Outsourced Kitting: The Fastest Way to Streamline

If you are truly working towards being a lean manufacturing company, then why would you be wasting time and resources on sourcing, procuring and kitting electronic components in house?

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By reading this you are at least moving in the right direction.  Focus more on serving your customers, improving you products and services, while reducing lead times and costs with outsourced component kitting.

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Your company and its staff should be concentrating on using their experience and skills to sell, build, test and design products, and not counting low value components for the production line.

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Outsourced kitting gives you access to thousands of suppliers while only dealing with one, you won’t have to find and contact lots of suppliers to check pricing, stock and lead times.  Then wait for the quotations to come back to compile and enter the data onto your system.

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I’m sure you know the next step, start raising purchase orders for each company you wish to procure components from.  You also know that, that’s not the end of it.

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Chasing orders in, short shipments, incorrect parts, split reels and lead times being pushed out all begin consuming your time and resources.

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In the following I will do my best to explain how outsourced kitting is one of the most effectively, simple ways to reduce costs throughout the organisation as a whole.

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It’s All About Flow

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Flow is one of the most important concepts to grasp in lean manufacturing, if everything flows smoothly then throughput becomes predictable.  Little or no peaks and troughs equal less dramas and costs.

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Flow needs to be throughout the organisation for effective efficiency to be gained.  There is no point doing a Kaizen event on an area, if the flow before or after it is bottlenecked.  Always consider the flow first.  See the flow in both material and admin to make the biggest impact.

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Let’s follow a single component through a manufacturing value stream, along with some ancillary functions.

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In this example let’s follow a resistor.

• It starts as all business starts, with an order from the customer.
• Sales take the order and load it on to the system.  This gives them the lead time to confirm with the customer.
• The system generates a work order and a purchase requirement for any material not currently in stock.
• Our resistor comes up on the purchase requirement report, so we start the process.
• We check with some of our favourite suppliers for pricing and lead time.  Some come back quickly, others we have to check websites, and a few end up needing to be chased.
• Now we to compile and enter quotes received into our system, and we can raise a purchase order for the required quantity.
• Next we email a P/O or web purchase our resistor.
• As we move closer to the production date we start the process of expediting, looking for alternatives and dealing with erroneous deliveries.  
• Our resistor arrives on a split reel and our machines do not run split reels, what’s more annoying is there is a note on the P/O highlighting the fact we cannot accept split reels.

So goods in have now wasted their time receiving the resistor, and you now need to raise an RMA, organise a credit note, ensure the replacements are shipping and get the split reel shipped back.

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Finally all lines needed to complete the kit have been individually received, booked in, transferred to stock and are sitting in stores waiting to be picked and kitted.

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Production starts kitting to feed the line with the build which our resistor is a part of.  Production use resources to pick, count and kit instead of actually producing.

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Our build goes through without a hitch and is ready to ship.  Our resistor has now joined all the other components and has become a shippable product for our customer.

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If this were a seventy line BoM you’ll need to multiply the process seventy times for this Bill of Materials, which adds up to huge unseen & uncalculated costs.

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Here’s the story:

• Purchasing has raised multiple P/O’s.
• Goods in have received multiple deliveries.
• Accounts has multiple delivery notes & invoices to process and multiple companies to pay.
• Production have used overtime and temps to process the kitting operation along with rescheduling, many times.
• Sales have made multiple communications updating the customer with changes to delivery dates and getting a hard time because of it.

It doesn’t seem to have any flow at all, and consumes large amounts non-recoverable expense.

Now when outsourced kitting is used, the process is massively streamlined.

1. The customer order is received.
2. Your system generates requirements.
3. Purchasing uploads or emails Bill of Materials to Colmworth.
4. Goods in receive a single kit of components.
5. Accounts process one delivery note & invoice.
6. Production receives a production line ready kit with no shortages.

It almost seems ridiculous to kit in house anymore.

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Outsourced kitting is a genuinely effective tool for lean manufacturing and cost saving.  Cash flow is also improved with delayed ownership.  Lead times are reduced and your stock holding is minimised.

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Let’s start today, upload your BOM for a no obligation quotation.

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