Situation:  Looking at the total life cycle, it was found that product’s value stream passed through a warehouse where it was sampled frequently and returned back to the same manufacturing bottle neck process for rework.  This value stream process was full of complexity, value draining rework, contaminations, handling, transportation, packaging materials waste, inventory, and long cycle times.

Finding:  Talking with the warehouse staff determined that they had professional engineering talent in their organization that could design and install needed processing equipment in the warehouse.

Solution:  Such an installation could provide redundant capacity which was desired by the customers plus provide the ability capacity to handle product sourced from other locations besides the one it currently supported.   An agreement was reached to amortize the equipment over the initial volume of product processed through it which in the first year still allowed the business to substantially increase its capacity, eliminate waste, inventory and cycle times, improve product quality by reducing the opportunity for contamination.

Result:  Increased EBIT by over $1.0 Million in the first year.  At the end of the initial volume guarantee, which was easily met, the business had the option to buy the new system for $1.00 and relocate it if it wished.  The warehouse was pleased with the improved bottom line due to a higher turn ratio on their warehouse space and more value added revenue on the throughput.  Basically the business outsourced its problem for a Win/Win/Win solution.  This project provided value for customers, the business, and the contract warehouse.