Month: August 2023

Have you ever hosted a dinner party just to discover that you have a week’s worth of leftovers at the end of the night? Waste, in principle, is a natural part of building or creating something. In manufacturing, however, you can’t put waste in Tupperware and have it for lunch the next day. In business, the consequences of waste have compounding effects that can negatively impact your bottom line.

The results of manufacturing waste are extreme. Inventory and manufacturing waste total an average loss of $163 billion annually, mainly due to human error in inventory management and manufacturing.

So how does manufacturing waste happen? And what exactly is classified as waste? Waste isn’t always the inventory that doesn’t make it to the customer’s door; it’s also the processes that don’t add any value to the customer. However, some activities, while considered waste, are vital to the production process.

You can assess waste in two ways:

• Product development: Waste that directly impacts revenue but is essential. For example, production planning, quality testing, creating warehouse reports, etc.
• Pure waste: Waste that doesn’t add value and is unnecessary. For instance, waiting for someone to finish using a machine before you can use it.

In this post, we’ll explore the different types of waste, strategies for reducing it, and how cutting waste can have significant, and sometimes unexpected, benefits for your growing business.

What are the types of manufacturing waste?

When companies examine ways to reduce waste, many look to the lean methodology — a philosophy of continuous improvement rooted in finding and removing waste in workflows. Lean methodology divides waste into eight specific types:

• Inventory: Excess stock that becomes waste.
• Transportation: The process of moving stock from one place to another.
• Waiting: The time a human or machine has to wait for the completion of one task to start another.
• Motion: Unnecessary movement that could be used for another purpose.
• Overproduction: Excess products that go unused.
• Defects: Products that don’t meet customer specifications and have to be discarded.
• Overprocessing: Processes that don’t directly deliver value to customers
• Under-utilized staff: Workers whose skills or time don’t deliver value to customers.

As you can see, manufacturing waste is not always scrap materials. It can also take the form of unused or misused time and resources.

How to reduce manufacturing waste

Now that we’ve defined manufacturing waste, how can small businesses reduce it? Remember, some waste is necessary to achieve the end result, so manufacturers can never totally eliminate waste.

However, there are strategies businesses can employ to reduce waste as much as possible. Here are 11 proven methods for success:

1. Implement lean manufacturing principles

The idea behind lean manufacturing, or lean warehousing, is to maximize efficiency by reducing all efforts and resources that don’t drive value to the customer.

Under lean principles, every aspect of the manufacturing process is examined under a microscope to pinpoint where inefficiencies stem from. Some improvements that may come from implementing lean principles may include:

• Reorganizing machines for maximum efficiency.
• Reevaluating employee schedules to ensure everyone delivers value while on the shop floor.
• Rewriting processes to eliminate any gaps in efficiency.

2. Prioritize warehouse organization

In manufacturing, warehouse design is critical. Warehouses should always be well-marked and organized so shop floor workers never miss a beat.
Clearly mark all the locations of assets throughout the warehouse, including:

• Inventory
• Supplies
• Tools

Over time, the markings may fade, become nonexistent, or obsolete. Worn signage may not affect longtime employees, but new hires and temporary workers may have difficulty navigating through a warehouse that isn’t marked or organized. When performing your regular waste audits, prioritize clear labeling.

Cin7 Core’s WMS app takes the legwork out of warehouse organization for businesses. With our advanced features, you can create dedicated zones, draw out walking paths, and more. With all this information available, you can easily visualize your most efficient warehouse layout.

3. Train employees on waste reduction practices

Businesses can create waste reduction processes and train employees on them so everyone is aware of the little ways they can reduce waste on the shop floor.

For example, businesses can establish standard operating procedures in the warehouse so everyone knows the expected quality and quantity of products during production. If everyone is sufficiently trained on the standards, waste is far less likely.

4. Optimize shop floor communication

Seamless communication on the shop floor is also key for ensuring everyone has the most up-to-date information regarding product specifications. Inefficient communication can lead to defective products and wasted time.

Easy ways manufacturers can pass information to the shop floor include:

• Daily meetings.
• Automated reporting.
• Quick debriefs between shifts.

5. Create goals and benchmarks for waste reduction

Attaching a specific benchmark to a goal makes it much easier to track progress and see how far you have to go realistically.

Example: If your company’s goal is to reduce waste, put a measurable value behind it.

1. Calculate the amount of waste you’re currently seeing and try to reduce it by 15% before the end of the quarter.
2. If you fall significantly short of that, your processes may need an overhaul.
3. If you fall just below it, you know you’re trending in the right direction.

6. Minimize water usage

Wastewater and industrial sludge comprise a significant portion of manufacturing waste streams. You can reduce them by minimizing water usage in the operations.

You can do this by substituting water with:

• Chemical drying agents.
• Dry machining.
• Reverse osmosis.
• Utilizing a membrane biological reactor system.

You can also encourage employees to reduce bottled water, as plastic drinking bottles comprise a major portion of plastic waste. Switch to drinking water in glasses or promote using reusable bottles in the workplace.

7. Optimize production scheduling

If you can streamline production schedules, you can cut back on wasted time. The best inventory management software includes automated demand forecasting as a built-in feature, so you can schedule accordingly and prevent unplanned downtime.

Once you know what demand looks like, you can create optimized schedules and ensure time and energy never goes to waste.

Watch our webinar on how to prepare for seasonal demand.

8. Minimize overstock and overproduction

Overstock and overproduction are perhaps the most common types of manufacturing waste. A great way to limit this type of waste is by implementing a just-in-time inventory system.

In a just-in-time system, manufacturers order raw materials from suppliers right before production begins. By waiting until the last minute to order these materials, manufacturers can keep production levels low, reducing the chance of obsolete inventory and deadstock.

9. Adopt a closed-loop manufacturing system

Green chemistry, or designing materials to reduce hazardous waste, is an excellent technique to reduce waste generated by various processes, but if that’s not a viable solution, consider a closed-loop manufacturing system.

A closed loop helps you:

• Keep track of inventory.
• Utilize recycled materials in the production cycle.

Closed-loop systems extend the life span of chemicals by maximizing their efficiency. It helps reduce contamination and minimizes the amount of new chemicals you need to purchase.

10. Reduce packaging

Redesign product packaging and ensure it uses the minimum amount of materials. Incorporate recyclable or reusable packaging content, such as air packs or corn-based packing peanuts, for cushion.

Buying products in bulk can also help reduce your overall packaging volume.

11. Optimize inventory management

Connected inventory performance isn’t just about quickly getting products to customers. It’s also about managing inventory in an efficient and growth-oriented way — and waste is often the enemy of growth.

By optimizing your inventory management through comprehensive software, you can see where waste is coming from and then take the necessary steps to reduce it. While sometimes waste is apparent, other times it’s harder to find. An end-to-end tool can provide a broad look at your inventory processes and help you determine where to improve.

Request a demo of Cin7 to see inventory performance in action.

Benefits of waste reduction

Minimizing waste provides several significant benefits for a business, some more obvious than others. Here are a few well-known, and some lesser-known, benefits of cutting back on manufacturing waste:

Reduces time and costs

Spending money on something you don’t need or don’t use is never good. Analyzing your manufacturing processes to see where waste is happening can help you significantly reduce costs — whether it’s on materials, labor, or both.

By creating a process built to prevent waste, you can also save time as you enjoy a more hands-off approach to inventory management. With all this time back, you can focus on the more important tasks, like growing your business.

Increases operational efficiency

Reducing waste doesn’t just mean cutting down on obsolete inventory — it also means filtering out the processes and time that don’t drive value.

Once you determine where the waste stems from, you can make changes that lead to more efficient processes. This might mean:

• Reevaluating your warehouse design for optimal efficiency.
• Reducing the amount of labor at a given time.
• Cutting back on repetitive QA processes.

Determining and deleting inefficiency can help you produce faster and grow quicker — with less money spent.

Creates a positive environmental impact

Overproduction and over processing can have a damaging environmental impact and should be avoided as much as possible.

Reducing packaging waste or using recycled materials can benefit your company’s production and its commitment to sustainability, giving you a competitive advantage in both growth and reputation.

Gives you a competitive advantage

It’s not common that companies will go the extra mile in reducing manufacturing waste. If you commit to prioritizing inventory control, performing waste audits, making efficiency changes, and reevaluating your processes, you can likely set yourself apart in your market.

How Cin7 can help

Waste is often hard to recognize, especially if you’re a growing business that has to focus on various other business items. However, adding automation to your inventory processes can help you glean where your inefficiencies lie and where waste is prominent.

Connected inventory performance allows businesses to see inventory from a bird’s-eye’s view and easily dig into where they can make improvements. With demand forecasting, reordering, and more done for you, you can create an inventory management machine impervious to waste.

Start a free trial of Cin7 to start reducing waste today.

MRP software isn’t a new innovation. Believe it or not, MRP software was used in the 60s when Joseph Orlicky developed it to help growing businesses like Black & Decker.

While its beginnings are humble, today, the market for MRP software is worth over $5 billion. Understanding MRP can give you a deeper knowledge of modern inventory management and connected inventory performance solutions.

Material requirements planning (MRP) software helps manage and optimize manufacturing processes. MRP helps companies keep the minimal raw inventory needed by outputting purchase orders and other reports. MRP relies on data and requires strict data protocols to output these documents.

MRP is like the grandfather of enterprise resource planning (ERP) software, and the principles of MRP are an important part of ERP. We want to explain MRP so you can better understand how this standalone solution works for businesses such as hospitals and restaurants. We will also explain how it has informed modern solutions.

How does MRP work?

MRP is a product-oriented approach to manufacturing and inventory control. This is why the main inputs include the master production schedule, inventory status file, and bill of materials (BOM). It’s all in support of the manufacturing process.

The two main phases of the MRP process are planning and execution. Remember that MRP software relies on consistent and accurate inputs. Businesses need to test and revise their systems to ensure accuracy.

Phase 1: Planning 

The planning phase sets the foundation for the entire process. MRP doesn’t leave room for error, so documents need to meet the needs of the MRP system. For this reason, all departments need to make sure they’re using the same standards when creating:

• Bill of materials (BOM)
• Master production schedule (MPS)
• Inventory status file (ISF)

Once all the key documentation is in order, you can input it into the system. It’s important to strive for perfection, but perfection is also unlikely. With time and adjustments, the system can begin to run smoothly.

Phase 2: Execution

With key documents ingested, the MRP system can use this information to monitor the manufacturing process. In basic terms, it will look at both sets of information to determine the minimum amount of materials required. At a top level, the MRP system then determines:

• Materials required
• Amount of materials required
• When the materials are required

The MRP can then generate reports based on this information. This includes purchase orders (POs), material plans, work orders (WOs), and reports. With accurate input data, it can predict potential disruptions and provide helpful suggestions.

Why is MRP important?

MRP is important because it optimizes ordering, planning, manufacturing, and supply chain management. The MRP process focuses on your product and strives for an optimal process that reduces associated costs.

MRP is a longstanding technology that is still popular today. Additionally, it’s a key component of enterprise resource planning (ERP) and the best inventory software.

Challenges and benefits of MRP

The demands of an MRP system can lead to benefits and challenges. It can lower costs and optimize production, but this can be difficult to achieve without strict guidelines and training.

MRP inputs

MRP inputs are the key documents used by the system for analysis, monitoring, and generating outputs. Data integrity is key to a successful outcome, and all inputs need to be structured cohesively for the MRP system to understand them. To make sense of this, we will break down each of the MRP inputs.

Bill of materials (BOM)

The bill of materials (BOM) lists the materials required to manufacture a finished product. It can provide details on raw materials, components, subassemblies, consumables, and more.

The main details of a BOM include:

• Type of materials
• Quantity
• Cost
• Procurement instructions

The details included in a BOM can be extensive, including product drawings and design instructions. One of the few details excluded from a BOM is labor. However, the master production schedule will account for this.

Master production schedule (MPS)

The master production schedule (MPS) is the bedrock of the MRP process. The MPS outlines important information and timeframes concerning the production of finished products.

MPS documents include detailed information on things like:

• Deadlines
• Demand forecasting
• Alternative scheduling options
• Bill of materials
• Inventory levels
• Staffing

For a successful outcome, the MPS needs to work with the information provided in the BOM. The MPS also requires detailed information for inventory levels.

Inventory status file (ISF)

The inventory status file (ISF), or inventory status record, provides inventory information for the MRP system.

The ISF includes information on:

• Available inventory (including safety levels)
• Ordered inventory
• Procurement details (including price and lead times)

This information informs MRP outputs, the outcome of the MRP process, such as purchase orders, and other useful reports.

MRP outputs

MRP outputs, the manufacturing documents generated by the MRP process, rely on high-quality MRP inputs. This means the MRP outputs are only as good as the MRP inputs. With enough testing and fine-tuning, the MRP will output highly useful and detailed documents.

Purchase orders (POs)

MRPs create purchase orders (POs) based on details from the input data. The resulting POs account for time-sensitive details like purchase order lead times.

The MRP can even make suggestions for changing existing orders. This information supports an optimized production that accounts for available materials. Businesses can produce items based on demand and availability, avoiding surplus stock.

Transfer orders

Transfer orders generated by the MRP will detail the exact materials for transfer between warehouses. As with POs, these orders will make recommendations based on known time frames.

Transfer orders can provide information on:

• What to transfer
• Amount needed
• Storage area
• Destination

Work orders (WOs)

Since MRPs know what is needed and when they can generate highly optimized work orders (WOs). They can also forecast demand and make recommendations for creating the appropriate amount of stock.

Work orders can provide details on:

• Product
• Route (steps for building)
• Materials, cost, and quantity
• Labor and cost
• Machines and cost

Other reports

Aside from the main reports listed above, the MRP can output other detailed reports. These are “secondary” reports, whereas the above outputs are “primary” MRP reports.

Secondary MRP outputs address:

• Performance control: order availability and other supply chain concerns
• Planning reports: inventory forecasting and demand planning details
• Exception reports: internal issues like delayed orders and manufacturing errors

MRP vs. ERP

Enterprise resource planning (ERP) is an evolution of traditional material requirements planning (MRP). ERP software offers many solutions rather than a stand-alone solution like MRP.

MRP focuses on the manufacturing process, but ERPs can involve and inform all departments. ERPs collect information from manufacturing to marketing and beyond. The result is a broad range of modules that support day-to-day organization.

ERPs can provide:

• Workflow automation
• Real-time monitoring
• Customer relationship management
• Project management
• Inventory management
• Compliance and risk management

Beyond traditional ERP, Cloud ERP platforms offer an end-to-end solution for product-focused businesses. These advanced inventory management systems can integrate operations and finances across multiple locations. With cloud ERP technology, businesses can stay flexible with up-to-the-minute inventory information.

Who should use MRP?

MRP is best for large-scale manufacturers with predictable batch production needs. It may be less suitable for businesses manufacturing a wide range of products. Additionally, it is a production-focused tool that doesn’t provide a wide range of modules.

Small- and medium-sized businesses that sell products should consider an end-to-end cloud ERP platform. Small teams can enjoy powerful inventory management, automation, and seamless e-commerce integration.

Take your business to the next level with a free trial of Cin7’s Cloud ERP and Inventory Management.