Supply Chain Question: Pros and Cons of Vending Marchines for MRO Items

Reader Question

What are the pros and cons of vending machine use when managing MRO items, and where might I find additional information on this subject?

Angus Workman
Stores Manager
Sabic Innovative Plastics

Category: Manufacturing

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Expert Panelist Response: Bryan C. Dolecki, Director of Procurement Operations, SDE Vendor Managed Solutions Inc.

Although many benefits may be realized through the implementation of a vending machine program for MRO material management, it may not be justifiable in all instances.

The more evident benefits include readily available stock at the point of use, which reduces the time required to obtain material from a centralized location. This is especially beneficial for those MRO items that have a high consumable rate and may cause defects in quality or downtime in production. Other more subtle benefits may be realized through the design of a vending machine program, such as only allowing a certain amount of inventory to be stocked at a particular location, thereby eliminating the potential to have excess inventory on hand. Finally, there are the hidden benefits that are realized through the use of the proper software package linking the vending machines to your procurement and financial system. Those benefits include the ability to restrict vending machine disbursement of materials based upon criteria such as an individual or department exceeding their budget, or an item is not authorized for use by a particular individual or department. Other benefits include system reporting capabilities that allow managers to monitor material use and spend by department, employee and/or machine. This demand management data may be utilized to identify requirements for training or capital investment by indicating abnormalities in material use by individual or machine.

Those investing in the program must be aware that neither the vending machines nor integrated software ensure a successful program. Optimal machine utilization will be paramount in justifying the cost of the program, as well as successfully realizing a return on investment. Additionally, in some manufacturing environments, it may be difficult to identify the proper type of vending machine that will allow for the required security of material while retaining the flexibility to disburse materials of various size and weight. Further complications are introduced when the manufacturing environment frequently changes its final product and the consumables required to manufacture those products are dissimilar in physical characteristics.

When deployed properly, vending machine solutions for MRO items have a profound impact on the end user’s efficiency and a company’s total cost of operation.

Below, I include some additional thoughts on this topic from our Director of Supply:

The introduction of machine-based inventory technology allows the end user maximum control over their inventory investment.

Benefits of Vending Machines:

Dollar Restriction Controls – Designed to limit the amount of inventory taken through demand management at the item level. When an employee has reached their dollar threshold, a supervisor or manager will have to be notified to obtain additional inventory.
Item Restriction Controls – Designed to limit the type of items that can be taken by an employee. Employees can be set up with access to only a predetermined group of items.
Inventory Reductions – Designed to limit the amount of inventory that can be placed within the machine for plant use. This drives down excessive inventory buildup by limiting what can be purchased at any given time.
Inventory Control – Obsolescence and slow moving items are easily identified and removed from the solution. Fast moving items are identified and targeted for evaluation. Each item can be tracked and evaluated at any time in the process.
Complete transparency - You get vision into not only what department is using the item, but who took the item with a date and time stamp. No item can be removed from the system without the system capturing who took the item and what department that item is getting charged to.
Strategic Deployment and Time Savings – Plant usage is looked at before each machine is deployed. All the items that are housed within each machine are specific to an area or department within the facility. This brings needed items closer to the end user, cutting down on not only transit time to and from a central area, but downtime waiting for someone to retrieve what they need.
Metrics and Reporting – Each transaction is captured and a vast array of reports can be utilized to better manage your inventory solution. Vision into usage, demand, employee needs, area needs, and dollar spend and a host of additional captured data helps drive out cost and build in inventory optimization.

Challenges of Successfully Implementing Vending Machines:

Machine Utilization – Tracking and managing machine utilization is required to justify the use of vending machines. Design of the solution must take into account the size and quantity of each material to be stored in the vending machines. This is extremely challenging in manufacturing environments where the final product frequently changes and the consumables required to manufacture those products are dissimilar in physical characteristics.
Identification of Machines – Every manufacturing environment will require different types of machines based upon the required security, size, weight and the quantity of material required to be stored at the location. It is challenging to balance each of these while maintaining high machine utilization.

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Other Responses

	Grainger's Services Team: Pros: Customers can save time and money through Dispensing Point-of-Use Systems (vending machines). 1. Productivity Improvement - MRO products are stored in the device at the point-of-use where work is performed. This helps eliminate trip time across the facility, to the tool crib, to obtain needed products 2. Product Consumption Reduction - Dispensing systems track the removal of MRO products from the storage device. Companies can set the specific amount of each product that is allowed to be dispensed. In addition, available reporting captures which employee removed the product, how much they removed, and how often they removed it. 3. Reduction in Shrinkage - Products are locked in the devices, and for high security applications, devices are programmed to allow only authorized users access to the products 4. Process Improvements - Automation of purchase order generation and streamlining restocking processes. Cons: 1. Costs - Depending the type of technology required systems may become costly. A simple vendor managed inventory solutions service may be a lower cost alternative. A needs assessment should be performed prior to investing in a dispensing solution. 2. Time Investment - Customers must maintain the data content in the device for the tracking and reporting to be effective. In addition, since dispensing devices provide an alternative to the traditional way of manually issuing product and placing orders, a user change management plan may need to be developed. Change management will help ensure systems are utilized in the most effective manner to help ensure the appropriate return on investment.