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Manufacturing Technique Reduces Inventory, CostsManufacturing Technique Reduces Inventory, Costs

Originally Published MDDI March 2005NEWSTRENDS

Erik Swain

March 1, 2005

2 Min Read
Manufacturing Technique Reduces Inventory, Costs

Originally Published MDDI March 2005


Erik Swain

Gates: Packaging is more than developing a package that fits and protects the product. Ease of use, inspection, shipping, and ergonomics considerations should also be taken into account.

Conventional wisdom holds that the best way to make the manufacturing process less expensive is to reduce labor costs. In fact, says a team from HEI Inc. (Boulder, CO), the best way is to reduce inventory, both warehoused and in process. At January's MD&M West show in Anaheim, CA, the team showed how device companies can reduce inventory through customer-demand-based manufacturing (CDBM).

“Materials are usually 70–90% of the cost of goods sold,” said Roy Humphrey, a product line manager at HEI. “Overhead makes up the second-highest percentage, and labor ranks third, usually at 2–10%.”
Using CDBM drastically reduces inventory, and thus reduces overall material costs and cuts overall manufacturing costs, Humphrey explained.

One principle of CDBM is to manufacture using batches as small as possible, even by individual product in some instances. This, Humphrey said, drastically cuts in-process inventory and gets each product through the manufacturing and quality control processes more quickly. To illustrate, the HEI team had six attendees simulate a manufacturing floor, making paper airplanes from a blank sheet of paper, with each person responsible for making a different fold. Using batches of six, it took 12 minutes to get a designated sheet from the start of the process to the finish. At the time that sheet got to the end, 46 others were in process. Doing the exercise in batches of three took 6 minutes and left 18 in process. Doing the exercise in batches of one took just over a minute and left five in process.

Another principle is mixed-model manufacturing, which can work with some kinds of medical devices but not others. This involves determining which products share which manufacturing processes and devising a manufacturing strategy that takes advantage of such efficiencies. In conjunction, said Henderson, which steps add value and which don't should be documented, and the steps that don't add value should be condensed or eliminated. Yet, he said, time and expense for rework and scrap should be identified and built into the process. Some level of rework and scrap is inevitable, and failing to plan for them begets inefficiencies.

Incorporating these and other principles of CDBM not only increases inventory turns, but also improves manufacturing lead times, on-time deliveries, service levels, and first-pass yields, he said.

Copyright ©2005 Medical Device & Diagnostic Industry

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