PLYMOUTH, Mich. — Companies struggling to balance the disparate goals of minimizing inventory costs while protecting customers from raw materials shortages can learn about an industry-best purchasing approach from Freudenberg-NOK Sealing Technologies at the 2014 IndustryWeek Best Plants Conference taking place May 5 to 7 in Milwaukee. Freudenberg-NOK will share its approach to managing supply chain uncertainty and generating savings through inventory optimization.
Robert Martell, supply chain manager, Chemical Raw Materials for Freudenberg-NOK, will discuss the innovative commodity purchasing model he has developed and successfully implemented across the seal manufacturer's North American facilities. The model, which considers a broad spectrum of factors in establishing optimal inventory levels, has helped Freudenberg-NOK eliminate hundreds of thousands of dollars in excess inventory costs on its books while ensuring its customers' material needs are met.
"For example, we maintained four weeks of Fluoroelastomers (FKM) as standard inventory but we began to ask ourselves if this was really the right number," Martell said. "It was expensive to carry this inventory. Factors like availability, production schedules, product use and cost weren't being factored in. We needed a more surgical approach – one that would identify ideal inventory levels that would protect our customers while minimizing risks and costs at our plants."
Martell's model, being implemented for Freudenberg-NOK's chemical spend, factors in considerations such as how much material a facility uses by part number, what kind of feedstocks are used to produce the material, where the material is produced, how stable is the supplier, the level of the supplier's inventory and how often is it made. By assigning a numeric risk value to these and other factors, Martell is now able to help plants develop an overall risk value that guides inventory decisions. This material-not-commodity approach was first piloted at Freudenberg-NOK's LaGrange, Ga., facility with marked success. The company has since been rolling out this inventory optimization model at other facilities and for all of its material buys.
"This kind of risk management fits perfectly with the active commodity management that our team practices," Martell said. "We are constantly refining strategies as they relate to different parts of our material spend. Our suppliers have told us this approach is a very efficient, elegant way to manage inventory. We work very closely with them to maintain this kind of dialogue and trust."
Martell will discuss Freudenberg-NOK's inventory model at the 2014 IndustryWeek Best Plants Conference on Tuesday, May 6 at 2 p.m. in the Wisconsin Center. For more information about the conference, go to: www.iwbestplants.com.
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About Freudenberg-NOK Sealing Technologies
Freudenberg-NOK Sealing Technologies is the Americas joint venture between Freudenberg and Co. in Germany and NOK Corp. in Japan. Freudenberg-NOK is a leading producer of advanced sealing technologies for a variety of markets including: aerospace; agriculture; appliance; automotive; construction; diesel engine; energy; food and beverage; heavy industry; and pharmaceutical. Founded in 1989 under the legal name Freudenberg-NOK General Partnership, Freudenberg-NOK is headquartered in Plymouth, Mich. and operates more than 20 facilities across the Americas. For additional information, please visit www.fnst.com.