Making Changes: How one company cut monthly costs by 20%

Making changes: How one company cut monthly costs by 20%

June 11, 2024
By Nick Nowak | Senior Lean Solutions Project Manager

The key to success? Lean into things.

Mining companies don’t have pre-existing workspace, they create it. And when you’re working in that kind of environment, you start to think about your supply chain in different ways.

Stocking equipment near the point of use becomes imperative. You can’t have workers who need something walking halfway across a site to get supplies. But you also can’t devote large amounts of space to inventory.

Where does that leave you? Ready for change.

Getting started

Change can be tough. Tough as slate, in fact. But there are ways to make it easier. Lean methods extend beyond manufacturing, and having a Lean expert look at your work is a good idea when you’re contemplating widescale change.

So, when The Digg Company created a list of changes that needed to happen, they knew they had their work cut out for them.

Their leadership saw three opportunities for improvements.

Free up space in and around their facility.
Reduce time cutting (and following up on) purchase orders.
Remove double-handling when receiving and distributing product.

In their current state, it was difficult to complete inventory management tasks in a timely matter given the flow and volume of product. Leadership at all levels wanted to take back real estate and benefit from a more streamlined supply chain.

Since they had a long-standing relationship with Fastenal, they spoke with their on-site rep, and he put them in contact with the Lean Solutions team from Fastenal.

Walking the work

Fastenal rep and customer walking the floow

Workplace solutions are best when they’re custom. Because of that, Fastenal’s Lean experts visit each location in person. Sure, there are best practices that can be talked about on a call, but if you really want to unlock a team’s full potential, you need to be able to see how and where they work.

So, Fastenal sent Zachary. (That’s his real name!) He went through the entire campus, asked a metric ton of questions, and created a Lean Solutions Business Assessment. Think of this LSBA like a SWOT analysis on steroids. In his report, Zach provided a detailed breakdown of where things stood in the business.

In his notes he says, “On a high-level, they want us to identify continuous improvement opportunities.” Then, he lists some specific directions to consider.

They're looking to consolidate SKUs and suppliers.
Adding in-plant lockers would offer them a way to standardize their PPE.
They are open to ideas like inventory management, better footprint usage, and FASTPODs.

Near the end of his LSBA, Zach drops this nugget.

“Following our meeting, the plant manager indicated he is interested in a TCOA. However, he would like to schedule some Teams calls a few weeks apart. This will give his site time to gather information for areas in-scope and periodically check in with us throughout this process.”

If you don’t know what a TCOA is, this is where things get interesting.

Finding a way forward

After hearing of leadership’s desired improvements, Fastenal sent a team to conduct a Total Cost of Ownership Analysis. Known more commonly as a TCOA, the report highlights opportunities for improvement in the supply chain by identifying waste and offering specific ways to mitigate it. This results in a comparison between the Current State and proposed Future State.

What wasn't working

Inventory visibility: Difficult to effectively track inventory.

Solution: Fastenal expanded duties to handle belts and filters.

Space constraints: Belts are hung on walls while items are piled in limited space.

Solution: Inventory and commodities were moved to a new dedicated space, a shipping container.

Double handling: Excessive time is spent receiving and sorting inventory.

Solution: Items that weren't handled by Fastenal were put under Fastenal's oversight.

Sourcing & POs: Time spent researching suppliers and vendors.

Solution: Again, consolidating to Fastenal, drastically reduced the number of POs.

Matching PO to products: Items often arrive without being associated to a PO.

Solution: Having fewer suppliers in the mix means a cleaner operation. Fastenal is more involved and their team can be less involved.

Building the future state

Let’s jump to the big finish. The TCOA showed a LOT of room for savings. The monthly costs were projected to drop 20%. Over the course of a year, the savings were expected to approach half a million.

The company saw the value and decided to move forward.

Some of the changes were big. Two examples were FASTPODs – container units modified to act as mini-warehouses and staging areas. These were installed on the campus in areas that made sense. In fact, both were put in empty spaces between buildings.

In a way, this added square footage to the campus. Fastenal maintains the FASTPODs and uses them to handle inventory management while freeing up room in previously crowded buildings.

Why do a TCOA?

Considered on its own, the price of an item can seem cheap or spendy. Taking a look at the total cost of ownership shines a light on all the invisible expenses. With a TCOA, it’s easier to see that using your own time to manage inventory is costing you way more than can be recovered by buying the cheap version of a few items.

Here are three reasons why you REALLY should ask about a TCOA.

What does it cost? Nothing.
How long does it take? 1-2 days depending on your size.
What's a typical result? 20-30% reduction in TCO.

You can carve out the path to success. You can be the reason work gets better. Just ask about a TCOA, and we can help.

This is an actual slide that was shared with the plant manager and site leadership.

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