During an internal lean audit at Field, a team member was reviewing the frequency of transactions associated with a small group of fasteners being used by one customer. The team member discovered the number of transactions was inconsistent with the value of the product. The customer was managing a Kanban program internally and was shipping low dollar items on a regular basis and spending more on the transaction costs than the parts were worth.
Upon further review, Field discovered that the customer shipped the Kanban products 904 times in 2014 for a total shipping cost of $11,740. The customer had also lost $67,800 to transactional costs from managing their Kanban program internally.
Field came up with a solution to reduce the costs and presented a proposal to take over the Kanban system which consisted of:
- Field creating inventory min. and reorder points
- Field creating, maintaining, and scanning VMI barcodes
- Field keeping VMI barcodes up-to-date
- Field delivering parts
- Field stocking inventory as it arrives
By taking over the Kanban process, Field eliminated both the shipping and transactional costs on 40 items that totaled $118,000.
- Elimination of transactional costs: $67,800
- Gave back time spent managing inventory to the customer
- Eliminated middle-man shipping costs: $11,740
Total savings opportunity: $79,540