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Submitted by Frank Costello |
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“VMI” |
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Vendor Managed Inventory is being played as the latest and greatest thing at D.T.E. since the invention of electricity. This idea was brought to them from the consulting firms they hired for the sole purpose of eliminating as many of our warehousing jobs that they possibly can.
According to D.T.E.'s PEP (Performance Excellence Process) numbers that I was given, the D.T.E supply chain management thinks this is a free service that is going to be provided by their vendors to stock our warehouse shelves and vehicles. (NO, I’m not kidding).
According to their P.E.P presentation, they plan on doing away with 19 warehouse positions in 2009. The company projects that they will save $1,900,000 annually (19 positions at $100,000).
Now let us take a look at what VMI is actually going to cost the company. These are not actual figures since the program has not been put into place yet, but instead are common sense assumptions based on my experience with this company. (Judge for yourselves based on your own experience. )
We have approximately 450 linemen at D.T.E. Energy. Now I would say at least once a week that we fill orders for truck stock and place material on each lineman’s vehicle. With VMI, the vendor, instead of us, will stock the open bin or kanban shelves.
Guess what! The orders still have to be picked by the lineman to stock their vehicles. That’s right! They now want to pay a lineman to pick his own material at about $32.00 an hour instead of us at about $25.00. It will cost the company $7.00 more an hour to pick this material instead of having us do our jobs. Does this sound like a good management decision to you? I don’t think so! Let’s do the math.
450 lineman (X) 1 hour per week (X) 52 weeks (X) $7.00 an hour = $163,800
Right off the bat they loose approximately $164,000 annually having the lineman pick their own material instead of us.
Now let us look at what the company looses by having their linemen picking material instead of doing line work. I do not have exact numbers on the number of A, B, and C crews but let’s say we have approximately 130 line crews made up of the 450 lineman.
With this VMI process these 130 crews would not be at there regular line jobs for 52 hours annually because they would be picking there own material. So again let us do the math.
130 Crews (X) 52 hours a year (X) $500.00 an hour = $3,380,000 a year
The $500.00 an hour figure is what the management has quoted to us many times on the cost to the company to have a line crew sitting idle waiting for material.
The way I see it, this process will cost the company $3,380,000 + $163,000 to initiate their VMI program for a total cost of $3,543,000 annually. This does not even take into account what the vendors will be charging the company for their services which I am sure will be immense.
They plan on saving $1,900,000 and spending $3,543,000 for a net loss of -$1,643,000 a year. Is this what they paid their consultants for? The Company surely is not getting there moneys worth. But that’s not their plan anyway is it?
DTE could make a positive difference to their bottom line, of at least $8,215,000.00 over 5 years, by ignoring the consultants on this matter.
Their plan is to eliminate warehouse jobs no matter what the cost. WOW! This company has changed over the years and in my opinion it’s not for the better. This is my 2 cents worth and frankly I’m appalled.
Frank Costello |
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D.T.E., Your Consultants Are Taking You For A Ride. |
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