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Supply chain July 07 Businessexcellence 15 Demand driven supply chain As the rising price of raw material raises the value of inventory reduction, manufacturers are discovering how digital kanban can save them a pretty penny, reports Thomas R. Cutler Prices for copper rose to a record $4.04 a pound in May as mine accidents and labor disputes disrupted production. A strike threatened to slow supplies from Peru, the world’s third-largest producer of the metal. Chile was the world’s biggest copper producer in 2006, followed by the US. Thanks to strong demand from Asia and other markets, low world inventories, bottlenecks in the refi ning stage, lower ore grades and high demand from investment funds, copper prices averaged 20 percent higher over the fi rst quarter of 2007 than a year earlier. Copper production was also up 6.9 percent compared to the fi rst quarter of 2006. The demand for copper is increasing dramatically. In the 1970s, a 1,500 square-foot house used about 280 pounds of copper. Today, a 2,200 square-foot house uses about 450 pounds of copper. A car in the 1970s used about 35 pounds

Businessexcellence July 07 16 a specific part number,” said Ball. “It seemed as though, whichever parts were made, they were not the parts that were needed that day at Franklin. Expediting of individual part numbers was the norm.” What Luvata needed was a system that could integrate with both the Buffalo and Franklin shop floor control systems and provide a visual, easy to understand, and real time representation of the total supply chain. The Buffalo and Franklin scheduling groups formed a team to address the need to reduce the amount of working capital tied up in the supply chain, and improve delivery reliability. “There was plenty of candid conversation within the team that moved the two plants from a win/lose mentality,” noted Ball, “to a group focused on developing a win/win result!” During a visit to the Franklin plant, it was revealed that Franklin was using a new tool called digital kanban (also known of copper. Now, 50 to 80 pounds of copper will go into one automobile. A Boeing 727 airplane uses 9,000 pounds of copper. Copper sheets are used in cooking utensils and in roofs. Copper tubes are used to make pipes for plumbing and carrying natural gas. Copper wire is used to carry electric current. Extruded copper, shaped by squeezing it through a hole, forms rods, hinges, tubes, and door handles. The price per pound of copper has increased from under $1 per pound in 1995 to more than $4 per pound in 2007, yet more copper is being consumed than ever before. Luvata Buffalo, Inc. is a brass and copper sheet mill operation located in Buffalo, New York that employs approximately 600 people. The company has a wide customer base that services many different market segments including the appliance heat exchange, telecommunications, ordnance, connectors and rolled products. Luvata Buffalo has a sister plant in Kentucky called Luvata, Franklin, which uses copper strip from Buffalo to make copper tubing for the air conditioning industry. In late 2005, Luvata Corporate Group issued the directive for all production facilities to collaborate and reduce total working capital across all facilities. The objective for Luvata was not only to reduce the inventory at Buffalo, but to work closely with its sister plant in Franklin to reduce the total inventory held by both plants combined. “This presented a unique challenge for both plants,” said Jeffrey Ball, value engineering and information services manager with Luvata. The two plants had separate planning, inventory, and scheduling systems and in order to ensure that the weld lines at Franklin never ran out of raw material, there was always a large amount of inventory in the pipeline. “A great deal of time was required by both the Buffalo and Franklin scheduling teams to avert the disaster of stock outs of