The virtual tool crib
At the Jet Propulsion Laboratory, space-age purchasing pulls out the paper and puts in responsiveness in MRO acquisition

by William Goodwin

Better known as the birthplace of the Martian Lander and the Cassini Saturn Project, the Jet Propulsion Laboratory (JPL) in Pasadena, Calif., has used its computer savvy to close its tool crib.  Today, any maintenance, repair or operations product requested by a staff member is filled without one piece of paper.

Managed by CalTech for NASA and other federal agencies, JPL is the center for all American robotic (non-manned) explorations of the solar system and beyond.  With an annual budget of approximately $1 billion, more than 4,000 people work at the 177-acre main site.

JPL, by definition, is a high-tech place.  There are not many repetitive, production-type activities in the assembly process of one-of-a-kind spacecraft.

Though JPL does not have to show a profit, they are subject to budget crunches.  Like the rest of NASA, the days of free-wheeling funding have passed.  So in addition to final-frontier projects like scooping stardust from a comet�s tail and soft landings on the outer planets of our solar system, JPL must respond to more down-to-earth challenges.

A truly paperless system
One of its most recent and rewarding projects resulted in decreasing acquisition cycle times while cutting the cost of processing MRO and other purchases.  The result is a truly paperless system.

Since 1994, this system has gradually grown to include almost everything that is ordered repetitively and in quantity at JPL.  In 1997, JPL�s paperless just-in-time (JIT) system handled $10.5 million in purchases and 41,000 orders from a total of nine vendors, says Amanda Beckman, manager of JPL�s Procurement Service Center.  Besides MRO materials, online JIT ordering now includes stationery, chemicals and laboratory supplies, janitorial, electrical, computer workstations, plumbing and electronic parts.  Photographic supplies and more computer items will soon be added.

Here�s how it works
JPL carefully selects a very limited number of vendors with 
whom it negotiates contracts for a specific list of supplies, 
tools and parts.  They create a catalog of products that goes online where users can access it at computer workstations throughout the facility.  Each item is available only through 
one preferred distributor.

About 650 employees are authorized to use the system.  After logging on by scanning their identification badge and entering passcode numbers, they can scroll through the electronic catalog.  They find the items they need, click on them, then fill out an electronic order form.  Clicking on the �submit order� icon is the final step that sends the order on its way.

An electronic notification of the order is sent via e-mail to managers so they can review, if necessary, what is being purchased.

Every step in the process is handled by computers and bar code scanners.  The order instantly travels by electronic data interchange (EDI) to the preferred vendor who picks the item, boxes it, puts a bar-coded label on it and sends it to JPL via the vendor�s truck or commercial delivery service.

When the package arrives at JPL, a receiving clerk scans the bar code label twice with a lightweight, radio-linked Norand Scanner, which helps prevent multiple or missed scans.  Once at JPL, the package is tracked from the receiving dock to the final user.  A system search for an order can pinpoint exactly where an ordered item is in the plant.

The package then gets delivered to the end-user without being opened.  It�s up to the end-user to verify the package�s contents.  Total time elapsed from initial order: 48 hours or less.

The payment process is also streamlined.  In the past, vendors received payment up to a month after shipment.  Now they get a check within 10 days of shipment delivery.  The payment process is not yet totally paperless.  JPL still issues paper checks; electronic funds transfer is in the future, even at JPL.

What do employees think of the system?
Brett Boettcher from JIT customer support remembers the transition from the old way of ordering and receiving at JPL. 

�I used to go along with a little cart and pull things off the shelf with a paper for every item.  This (paperless JIT system) represents a real advancement for my career path," he says.  " That�s why I bought in, but at first, not everyone saw it that way.  It took some time, but once people realized the process really works, they learned to plan ahead and now appreciate the system.  It used to take twice as many people to make receiving work.  Now it takes one to four guys, depending on how busy we are, to handle JIT receiving.�

�This is such an improvement,� Boettcher continues.  �Before, every package was opened and manually entered at receiving.  Now packages are opened only by the end-user. Wrong or short orders can be returned by accessing the system which prints a return ticket for the driver.  All debits take place automatically.�

�Getting employee buy-in was probably easier at JPL than at other places because there were already twice as many computers here as people,� says Linda Clifton, JIT acquisition team member.  �People here are averse to writing on a piece 
of paper when they can do it on a computer.  Still, this was a 
new concept four years ago.  We were nervous that the 
two-day turnaround might not work, but it has exceeded our wildest hopes.�

Employees in departments not originally served by the paperless JIT system heard about it through the company grapevine, says Rosa Valdez, JPL vendor contract negotiator.  �Now people in other areas of JPL come to us � the photographic department for example � and ask if they can have a JIT system too.  We tell them, yes, they can.�

The interface between JPL and distributors
Based on a lengthy selection process, JPL awards performance-based contracts to a select number of distributors.  These contracts are not awarded on the basis of low bids.  Instead, JPL looks closely at the company�s infrastructure to determine that they have what it takes to be a long-term partner.

JPL�s contract requires that 95 percent of all orders be delivered within an agreed-upon time (generally within one or two days of submission).  Falling below this performance level jeopardizes 
the contract.

JPL evaluates performance monthly.  �Most of the time the vendors do better than the required figure.  When we first started we weren�t sure if this was a realistic expectation, but most of our vendors are now doing better than 95 percent.  We�ve found that it takes a two- to three-month ramp-up period to get the system working,� says Valdez.

A dedicated contract negotiator from JPL is assigned to each vendor.  This helps keep the electronic catalog up to date because it continuously changes as JPL projects change.  MRO supplies make up about 30 percent of JIT orders, while stationery and office products account for the majority (60 percent) of the volume.  Software and other supplies fill the balance of the paperless orders.

Continental-McLaughlin, a Los Angeles-based industrial distributor, is a seasoned provider of maintenance, repair and operations products to JPL.

This distributor and JPL look at their relationship as a partnering activity instead of a conventional buyer-seller relationship.  This is reflected in the teamwork attitude toward the MRO catalog. 

�Since we see this as a partnership, we give Continental-McLaughlin the option to stock a particular item.  We never force them to carry something that is not to their advantage.  The contract stipulates a two-day turn-around although they often send it same-day when the item is in stock,� Valdez says.

�We work with JPL to produce a catalog that changes constantly," says Phil Jaskoviak, vice president of sales for Continental-McLaughlin.  " Currently, we have about 3,000 items with 100 percent 48-hour delivery.  The prices are our cost plus a fixed add-on, depending on the price of the item.  It�s set up so that the price structure and delivery time can vary for each commodity class."

As gee whiz as the virtual warehouse system sounds, it has its limitations.  

�JPL is a research facility, so there are an unlimited number of items that are always going to have to be ordered outside of the JIT system," says Jaskoviak.  " Furthermore, they do not have a CMMS (computerized maintenance management software) system because they are not a production facility doing constant-use operations.  However, I believe that JPL�s JIT acquisition system would be even more beneficial in a production facility in conjunction with a CMMS."

The software
The computer software driving JPL�s paperless fast-cycle acquisition system was developed entirely in-house for under 
$1 million. 

�We developed it ourselves,� explains Beckman, �because we had to interface with the existing mainframe that JPL uses for its business operations.  There wasn�t any software in existence that could make all the interfaces that we needed.  It uses a Sy-Base back end with client-server type software and a PowerBuilder front end that works on both our Macintosh and PC platforms.�

This powerful JIT software is for sale through JPL�s Technology Transfer and Commercialization Office.

Built-in security
All JPL employees could access the JIT paperless ordering system.  Even though Beckman asserts that pilferage is not a problem at JPL, multi-level security is built into the system.

To gain access, employees must enter or scan their badge number, type in a personal identification number (PIN) and a computer- generated access code that changes every minute (which appears on each certified employee�s pager-type receiver).  Any errors in entering badge number or a PIN immediately shows up on the computer screen.  Every order also automatically goes to supervisors for review.  Further, each employee has access only to certain commodity catalogs with pre-approved dollar limits.

The system also randomly calls out two percent of all incoming goods which are opened at receiving.  Here, they are double-checked to assure that JPL is getting what they are paying for.

Time and money savings
Because of the paperless system, JPL�s transaction costs have gone down significantly, but exactly how much is not yet precisely known.  A cost-benefit analysis is currently underway.

However, there are sure signs of savings.  The number of people working in acquisition has dropped sharply.  For example, software acquisition used to require 14 people; now it takes six.

JPL used to manage procurement with five databases; they now use one. 

�We eliminated all the intermediate steps in the process that cost so much,� says Valdez.

JPL has realized great savings in warehouse space.  There is no tool room and now only emergency and safety supplies are stocked onsite.

This article appeared in the April/May 1998 issue of MRO Today magazine.  Copyright, 1998.

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