Lean Ops & Supply Chain – Chemline

Download Case Study

Problem / Challenge:

This polyurethane manufacturer had grown quickly but had significant manufacturing and supply chain challenges that affected quality, inventory and on-time delivery. The company was good at quick-reaction fixes to problems but not sustainable improvements.

The CEO estimated the operations & supply chain problems were costing $3 – $4 million a year in lost profit

Lean Assessment – Value Stream Analysis

The first step of eliminating waste, increasing throughput and reducing costs in operations and the supply chain is to Value Stream Map across the “Plan – Source – Make – Store – Deliver – Return” processes. The analysis identifies the wastes and quantifies costs while highlighting redundancies and gaps

Value Stream Map Details

• Lack of Aligned and Actionable Performance Metrics
  • The company had many dashboards but did not have metrics owned by the key operating departments (Purchasing, Prodn, WH, Quality, Customer Service, R&D)
• No Quantification or Root Cause Analysis of Cost-of-Poor-Quality
  • Quality was a chemistry function that carefully checked chemical properties but there was no focus on root cause of defects in production or at customers operations
• Lack of a Demand Forecasting or Inventory Strategy created ad-hoc stocking policies
  • Scheduling was reacting to orders or to informal stocking agreements
  • Purchasing was ‘fighting’ numerous stockouts of raw materials
• Communication between Sales and Ops / Supply Chain was informal
  • There was no way to systematically communicate changes in future customer demand
  • New products with new raw materials were not communicated to Purchasing creating last-minute scrambling
• Warehouse Layout was Unproductive
  • Extra movement required to pick items
  • Poor utilization of space

Process Flow Mapped Purchasing-Warehouse-Ship Process

SKU Classification Analysis

Orders, Pounds and GM$ data hidden for confidentiality

Focal Improvement Areas

• Inventory
  • Created machine learning demand forecasting model
  • Classified all finished goods (FG) and raw materials (RM) into SKU classes
  • Implemented MRP with calculated safety stock based on SKU class and produce-to-forecast
• Integrated Business Planning (IBP/S&OP)
  • Implemented ‘IBP Lite’ at this mid-size company to increase communication with minimum bureaucracy
  • Focal areas:
    • Sales Reps adjusting model-forecast based on insights from customer ordering
    • New customers and new products
    • Capacity constraints at suppliers
• Quality / Cost-of-Poor Quality
  • See details on last page

Quantified Results

• Implementing Quality Improvements increasing 1st Pass Yield from 81.3% to 94.3%
• Increased on time delivery from 67% in February 2024 to 97% February 2025
• Increased FG inventory turns from 9.7 in February to 13.5 in September
• Shipping errors reduced from average 2 per month to 0 for last 6 months
• Reduced Manufacturing overtime from 14.3% to 9.6%

Root Cause Analysis Of Defects And Customer Returns

Cause & Effect – Root Cause Analysis

Reducting Cost Of Poor Quality

• Starting in June, developed quick-turnaround root cause analysis meeting for every internal quality defect, customer return or shipping error
  • Included the different stakeholders in the meeting including the person who caused the defect/return/error
  • Categorized the error as either:
    • Operator/ procedure error
    • Formulation
    • Production equipment
    • Supplier / raw material
• Created Cause & Effect Diagram for every defect/return/error
  • Using this tool took the focus off ‘blame and shame’ but still created accountability
  • Developed correction actions that are tracked in quality update meetings until they are completed

Lean Warehouse Project: Reduce Material Handling & Increase Space Utilization

This spaghetti map of the old layout requires the batch maker to travel to every part of the building to retrieve raw materials for their batch taking away from productive time, reducing equipment utilization and impacting on time delivery

New Lean Warehouse Layout

Lean Warehouse Layout

• Used narrow aisle forklifts to increase space utilization
  • New warehouse can fit an additional 524
    pallets and 233 totes
  • This allows all materials to fit in the warehouse
• Lean Warehouse layout created natural flow to dock doors (on right side of the drawing)
• New Raw Material Handler role will stage all raw materials for batch-makers, keeping them focused on manufacturing and equipment utilization

Balanced Performance Scorecards

• Every department reporting to the COO now has a scorecard aligned to the company’s goals and the metrics the CEO tracks
• Each department leader meets with the COO and CFO monthly to review their scorecard and provide status on initiatives and action items to improve performance

Learn more about our Lean Warehouse, Performance Scorecards, Sales & Operations Planning, Demand Forecasting and Inventory Optimization Services