8/10/2019 Importance of Inventory Control

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Importance of inventory controlGregory Burnworth, MBA Absolutely. Inventory is truly very evil. It drives many of the other dealdly wastes and is often caused by overproduction. It hidesall sorts of problems that need to be dealt with. It impacts quality, timeliness, cost, morale as work just pil es up.

Inventory is just as evil i n service indsutries, some would argue even more because it can be hard to see. It could be in the system and not visible - like astack of papers that are orders. To address inventory, you need to analyze your processes first. In many service fields, i nventory occurs as a result of batchand queue processes with lots of handoffs, inspection, and waste. Look to reduce the workunit wait time between steps using principles like steady flow. Whydoes the work unit need to stop and be batched or even handed off at all? Look at co-locating common functions / processes into workcells for the serviceline. Understand the demand data, cycle times, and takt times for the servce process. Standard work and pull systems / kanban can help limit the inventory ifit can't be completely eliminated. Is it overprocessing underprocessing or meeting demand relaibly? Understand where the bottlenecks are and what causesthem. Line balancing the cycle times to the takt times will also reduce inventory as flow increases. Help others see that inventory is evil!

Todd McCann @Len, Great Question!Gregory has generated many points for you to think through.Excellent thoughts Gregory,

Those darn administrative processes can and will cause delays, both natural and self imposed delays on downstream activities if not addressed with thesame discipline as manufacturing processes.

My minds eye see's them as nothing more than another production process with an output product that requires specific and measureable specifications just as any manufactured product would.IMHO Paper processes and electronic processes, which are nothing more than paper process using no paper, fall under the same requirements of SafetyQuality Cost and Delivery as manufactured products, fungible and tangible.

The second ring administrative processes, e.g. customer order processing, material and engineering deviations change orders, material and servicepurchasing, the list is not endless nor infinite so one can begin to remove waste.

Methods to expose and remove and eli minate waste.Gregory pointed out the several.Here are othersBuild administrative work cells and move the people not the work.How would one accomplish and create these work cells, and Why?

One must truly understand through measurement the demand curves for specific adminstrative products, IMHO in most instances and from my experiencethese processes display variable demand. On and then Off. Up and then Down.Understand the "OutputProduct" demands on a specific admin process by measuring and graphically depicting the demand so Patterns of demand for aspecific output (product) can be exposed.Get out your IE hat and measure activity time C/T, you wil need this data to better understand pacemaker activity.Use Yamazumi chart and decompose work activity to a known admin product with a known demand.Set a target condition for C/T per activity and L/T as well.Pareto data if you desire and look for those processes that cause the most pain.Pain can manifest itself in many forms. Delay, Corrections, let your conscience be your guide.Identify all "Products" created by the administrative processes.Identify those where "Corrections", where the seventh waste most often occur.Measure and understand the skills required to perform each admin activity and understand if the admin process skill mix is adequate and an enviromentsolely dependant on the shoulders of one individuals capability is present, but hidden from view.Cross train and make everyone in the admin process a Mile W ide and an Inch deep.Think Flexibility....Hint Hint, then think admin Work cells...Hint Hint..

Genchi Arno Koch's website and Learn the technique named Makigama, loosely translated as "Role of Paper" as in the Role of an actor in a Play.Great Technique.. and I have used this technique with admin processes to expose the existance of Gregories point of un-necessary over-processing and un-necessary overproduction, un-necessary inventory, duplication of effort, triplication of effort (Webster would kick me for that word : )' you will find the otherwastes present as well through use of technique.

My Point: Start with the End in Mind!There are several Target conditions one could impose on administrative processes, reduce to eliminate un-necessary Corrections, aka rework, reduce C/Tand thus L/T, free up hidden capacity using the same techniques one would apply to hard product manufacturing. Expose skill defeciencies in process andcorrect through human development. On and On I could go.....

Open the mind, see the waste, measure the waste, remove the waste!Yes it is Simple as that.

RespectfullyTodd McCannKAIZEN Spirit = "The Art of Making Much with Little"

Mel Preston Thinking about the rocks in the river analogy. The water represents Inventory which hides many wastes(rocks). What would the waterrepresent in a non-manufacturing work-stream? I find that Time is often the water because adding more time to complete the work within the work-streamcovers the many wastes found in both the front and back office. (many handoffs, waiting, approvals etc.)

Inventory is an especially evil waste because: A) It shows up on a balance sheet as an asset, which is dangerously misleading, becauseB) In truth, inventory is not an asset at all, but rather is the source of many hidden expenses (i.e. wastes, costs).I don't think there's a comparable situation in a service enterprise. In terms of the wastes, I'd think "backlog" would be more comparable to "mura" (i.e. unevenness, inconsistency) and could be dealt with by leveling the workflow.

Gregory Burnworth, MBA Point well taken given your examples Peter.

I would agree that buffer inventory is helpful and sometimes necessary, especially if that choice delights the customer. Ideally, we would be designing ourvalue streams to delight customers, and i f having choice is part of that requirement, fulfilled by a manageable inventory, then fabulous.

I'm wondering the extent to which such cases are the exception rather than the rule. There's a big difference w/ limited inventory with processes undercontrol, and WIP calculated, and processes out of control (my guess is the majority) with work pushed downstream, piling up, etc. So in the world ofbrownfields, I would hold the line with inventory expressed as "evil."

If the problem is a backlog of work orders that slows delivery for somethign I need, in most cases that would not delight me. In my case, I would look at othervendors who could deliver on time. The organization also ties up resources, time, and more with wasteful backlogs. For business survival, it affects cash flow

and how quickly companies can post revenue. Lastly, inventory hides errors, and does not contribute to meaningful problem detection and proplem-solving /people development.

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