Sullivan-Palatek Inc., is a leader in manufacturing and design of a wide range of electric and portable rotary screw air compressors. From humble beginnings in 1984, Sullivan-Palatek has grown from providing engineering services to existing clients, to a privately owned company that manufactures many customized compressor packages and specialized air ends.
In 2013, the company was confronted with the most complicated federal regulation ever placed on the construction equipment industry. All of the portable air compressor models needed to be redesigned to operate with Tier IV final diesel engines in a phase-in period that spanned five years. In addition to being considerably more expensive, the Tier IV engines required new electronics to monitor emissions and the nature of their operation required a complete redesign of each compressor package. The result was that Sullivan-Palatek needed to source thousands of new parts on a first time buy and phase the production in with older models.
Costs increased, inventories swelled, engineering designs were unstable and numerous parts were obsoleted. The company’s staff was under immense pressure due to the amount of change that needed to occur in a short period of time.
In assessing potential areas of improvement, Sullivan-Palatek’s leadership team realized they were costing the company money by maintaining excessive inventory levels. While the company was set on reducing inventory—both active and obsolete and slow moving inventory (OSMI)—they were dedicated to maintaining customer expectations.
Purdue MEP worked closely with Sullivan-Palatek’s purchasing and materials departments to uncover root causes driving the excess inventory. Sullivan-Palatek’s staff classified inventory by annual spend to allow for a concentration on the high spend components, driving down safety stock and order quantities. The established goal is to order more often, in lower quantities, so there are not large amounts of inventory if an order is cancelled or postponed, but at the same time, not increase costs. As a result, the company has been concentrating on processes that drive the purchasing department to order parts. These include the ECN process, inventory accuracy, correcting bills of material, and replenishment methods.
Additionally, Purdue MEP highlighted cost reduction efforts by the purchasing department, and established a tracking spreadsheet to keep visibility of these efforts and successes. The summary tracking was an essential feature providing management with a better way to monitor the company’s progress.
To assist in continuing process improvement and root cause identification, Purdue MEP held a problem-solving course for Sullivan-Palatek employees from all levels of the organization. The participants learned about identifying symptoms versus problems, problem-solving tools, and then conducted team problem solving exercises using real scenarios at Sullivan-Palatek.
Due to the successful partnership with Purdue MEP, Sullivan-Palatek’s inventory is down $5.0 million and efforts continue to identify and reduce OSMI. Correcting bill of materials has become an area of concentration so that correct parts, in the correct quantity, are ordered. This reduces both excess active inventory and OSMI. Communication has also increased within and between departments. This increased awareness and sharing of information is helping the company better understand how one department’s actions affect other departments.
“During this process there were terrible lead time, cost overrun, and inventory control issues. Since the beginning of 2016, we have engaged Purdue MEP to meet with our staff and come up with solutions to our bottlenecks.
The result has been improved involvement and problem solving by staff employees, reduction of our inventory by over 20%, and an improved cost system from outside suppliers that will save us several hundred thousand dollars per year.”
-Bruce C. McFee, Chairman & CEO, Sullivan-Palatek