Improve Profitability with the 9 Box Model
Ruben Mirensky, President and CEO of IMCO Associates Inc., releases an Inventory Management Strategy called the 9 Box Model and Trade-Off Tool. It uses Product Segregation and Rationalization to optimize decision making for Inventory Management.
This strategic planning tool, in combination with a Manufacturing Execution System (MES) software, is a game changer for companies looking to increase their bottom line. Mirensky’s system improves profitability and OTIF (On Time and In Full) delivery for companies across the manufacturing space. Continue reading to learn how your company can benefit from the 9 Box Design in combination with IMCO – CIMAG MES.
THE 9 BOX
The 9 Box allows key decision makers to balance inventory solutions in a visual and concrete way. According to Ruben Mirensky, “When service levels are very low, the whole supply chain system goes into a downward spiral. Every step of the supply chain, customers, both internal and external, tend to order and increase inventory to try and make up for the failures in delivery. That artificial demand, in turn, puts more pressure on the capacity to deliver on time real requirements which of course causes OTIF to spiral even further down...”
Luckily for manufacturers, Mirensky’s 9 Box can help.
HOW IT WORKS
The 9 Box Tool first segregates products according to:
- The Level of Usage
- Variability of Usage
These categories then act as a guide to display what changes need to happen to improve the current inventory setup.
THE 9 BOX QUADRANTS
AL & BL
Above you will see an example of a 9 Box Analysis Graph (image 2) from a previous project completed by Ruben Mirensky. He suggests that the focus of improvement efforts should be on any items that fall into the AL and BL quadrants (in green). Those quadrants represent items that are sold more often and in steady quantities. Directing the focus to these sections causes a progressive domino effect for OTIF.
Referring to images 1 & 2, one can see that concentrating on the improvement of reliability in the AL and BL quadrants creates an opportunity to increase OTIF to a level of 55% to 65% in a couple of months.
AM & BM
The next quadrants to examine are AM and BM (in orange). Items found here will be the products ordered less frequently with various (inconsistent) quantities. This model helps management personnel recognize goods that should not be part of the production wheel.
From here Ruben Mirensky suggests evaluating the lead time to reduce the amount of inventory. He explains, “the safety stock will need to cover not only their demand variation, that is deeper than the one of L items, but also the quantity needed to satisfy the average demand for the period between the lead time our customers, internal and external, give us and the lead time we need to make those products. The focus for those items should be to shorten the lead time we need to make them. That will allow us to reduce inventory without impacting OTIF delivery or better yet, improving it.”
The next phase of utilizing Mirensky’s system requires making a strategic decision involving useless inventory. Any items that fall into the DZ quadrant will be useless inventory. These products need to be removed due to the fact they hold little to no value for the company.
The Complexity of “H” Items
This is where things get a bit more complicated. According to Ruben Mirensky, items that fall in these quadrants are products used or sold sporadically or with significant variations in quantity.
“H” items require a differentiation for three distinct situations:
- H items that ARE NOT REALLY H items: There are one or more similar items in the L or M quadrants and those items in the L or M quadrants have a tighter spec than the H item in question.
- H items that ARE NOT REALLY H items: There are one or more similar items in the L or M quadrants except that the spec of the H item is tighter than that of the corresponding items in the L or M quadrants.
- H items that ARE TRULY H items: There are no similar items in the L or M quadrants or there are but the H itemhas a tighter spec and the cost of producing the corresponding items in the L or M quadrants to the tighter spec of the H item is higher than the cost of the disruption to the regular manufacturing operations.
(Click here to review Mirensky’s white paper explaining each “H” situation more in-depth)
According to Mirensky, “Assuming Customers cannot be charged a higher price for these special “H” items and they are not willing to buy a full batch of them, what concession can be obtained from customers to make it economically possible to produce these special “H” items?”
As we stated above, in most cases the costlier aspect of H items is the disruption they cause to the regular manufacturing operations. Mirensky continues by saying, “Having Customers agree to give us longer Lead Times will allow us to produce these special “H” items when the disruption they cause to the regular manufacturing operations is the lowest and therefore the cost of producing them is the lowest.
IMCO – CIMAG MES & LEAD TIME
Now that we have covered The 9 Box model let’s review how a Manufacturing Execution System like IMCO – CIMAG MES enhances its usefulness for companies.
Business leaders will agree it’s easier for customers to accept longer lead times versus paying higher prices or receiving different quantities. Ruben Mirensky suggests in his white paper that having longer lead times will give your company the opportunity to designate specific times for production of “H” items to have the least impact on regular manufacturing operations. Doing this will reduce the cost of disruption as a result.
Manufacturing Execution System (MES) Software
MES Software is used internationally across the Manufacturing space to enhance the capabilities of Enterprise Resource Planning (ERP) Systems. Systems like IMCO – CIMAG MES provide a sophisticated approach to Shop Floor Control. If your company needs to automate and optimize key manufacturing functionalities like Scheduling, Traceability, and many others…this is the solution your company needs to budget for in the future. (Check out the overview video at the bottom of this page*)
Using a system like IMCO – CIMAG MES in combination with Ruben Mirensky’s 9 Box allows your company to run item segregation and rationalization models with a click of the button. (It’s indeed that simple!) The state-of-the-art Scheduling Module from IMCO – CIMAG MES makes it easier to find when “H” items will have the least impact on regular manufacturing operations (as we mentioned above).
Mirensky explains in his white paper that the implementation of commonly used workarounds is key to achieving visibility in regards to sizes and specs. Overall, this will make it easier to identify similar items.
A GAME CHANGER
Ruben Mirensky’s 9 Box Tool in combination with MES Software provides decision makers critical data needed to improve operations. Having the ability to determine inventory solutions on a visual level can transform profitability and efficiency across entire companies. Mirensky’s 9 Box tool is more than just a revolutionary Inventory Management Strategy; it is a game changer for manufacturers everywhere.
Contact us today to learn more information about the benefits of The 9 Box Design in combination with MES Software.