DFSS: Restructuring the

Internal Supply Chain

Inventory management was done as an ad-hoc process. Floor leads guessed how much inventory they would need and when they

needed it based on tribal knowledge. Then they would flood the Purchasing Dept. with requisition forms, often for parts that were

already on-order and/or ordered in other depts.

The company has been looking to move to a new ERP system and decided to bring in a

Green Belt to design a new manual inventory management and a centralized warehouse to

house the process.

D C D O V

Understanding the needs to be fulfilled by the new design

Define

utphen Company: A 120+ year old company

who has survived based on making quality trucks

through hard work as the company has been handled

down from on Sutphen to another. The company has

grown and expanded , their production operations

have been the main focus while it’s business process

have developed ad hoc.

The Approach: Implementing an ERP system at Sut-

phen has been in the works for some time, however

stock-outs were common, purchase orders were never

consistent, floor employees dictated when and how

much to order. Inventory control had to happen be-

fore the move to the ERP system. The company de-

cided to bring in a Green Belt candidate to tackle this

problem by designing a new system. The system is

intended to serve as a “backbone” to aid the company

as they go thorough the acclamation phase of the ERP

transition.

Interviews: The first step was to meet the team.

Talking with them to see who to rely on, what posi-

tions they held/roles they filled and who had what in-

formation was the first task. From them the picture of

how the system actually works could form. However,

it was found that once one had a grasp how a process

would work there often it was met with a response of

“Yes, but not exactly…” There were some process

maps that had been done by previous external consult-

ants for individual processes and after the candidate

compiled a composite, much clarity regarding the

learnings from interviews was reached.

Finding the problem: With the process maps provid-

ing Level 2 detail of operations, we still needed to

zoom out to a Level 1 view to grasp the problem at

hand. The product ended up with a model like the pic-

ture at the bottom right above. It became intuitively

obvious that purchasing was the bottleneck. Then the

candidate went out the warehouse and dimensioned

the building for a baseline.

Voice of the Customer: Going around for a second

round of interviews revealed people’s expectations of

the system. The first House of Quality helped to

translate these into technical features for the design to

focus on.

D C D O V

Concept

Solving the problem through

redesign

System Concept: This phase contained a lot of tools

and work. The first thing that had to get figured out

was how to solve the systematic problems. The new

system model that was going to solve the issues of the

old ways turned out to be the picture in the top left

corner above. There will be a central warehouse the

sends material to the floor in the form of kits and re-

plenishment bins, which is noted as the replenishment

loop. Then the warehouse will send Kanbans to pur-

chasing, instead of coming directly from floor, to tell

them when and how much to order.

Measurement Plan: Next, we had to execute the

measurement plan that was developed in the Define

phase. The Yellow Belt candidate that started at the

beginning of the year had the task of extracting the

data from the old system and to build a data ware-

house. The other component of the measurement plan

was to execute the sampling strategy and gather the

physical dimensions of parts. This data would be used

to later to calculate the spatial requirements for and

the capacity of the central warehouse. We used a grid

that marked the sizes for the “buckets” that we laid out

before execution. We would put a part on the grid and

checked which sized bucket it’s footprint would fall

in. The grid is shown above the histogram. The histo-

gram is the results with increasing size buckets going

from left to right.

Process Concept: One thing not shown in the graph-

ic above is the Shipping and Receiving process rede-

sign (which includes storage at central warehouse).

The building that has the S+R office and the ware-

house are adjacent to one another. The concept is to

turn the process into a U-shaped cell to provide visi-

bility between the open end (receiving/QA) and the

back end (material leaving the warehouse). A door

that lead from the office directly to the warehouse was

put in.

Warehouse Concepts: Several layouts were con-

structed and evaluated. The three main plans are

shown in the graphic above. Drawing on team mem-

ber’s previous learnings and warehousing textbooks

the layouts with different flow patterns were concep-

tualized. Pros and Cons were developed for each then

the team decided which one they favored.

This model was used to conceptualize the design

for the new system and highlighted the main

functions.

Before designing a warehouse to store inventory,

we needed to understand the size distribution

for parts. We used a grid to measure the foot-

print of a part and which size category it fell into,

which was used for capacity estimates.

D C D O V

Design

System Design: The system model that was created

in Concept was taken a step further. The system was

drawn out in the form of a value stream map (seen

above). The SOPs for every operation within both

loops were recorded and time estimate for each step

were developed from the SOPs.

Warehouse Design: Initially, we had only a percent-

age of the building for our warehouse. After the po-

tential for benefits sunk in and the project gained

some momentum, the team was able to get the other

part of the building to be added to our scope.

We had dimensions of the shell from Define and the

next step was to establish what kind of material han-

dling equipment we had at our disposal. This deter-

mined the aisle widths. Because the building was long

and too narrow for the MH equipment to come back

around in a circle, the warehouse had to be divided in

half: one side for items requiring the equipment to lift

and one side for the lighter items.

Next, we had to designate area for the attendant to

perform their functions (kitting and receiving in-

bound) . Then the flow patterns for material had to be

thought through. The plan was to do a FIFO method

with the center rack having access on both sides and

the other racks being accessed from only one side.

While getting quotes, we were offered a great deal on

gravity fed racking which we positioned around the

kitting area for most used parts. A cage was added to

the front door so people could come in and place or-

ders but not remove parts unsupervised.

Kanban Design: Once the Kanban type had been se-

lected in concept, we realized that the use case in each

loop was slightly different. Additionally, the same

card had two different audiences. So the front was

design for the person pulling the card and the back

was design for the person receiving the card. The

cards were color coded to indicate which loop they

belonged to.

Build Plan: The needed materials were given to the

company’s three main racking vendors for quotes.

We decided to buy select materials from each that

minimized our total cost. The construction happened

concurrently with the next phase.

Detailed Design

The system, at each major level of inference,

is shown to the left. This system included

elements of lean, set the company up for

success and solved the focal problems ad-

dressed in Define. Below, is the final design

of the Kanban which was selected to be a

card like the sister faculties had.

D C D O V

Optimize

Current

State

Designed

State The yellow belt candidate that was assigned

the error-proofing hard triggers developed a

Kanban selection tool that will help drive

system towards the idealized design state

Piece-wise Implementation

For the old system data that was extracted, there was

no discipline around recording/tracking. The team de-

cided to go straight to vendors seeking feedback. The

emails asked for a quoted leadtime and for several price

quotes in order to find a bulk order discount.

The current state of the design was planned and implemented as the

first phase in a series of steps (due to not having enough funding) up to

the complete idealized design state.

Warehouse Low Level Design: There were still

parts in the warehouse during construction. After

building, the parts got moved back onto shelves and

the low level design started around those parts. Those

parts were mainly pallet items and weld parts. We

knew that we wanted to keep as many parts as we

could close to the kitting area for quick access. The

small bins (and thus more bins) were put on the bays

closest to the kitting area.

Accordance to EOQ model: In the warehouse, in-

ventory levels will be set according to the EOQ mod-

el. One of the yellow belt members had created a list

of recommended SKU to centrally control and calcu-

lated EOQ, reorder point and safety stock based off of

system data. The Green Belt candidate decided to set

floor levels as (EOQ - reorder point) / 2 / # of POU

locations.

Implementation Plan: We did not have the budget to

completely fund all aspects of the design. So we had

to implement in phases and make a gradual transition

up the idealized design. We did not have the bins to

fill out the floor locations, the warehouse and the emp-

ty ones that would be traded out on the floor. So we

had to sacrifice populating some of the floor locations

not having bins so we could use them for transporting

material out of the warehouse.

Outsourcing Risk Management: We would not get

time to pilot this new system so we had to bring on

two more Yellow Belt candidates to take the risk man-

agement part of the project to ensure a smooth opera-

tion once it come online. The Green Belt helped

guide them and teed up one of the projects. After go-

ing through a rigorous FMEA on the design, they

landed on error-proofing warehouse Kanban/hard trig-

ger selection and proactively seeking out parts at risk

for EOQ change by performing a sensitivity analysis.

Seeking Feedback: The team met to look at the EOQ

calculations and determine if they were feasible.

There is the potential for our EOQ to be off, not due to

any fault on our Yellow Belt ‘s project, but due to how

the data was captured. So the team put together a

spreadsheet to send to vendors for leadtime and price

quotes for 1/2, 1, 2 times the EOQ looking for bulk

order discounts.

D C D O V

Verify Before... After...

To ensure the sustainability and progress of this transition...

System and Kanban Monitoring via Excel EOQ “Watch-out” Tool (Yellow Belt Project)

Quarterly Review Meetings Visual Management

Sust

ain

abili

ty P

lan

Visual Management Elements: A simple element to

add to the design that will error proof operations is

visual management. We plan to paint lines on the

floors of the warehouse for forklift traffic and indicate

to people not to stand, park or drop stuff there. Also,

we plan to paint the outlines of skids on the floor so

the material handler knows where to drop of the ship-

ment without getting in the way of traffic.

Quarterly Review Meeting: Part of sustainability is

continuous review and continuous improvement. To

ensure this, the design calls for key members of the

organization to meet on a quarterly interval to go over

system performance, address issues of concern, listen

to feedback, integrate new information, and plan con-

tinuous improvement activities. In the beginning the

team will have to meet more frequently (bi monthly)

to catch problems of acclamation early which will

gradually change into quarterly.

Review Meeting Tools: For the meeting just dis-

cussed, the team will have several tools and/or inputs

to use in the meeting. For the early meetings, the

team will have the feedback from vendors to adjust

level settings. The team will also have feedback from

the floor, which will be particularly helpful in clean-

ing up the BOM so MRP can be run. The team will

also have a system monitoring tool that watches ware-

house levels and how close they get to reorder point,

dipping into safety stock and running out. The other

metric tracked by the system monitoring tool is the

frequency of cards entering the warehouse (which can

indicate floor levels being set too high or too low) and

the number of expedited orders (which indicates trig-

ger not working, levels not being set correctly, or em-

ployee buy in issues).

Jared Walter is a Green Belt candidate with the Industrial and

Systems Engineering department at The Ohio State Universi-

ty. He has worked Operations Research and Quality Control

at a composite materials manufacturer.

Acknowledgements:

Adrian Hall, Josh Niewiadomski, and Nick Stagge for their

contributions to this project

Dr. Scott Sink for being a great mentor

Jon Corsetti (for his coaching) and the rest of Sutphen