Lean manufacturing from a spring manufacture’s standpoint as it relates to the spring manufacturer’s customer is largely about minimizing the costs of the supply chain. Consider a spring customer who uses a just-in-time inventory system, which is the best way to economically produce springs for the spring manufacturer?
There are 3 basic ways to go about it:
1. Buy wire on a weekly basis and making springs as needed with zero stock
2. Buy a larger portion of spring wire to manufacture springs for multiple releases
3. Buy all the wire for the contract period and stock all the finished goods
Which is leaner for the spring manufacturer?
There are several things to consider. One is multiple machine set ups with weekly-type releases. These can be costly (depending on how complicated the set up is) and the actual set up time for the first release should accurately answer the question of labor costs associated with the job in terms of set up.
The second factor is the cost of raw material and how much raw material makes sense to bring in for tying up inventory dollars. If the raw material is expensive, a large amount of raw material that sits on the floor for months at a time waiting to be twisted; can disrupt cash flow.
The third factor is material price volatility. If the raw material has a price variance nature, such as stainless steel spring wire, a jump in surcharges can have a negative effect on margin.
The answer for the spring manufacture is to take each JIT, or long-term commitment on a case-by-case basis. Generally speaking, contracts should be reviewed on a 90-day basis; this should even be written into 12-month agreements. In reviewing the original agreement, factors to look for include the customer’s actual usage, the fluctuating costs of material, and the accuracy of the labor time in the original quote. The 90-day period leaves an out for both parties should the original agreement end up not working for either party.