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KAIZEN presentation STI-KUZ inventory optimization

KAIZEN presentation STI-KUZ inventory optimization. WIN. Kolesov Anatoly Spare Parts Department, Product Support Division Komatsu CIS, LLC Date: March 1, 2012 [Capstone]. WIN. AGENDA. Responsibilities outline DB Inventory status Target set up Basic target action plan

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KAIZEN presentation STI-KUZ inventory optimization

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  1. KAIZEN presentation STI-KUZ inventory optimization WIN Kolesov Anatoly Spare Parts Department, Product Support Division Komatsu CIS, LLC Date: March 1, 2012 [Capstone] WIN

  2. AGENDA • Responsibilities outline • DB Inventory status • Target set up • Basic target action plan • DB inventory by region • Improvement zone selection (3 steps) • «19» items group investigation • Action plan development • First phase of improvement • Second phase of improvement • Schedule

  3. RESPONSIBILITIES OUTLINE Company outline: Name: Komatsu CIS, LLC Place: Moscow HQ, (3 branches) People: 138 employees Other Division Other Division Product support Division Personal profile: Experience: 7 years Position: GM Parts department Directly reporting to GM of BU GD [ Mr. Takatsuki] Total 15 people in Parts Business Unit Parts BU Parts responsibility: DB support in parts business development Totally:8 DB in RUSSIA, 3 CIS Service dep. Sales & Planning dep. Operation dep. Main responsibilities: • 1) Sales planning, promotion by commodity; 2) Inventory control; • 3) HANSEI activity; 4) Reporting control (DB & KCIS); • 5) All scope of analytical work;

  4. DB INVENTORY STATUS CONSOLIDATED DB PARTS INVENTORY INCREASE +105% & 1.1 points to MOH Target MOH 4.0 Mil.$ GAP (100) Increasing inventory is a natural feature for growing market development but should be strictly regulated & monitored to prevent possible financial risk for the company! Chart # 1 BASIC Policy: Decrease DB inventory; Split responsibility for Functional & Consumables parts

  5. ACTION PLAN (BASIC TARGET) IMPROVE RUSSIAN DB MOH GAP

  6. DB INVENTORY BY REGION IN RUSSIA TTL INVENTORY: 49.4 CONSOLIDATEDMOH: 5.1 Inventory volume (Mil. $) MODERN 10.9 MOH: 4.1 STI-Spb. 3.4 MOH: 9.0 ISTK-C 7.8 MOH: 3.5 KOMEK 7.8 MOH: 4.9 MAGADAN STI-KUZ 9.9 MOH: 11.7 Moscow STI-FE 4.6 MOH: 2.6 MACR 1.1 MOH: 4.0 STI-Sib. 3.9 MOH: 5.7 URAL CENTRAL FAR EAST SIBERIA Basic inventory KPI is MOH so DB with biggest MOH index and abnormal inventory amount should be selected for improvement!

  7. Step 1 SELECT IMPROVEMENT ZONE Biggest MOH 1st in Functional parts 2nd in stock volume Target MOH Chart # 2 Data source: DB monthly report by p/n STI-KUZ SELECTED AS PRIOR TARGET!

  8. KUZBASS REGION (PROBLEM ZONE) OUTLOOK AREA • KCIS REMAN (MAY 2011): • Total area of a building: 6 000 m2 • Repair shop: 2 000 m2 • Parts warehouse: 3 000 m2 • Office area. Area: 95,5 k,km². Population: 2.8 mln. 2 major cities: Kemerovo & Novokuznetsk Main industry: Mining Main product: Coal Kemerovo city: “THE CAPITAL OF MINE REGION” SUPPORT Leninsk-Kuznetsky 29,5 mil.$ (+14% vs last FY) • STI-KUZ (warehouse) • Parts warehouse: 1 000 m2 • Novokuznetsk DEMAND Mil.$ AVAILABILITY 2nd in Mining machine fleet In RF CUSTOMERS (Komatsu unit base): KUZBASS RAZREZ UGOL (KRU) – 51 utit KUZBASSKAYA TOPLIVNAYA KOMPANYA (KTK) – 32 unit UZNIY KUZBASS – 22 units COALvs DB SALES & INVENTORY Chart # 3 UP TREND (100)

  9. Step 2 SELECT IMPROVEMENT ZONE SELECT TARGET COMMODITY [Engine: 1, 339 items (20%) from 6, 563 ttl.] FOCUS ON AREA TO INVESTIGATE! AVG. ∞ Chart # 4 [Total items analyzed 6, 563 ] • Common features (Below average): • Related to Functional group • Excess qty (68% of total items) compare with MAD • Subsidiary responsibility (not DB) • 70% of items have no sales record AVG. Investigate with DB inventory analyst Chart # 5

  10. Step 3 SELECT IMPROVEMENT ZONE TTL: 73 items from 1, 339 (5%) AVG. *∞ 19 ITEMS FOR INITIAL INVESTIGATION! MOST CRITICAL FOR CURRENT INVENTORY! *∞ - NO SALES IN LAST 12 MONTHS AVG. Chart # 6 1,3 mln. (43% of Engine commodity) MOH: 75.82 “19 items” group investigation

  11. Investigation of “19” items group (1) FOCUS GROUP FOR FACT FINDING From DB: INVENTORY SPECIALIST PARTS MANAGER SERVICE MANAGER PIC “Round table” negotiations “Brain storm analysis” Warehouse visual check Reports data analysis From KCIS: INVENTORY SPECIALIST PARTS MANAGER SALES ANALYST PIC Important to find the fact of keeping functional parts & excess quantity parts! Important to find a way for inventory optimization! Take countermeasures!

  12. Investigation of “19” items group (2) ###: ETC (## Mil. $) MOH: Low sales HOW LONG ON STOCK?: 8 MONTHS! WHY KEEPING: Service request DO YOU KNOW THE POLICY: Not quite WHY WHY WHY WHY #4: Connecting rod (0.08 Mil. $) MOH: 57.45 HOW LONG ON STOCK?: 8 MONTHS! WHY KEEPING: Service request DO YOU KNOW THE POLICY: Not quite #3: Crankshaft ass’y (0.05 Mil. $) MOH: No sales HOW LONG ON STOCK?: 8 MONTHS! WHY KEEPING: Service request DO YOU KNOW THE POLICY: Not quite #2: Connecting rod (0.08 Mil. $) MOH: No sales HOW LONG ON STOCK?: 8 MONTHS! WHY KEEPING: Service request DO YOU KNOW THE POLICY: Not quite #5: Pump (0,03 Mil. $) MOH: No sales HOW LONG ON STOCK?: 8 MONTHS! WHY KEEPING: Service request DO YOU KNOW THE POLICY: Not quite WHY WHY WHY WHY WHY WHY WHY WHY WHY WHY WHY WHY WHY WHY WHY WHY #1: ENGINE (0.17 Mil.$) MOH: No sales HOW LONG ON STOCK?: 10 MONTHS! WHY KEEPING: Customer request DO YOU KNOW THE POLICY: Not quite WHY WHY WHY WHY DB inventory data analysis + Discussion with PIC (DB & KCIS)

  13. Investigation of “19” items group (3) STI-KUZ Poor inventory planning Absence of clear inventory policy No reliability to KCIS inventory Just hired inventory specialist Low level of inventory ICT utilization Service request WHY STI-KUZ STOCK “19” items? Long L/T No forecasting Absence of necessary parts in region Lack of training Request to keep No PIC No stock Not clear provided inventory policy Lack of communication Lack of feedback Customer policy CUSTOMER KCIS Focus Preventive measures

  14. Target: decrease functional parts inventory at STI-KUZ Due to analysis, the basic problem part of DB inventory is Functional parts FY12 DB INVENTORY TARGET (ALL DB) FY12 STI-KUZ INVENTORY TARGET Mil.$ Functional parts down ▲ 4.6 mil. $ Functional parts down ▲ 53% 12.2 8.5 57.6 40.7 STI-KUZ Functional parts decrease Phase one: Immediate action to parts decrease to achieve the target Phase two: Develop tools (ICT, Policy etc) to prevent recurrence In order to keep serviceability level KCIS will assure certain parts inventory in the region including parts taken from DB! Action plan

  15. ACTION PLAN DEVELOPMENT ACTUAL STEPS: Phase One (Just Do It action) Appoint people to project team (Inventory development team) to organize Functional parts transfer to KCIS: KCIS Parts manager, Inventory specialist, Financial manager, Jurist, Warehouse manager DISTRIBUTOR Parts manager, Inventory specialist, Financial specialist, Jurist, Warehouse manager b) KCIS ICT development Add new stocks in the system (Required to control transferred parts) Functional parts control tools development Buyback &/or transfer Functional parts with low rank to KCIS responsibility Efficient inventory policy is one of the key points for product support CUSTOMER DB KCIS KAIZEN

  16. ACTION PLAN DEVELOPMENT • ACTUAL STEPS: • Phase Two • Inventory policy deployment • Develop inventory policy with restrictions & responsibility splitting (include in PPPM) • Implement inventory policy development at DB (internal) • Periodical inventory meetings with PIC (manager position) • b) KCIS/DB ICT development • Parts orders control (SO control) • Implement inventory control by segments (Commodity, Industry etc) • Parts database maintenance • Inventory control improvement • Continue trainings for DB inventory analyst by KCIS planning group • Conduct overhaul planning & control meetings (information exchange) Efficient inventory policy is one of the key points for product support CUSTOMER DB KCIS KAIZEN

  17. EXECUTION SCHEDULE All DB Select PIC New W/H adding 1st lot 2nd lot 3rd lot 4th lot Fix key issues Release to DB Upload to system Control Points fixing Legend: Scheduled action, Periodical update

  18. Thank you!

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