A global market leader in the medical device industry sought to avoid a significant increase in warehouse storage costs by leveraging lean techniques.

Evaluation

We led a lean transformation initiative to identify ways to reduce inventory without affecting order fill rates. Upon examination, our team found that the company was holding too much inventory with low rack space utilization. As a consequence, there were aisles full of pallets, material control issues, and morale problems plagued their warehouses. Moreover, along with cost issues, the lax warehouse system gave ample opportunity for injury claims. Management wanted to avoid non-validated off-site storage as much as possible.

Approach

So, we implemented a Kanban system for several materials, included corrugated box suppliers to limit inventory levels. In addition, to improve storage space utilization, many full pallet rack spaces were converted to 1 / 2 pallet places, and we additional shelving was installed for single box storage.

A new freight forwarder was selected to perform smaller, more frequent transfers from the materials to finished goods warehouse to reduce the required staging space, at no additional cost. We implemented Kanban for reagent kits between the finished goods warehouse and the assembly floor in a different facility to create a stricter control of reagent kit inventory.

Results

We achieved many benefits with no capital expenditures.

Aisle storage was eliminated, while space utilization improved by 30%. One-third of racking was removed since it was no longer required, which allowed the company to perform final kit assembly in the warehouse. That freed up space in the cleanroom for additional reagent manufacturing. We improved picking efficiency by 28% since kit components were stored adjacent to each other, and aisles were no longer congested. In the end, we helped the client avoid a $2M capital expenditure for an additional warehouse and finished goods refrigerator.