Reducing Inventory

Yesterday’s post on vendor managed inventory touched on a couple of things about “lean” and reducing inventory that I’d like to explore further.

All too often “inventory reduction” has been a way to “sell” a lean manufacturing implementation. The reduction of inventory becomes the objective. While this isn’t inherently a bad thing, it is all to easy to get caught up in the trap of “management by measurement” and do it the wrong way.

Reduced inventory is a result of good kaizen, but it isn’t the justification for doing it. The purpose of kaizen is to solve problems, specifically the problems that disrupt the smooth flow of work and creation of value. Solving those problems saves time – worker’s time, customer’s time, leader’s time because everything runs more smoothly and predictably.

The primary reason that inventory is there is because things aren’t smooth and predictable. Once they are, you can take some of it out.

The necessity to have inventory at any given point in the system is evidence of a problem that has not yet been solved. (Including, sometimes, simply having poor inventory management, which is another way of saying “overproduction.”)

By asking “What must we do to live without this piece of inventory?” you can uncover the next problem to solve, and then make a decision to solve it.

If it is solved, then inventory can be reduced. But it doesn’t happen automatically, you have to actually take it out of the system and keep it from coming back.

But in any case, this is a lot different than just shoving the ownership of the inventory onto someone else.

2 Replies to “Reducing Inventory”

  1. Your so right. Excess inventory is not “the” problem. It is only evidence of a problem. Here where I work we did a root cause analysis and found out our excess inventory is caused by several problems with our machine shop. Processes that seemed unrelated to inventory control. The planning department was ordering excess inventory to compensate for machine shop issues.

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