Vision: An online OEMSG storefront that is available to our customers who purchase components that will provide 24/7/365 product accessibility enabling greater brand exposure and improved customer experience.

Improved customer experience= Being able to tie in VOC surveys we do nothing with, be able to show customers immediate lead times and what products we offer, and would add more time to the CRC’s schedule to spend interacting with customers.

*Daily deals for pushing aged inventory to customers instead of doing Morton returns*

*A warehouse management system would allow for the discontinuation of annual physical inventory count (Green dollars will be saved)*

Biggest Challenge: We currently use no technology (i.e. bar code scanning, warehouse management system) in any of our warehouses.

Investigation:

End of March: I contacted Jeffery LaBarre who is a logistics expert at Morton. He was very enthusiastic and immediately put me in contact with Brett Winston and Peter Tronick. Brett and Peter are currently working on a project in Morton to integrate a new WMS system with our old main frame systems. They also provide consultations to groups such as ours who want to improve supply chain efficiencies.

Bobbi, Sarah, Dan Staab, and I went on a tour of the Parson’s facility with Brett and Peter. They commented that they could tell that a lot of pride was taken in the warehouse area due to its cleanliness and organization. They felt that due to the large size of most of the parts in inventory, the nature of our business with Parsons (U/C assembly), and how small the square footage was that the current method of inventory management was probably sufficient, but there is always room for improvement.

During the first week of April Bobbi, Jason, and I traveled to the MODEX Supply Chain conference in Atlanta. We were able to see new warehouse technologies, network, and research specific types of hardware that would work for a warehouse environment (rugged tablets, hand held scanners, etc.)

Prior to our trip, I scheduled a tour of KMI with Brett and Peter. On April 19, 2016 Faith, Kim Harper, Jason, and I met Brett and Peter at KMI. We also had the opportunity to meet Dick Lohnes and Rich Kriegsman who led up the tour.

Observations made during the KMI tour:

OEM Solutions inventory is being stored in large cardboard cartons on basic warehouse types of racks. The racks are approximately 12 feet away from each other in order to accommodate fork truck traffic. Multiple different part numbers are placed in the same box and those part numbers are identified with the part number being written on masking tape. The tape is placed on the front of the box.

OEM Solutions bills of lading are kept in cardboard boxes out in the warehouse with the boxes dated. If we have to contact KMI for any shipping information, a worker will then go through a box, find the correct bill of lading, scan it, and then email back to our CRC.

Workers will come out as needed to pick material and then take it back to work stations for consolidation and packing.

Kim comes out to KMI once a month to do small sample inventory checks.

Discussions:

Brett and Peter expressed their concern over the masking tape and cardboard box method of inventory management. They suggested using bar code scanning in conjunction with a new rack/bin system in order to shrink our overall foot print and reduce the time it takes to pick parts. They noticed that in several of the cardboard boxes, there may have only been one or two parts inside the box. They called this “dead air”. With a bin system and bar coding, smaller piece parts could be consolidated to save on square footage being walked by workers. This would also free up rack space to store larger items that are currently scattered throughout the general area.

The bin system could also reduce search time for parts and the amount of time walking to pick parts due to the length and width of the distance between cardboard box storage. If WMS software was utilized, the system would determine the best places to store high running part numbers and store common part numbers closer together.

Peter also asked if trucks leaving the dock with maybe one or two arrangements were also bringing material back in order to be efficient in a transportation sense, and he was told no. The trucks usually are empty, but will make multiple trips a day to pick up material and drop it off in different locations.

I contacted Brett and Peter after the tour and thanked them for their time. They will be compiling their notes and sending us recommendations of next steps.

Challenges and realizations:

Process owner and KMI management and owner are okay with current state. Will need change management actions taken. We will contact Danica for assistance.

KMI charges OEM Solutions a fixed rate for the building space and we pay variable rates on labor (we are charged for inventory pre-counting, trucks running without full loads or no loads at all, etc.). As observed, multiple boxes only have one or two piece parts inside of them. These should be consolidated in order to reduce our foot print. Then larger items that are taking up additional floor space could be placed on the heavy duty racks. Trucks should not be making multiple trips with no loads.

With a WMS, bills of lading would be electronically available to CRC’s and would not need to be stored out in the open in the warehouse.

Brett and Peter confirmed that with a proper WMS that we would not have to continue to have an annual physical inventory count. The counts Kim is already performing would be sufficient.

A CRC had an order that was past due to the customer but the customer expressed that if they received it by 4/21 that it would not affect production. KMI had just finished back flushing the work orders, CRC had sent a note to KMI to run the sales order and to ship UPS NDA prepaid using OEM's account number. CRC sent the email at 11:02, plenty of time to get something ready to ship NDA that's urgent. CRC received a reply at 1:29 that the order was "printed and sent to the warehouse". Needless to say it didn't ship 4/20 and it didn't even ship NDA so the customer didn't receive it until Monday. CRC states,” This is an example of our dependence of manual intervention. Carrie was probably on her lunch break when I sent the email. I could have probably called and made sure someone was working on it but the fact that I requested UPS NDA and they didn't even bother to do that.”

“If I'm waiting on a part that I think is coming in, let's say, from Morton's truck (bi-weekly truck full of all different parts). I know the truck runs early in the morning and my part is probably sitting on KMI's dock. They unpack everything and check it in and then the paperwork goes into the office and it's not until afternoon that you will actual see the parts "appear" in the system to be able to run your work orders. I usually set a reminder on my calendar to check for the part in the afternoon. If we had the ability for the receiving dock to scan items we at least know that it arrived (or not) before the day was almost over.”

Actions items:

Contact Danica concerning change management issue-Assign someone to contact her. Drake has been asked to compile information concerning how much we lose financially on an

annual basis due to the inventory count. Not only is QAD shut down (no orders can be processed), but the salaries of the employees counting has to be considered as well (non-valued added exercise), variable labor rates charged by KMI, supplies purchased, and food expenses during the count. (Estimates are currently at the $50,000-$60,000 range, but we are waiting for a definitive answer from accounting). –Will need someone to bird dog accounting.

Determine how much we are spending for unnecessary transportation costs and other charges that currently are not being tracked effectively (all manual entry and on paper). –Steve Glidewell?

April 21, 2016: This morning Bobbi, Jason, and I spoke with a third party consulting firm called St. Onge. They have previously done supply chain optimization projects before for Caterpillar. Examples of facilities that St. Onge has helped include York, HH, KK, a container study, logistics project in Canada, Mossville, and Mapleton.

They specialize in end-to-end supply chain optimization including network optimization, inventory optimization, system recommendations, and labor efficiency. We would need to have them sign an NDA after seeking approval from senior management for them to walk through our warehouses. The three of us felt as if we could use our own Caterpillar resources at Morton for this instead of spending extra money.

April 21, 2016: Bobbi, Jason, and I met with Jeff to discuss his previous bar coding project from two years ago and what lessons he learned and if he had any information to share.

The initial proposed budget of $250,000 was greatly overstated. Actual cost may be closer to $50,000.

QAD does have a function that will work with bar code scanners, but licenses would have to be purchased in order to use this feature.

QAD is cycle count capable, which would also eliminate the need for an annual count. Jeff is going in two week to investigate the newest QAD version called Enterprise. This new

version will be fully capable of supporting bar code technology and will have its own WMS integrated into QAD (eliminates the need to have compatible software created).

As our resident SME, Jeff stated that by using this new version of QAD in conjunction with bar code scanning technology that inventory efficiency, inventory accuracy, time efficiency, and ASN’s would be improved.

We discussed proposing upgrading to Enterprise, purchasing bar code scanners, and consolidating inventory at KMI. We can also check with facilities that are closing in order to re-purpose bins, racks, and other hardware to help reduce cost.

Once we get more definitive numbers from accounting, we will need to start putting a short, but to the point, presentation together to present to the stakeholders. In order to effectively do this, we may need to consider rolling out in three phases:

Phase 1: 1. Show our current state

2. Show our competitors state

3. Show future state (possible “demo” storefront webpage??) Who could help with this??

Phase 2: 1. Suggest an update to KMI’s contract with us to be based around performance (i.e. quality and velocity metrics)???

2. Installation of bar coding system and footprint reduction.

3. Variable rate structure for picks and put aways??

4. Deductions made for damage??

Phase 3: Blue Dot: OEMSG storefront by 2019.