with pencil and paper folowed by data entry into the computer was a slow and error prone process.

The problem was made worse when people set aside material for customer orders.Other people would then borrow from these stocks for other orders. The result was unexpected shortages in WIP inventory.

Tracking Picking, Packing and Shipping

Dozens of customer orders were carded, boxed and packed ready for shipment at the same time. Many of these orders contained hundreds of different products.

Short delivery times meant some order lines being picked and packed while others were still being manufactured. The company tried to keep track with pencil and paper. Incomplete orders were often not discovered until it was time to ship them.

This result was short shipments, expediting, overtime, and much anguish.

Solution

The BellHawk Production and Inventory Tracking System includes a pull-based inventory management system.

When orders arrive, BellHawk examines finished goods inventory to see what quantity of each product is available. If there is not enough BellHawk creates a job to make an economical quantity of the product.

This job allocates inventory for its components parts, based on its BOM. Again if there are not enough, the system creates further jobs to make economical quantities of the components. These in turn allocate inventory and create jobs until the BOM tree arrives at purchased raw material. BellHawk issues purchase requisitions to buy more raw materials.

For each inventory item, BellHawk maintains debits for jobs that will use the inventory and credits for jobs or purchase requisitions that will create inventory.

• Jobs are created whenever the allocated inventory (physical plus credits minus debits) falls below an established threshold.
• Components are manufactured in economical quantities.
• These batches represnt a preestablished trade-off between minimizing inventory levels and producing (or ordering) items in a cost-effective way.

System overview

1. Several buildings are networked together.
2. The BellHawk database uses SQL Server with mirrored disk storage.
3. All the tracking is done using PCs equipped with corded and cordless barcode scanners.
4. The BellHawk system is tied into the EDI system to receive its orders.
5. These orders generate barcoded pick and pack sheets when finished goods are available in inventory.
6. These sheets are scanned to control and monitor the flow of materials from finished goods inventory.

Results

1. Supervisors have realtime visibility of the dozens of orders being assembled at any one time.
2. They can spot incomplete order problems well ahead of shipment and corrected them.
3. The system maintains perpetual inventory and computes its value.
4. Cycle counting to verify accuracy is much easier with barcodes and automated weighing scales attached to the PCs.
5. A BellHawk Time and Attendance module replaced clocks to track the work time of several hundred employees.
6. It was easy to customize BellHawk to handle the company's special overtime, holiday, vacation and compensation rules.

Benefits

Shop floor supervisors no longer have to guess how many components to make. The system does the calculation for them.

Stock-outs were virtually eliminated and the rate of inventory turns more than doubled .

The system automatically collects the weights of every batch of materials and scrap at each step in manufacturing. It compares these weights with expected values and warns management when there is a discrepancy

At any time, the BellHawk is tracking thousands of inventory containers and hundreds of replenishment jobs. Management has an accurate view of where every inventory item is, how much is available and the amount allocated.

The owner said, “After only 2 1/2 months, we’ve already seen a big improvement in our on-hand inventory levels and our ability to prioritize work in process. I‘m surprised at how quickly BellHawk has helped straighten out our operations.

"We received two very large orders one week after the other and the factory turned them around effortlessly. We are now shipping product well before the cancel date.

“BellHawk has made our lives much, much easier. This year we should be able to go through our busy season without all the overtime we ran last year.”