intended purpose of Cummins’ Supplier Managed Inventory project is to improve
and visibility of production material available for use in assembly. This
should help both
Cummins and their suppliers reduce the overall inventory in the pipeline over
time and stabilize
In today’s environment Cummins maintains
safety stock at their facility to compensate for scheduling changes, inventory
inaccuracies, supplier lead times for replacement, and transportation time. The supplier does not
have visibility of this material.
The supplier must rely on the
demand forecast from Cummins and their own historical information for production planning and as a result
may have too much or too little inventory in process at any point in time. They may not be able to
react to a shortage caused by demand swings, inventory errors, transportation problems or quality
issues. Most suppliers will carry excess inventory at their location to be able to provide their
product to Cummins when these instances arise.
When material is stored at an
offsite location, it is visible to all parties. Cummins can see what is available for immediate use and the
supplier can see if Cummins is pulling more or less than forecasted demand.Cummins can reduce their in house safety
stock and the costs associated with carrying excess inventory. The supplier can reduce
inventory in the pipeline by using actual versus forecasted data to maintain a
safety stock level at the offsite location. This can in turn contribute to leveling of production
scheduling for their product. There is a process for advanced notification when problems occur. There is
increased reaction time since the material is located nearby, which can save emergency
transportation and expedite costs.