Description

Tier one automotive Seat Assembly Supplier with total material purchases of over $100 million dollars incurred inventory losses of more than $1.5 million dollars annually. Our client consistently missed forecasted financial targets.

Challenges

Material shortages on the assembly line was a regular occurrence. Customer experienced down time, efficiency issues, incurred unbudgeted overtime, and massive premium freight costs more than $500 thousand dollars per annum.

Solution

MH Business Solutions took a ground up approach and conducted a comprehensive review of raw materials and finished goods inventory activities. We interviewed employees, reviewed documents, and observed tasks processed in real time. We visited two of the most significant raw materials Suppliers. We also visited and conducted visual and process evaluation at Ford Motor Company Assembly Plant where the finished seat assemblies are shipped to. We generated a comprehensive process and activity flowchart that included the issues and errors we found.

Benefit

In addition to all the errors and issues we uncovered, we discovered a certain monthly variable quantity of inventory at Ford Motor Assembly Plant that should be classified as In-transit inventory in our customer’s books. Ford Motor Company does not recognize finished goods inventory received at their receiving dock as payable due to our client until it reaches a certain point in their assembly line. We created a corrective actions and training manual to assist employees in performing regular tasks. Customer’s cycle count and annual physical inventory procedures were updated.

Result

Customer inventory record keeping, and management witnessed a remarkable improvement. Subsequent physical inventory exercises have produced negligible variances. Premium freight costs and overtime charges dropped significantly.