Accurate and well organized metal fabrication inventory can spell the difference between profit and loss for some companies.
Too much inventory could mean working capital and cash flow are tied up, sitting idle in a warehouse. Too little can bring production to a standstill, impacting delivery and customer satisfaction.
While it’s important to examine a metal fabricator’s craftsmanship and quality control measures, their raw materials inventory management practices should not be overlooked. A metal fabrication manufacturer’s ability to deliver products on time and within budget depends on it.
Inventory management is the practice of ordering, storing, and validating raw materials and parts for the manufacturing process. The goal of an effective inventory management system is to keep enough stock on hand to keep production lines going, yet not so much that it ties up too much capital. This requires an accurate and transparent view into stock levels of raw materials and parts as they move through the production process.
Recent supply chain disruption and volatile markets have left some metal fabrication companies scrambling to replenish their supplies and provide on-time delivery. Lead times for raw materials and parts have been highly unpredictable in recent months, making the common “just-in-time” approach untenable, at least for now. Prior to the COVID-19 pandemic, many items could be delivered within a couple days. Today, those same items may take weeks or months to show up at a facility’s door.
To combat those challenges, companies need to keep a handle on their current inventory and order items as far in advance as possible. Once a project is confirmed, a bill of materials (BOM) will be developed and buyers should immediately contact suppliers to determine availability.
It’s important for estimators and buyers to have a good understanding of market conditions and pricing to provide accurate bids and timelines. It’s also critical to have a good standing relationship with multiple quality suppliers. When materials are in short supply, a supplier may choose to sell what they have on hand to their best customers based on historical order volumes, on-time payments, and an overall assessment of their relationship status. Maintaining several supplier options also helps to mitigate supply chain risks.
Good communication and fair and ethical practices among the metal fabricator and their supply partners are foundational to maintaining adequate inventory and addressing supply chain issues.
Modern manufacturers leverage technology throughout their facility, from the front office to the manufacturing floor. The warehouse is no exception.
Some manufacturers use a barcoding system to help streamline their inventories. The use of this technology may be dependent on the types and quantities of parts kept on hand, however. A metal fabricator that relies on thousands of disparate commodity parts will likely benefit from a barcoding system. Those who produce small quantity batches may not warrant a barcoding system.
Most modern facilities use Enterprise Resource Planning (ERP) software to help provide a real-time view of inventory levels. For those who use barcoding systems, the data can be linked and will automatically adjust inventory counts. For those who forego the practice, a simple ERP input form can be used to keep accurate numbers.
Automation can only go so far, however. Regardless of which system is used, routine cycle counts can help to validate what’s in the system. A cycle count involves selecting a group of items and performing a physical count to ensure it matches the data — a spot check, of sorts. To further ensure accuracy, a physical count should also be performed each time a product is pulled from the shelf to validate the remaining stock. If the system says there are 100 pieces and 60 are needed, a cycle count will confirm that 40 are still in the bin.
Having skilled, organized, and detail-oriented workers is just as critical as having the right inventory software. Here at Fox Valley Metal-Tech, our inventory team takes pride in having accuracy levels in the high 90th percentile. This helps all departments, especially purchasing, save considerable time and money knowing that they can depend on the numbers in the system.
As mentioned, software can take you only so far. Optimizing inventory management takes a dedicated team and clear, documented processes. A critical step in maintaining accurate inventories is to maintain a clean and organized shop floor and warehouse. If you’re on a facility tour, be sure to take note of how clean and organized the parts room, tooling storage, warehouse, and other areas are kept. An organized facility can help determine whether they have a good handle on where things are and how many are on hand.
Another sign of a streamlined inventory system is the placement of frequently used items. Are they toward the back of the warehouse or within easy access of those who use them most? For example, Fox Valley Metal-Tech keeps consumable items such as safety, grinding, and welding supplies right on the shop floor in a vendor-managed vending machine rather than a tool crib. Workers have 24/7 access to the items they use every day and don’t have to wait for supplies to be replenished. When the supply of an item drops below a certain threshold, a reorder is automatically generated to ensure it never runs out.
Sometimes an inventory team will allocate or bundle designated raw materials to a specific area upon arrival to the facility rather than storing them on various shelves. It helps ensure that it won’t get pulled or used for another project.
This is especially important for Department of Defense (DoD) projects that require certifications and material test reports (MTRs). Detailed documentation must be kept to certify material inspections, part numbers, PO numbers, etc. Accurate and legible documentation is required for compliance and will be included as part of a Quality Data Package (QDP) provided to the customer upon completion.
If paperwork doesn’t comply, an automatic hold is put on the materials and it can’t be processed through receiving until rectified. All certification documents are linked electronically to POs in the ERP system. When those particular items get used, the ERP automatically “pulls” the information forward with the project so that when it gets to the final inspection, all documents are there to validate each step along the way.
Deviating from a specified DoD product is not an option, even for the smallest part. If a certain rivet, screw, or washer is listed on the BOM, inventory specialists can’t just grab another comparable one off the shelf. Every component must be exactly as specified by a DoD customer, making accurate inventories and documentation critical.
Understanding a prospective metal fabrication supplier’s inventory management system is an important consideration when deciding on who will produce your products. Fox Valley Metal-Tech recently expanded its facility to help increase manufacturing capacity and streamline inventory even further so that it could be managed entirely at a single, climate-controlled location. To learn more about our capabilities and specialty services, contact us today. Also take a look at our helpful RFQ Guide below to assist you in the bidding process.