Inventory Is NOT a Security Blanket!

December 7, 2019

Why do we care about inventory?

  • It costs money
  • It uses needed capacity
  • It negatively affect service
  • It hides problems thereforeIt delays fixing problems!!!

My view on inventory management

  • The objective
    • Making the right amount of items at the right time
  • Corollary On Service
  • Providing our customers consistently, with how much of what they want, when they want it.
  • Taking time out of operations is critical to success in achieving both objectives.

The MYTHS about inventory

  • Low inventory = Poor service
  • Good service = Fastest delivery
  • Many stocking locations = Good service


The FACTS about inventory

  • Minimal inventory designs are more responsive to customers.
  • Reliability to customers delivery dates it Is more valued than speed
  • Fewer locations result in improved reliability
  • Low inventory and excellent service go hand in hand

Inventory and service

  • Short cycle times, flexible manufacturing, responses suppliers and clear communications, gives you the ability to have low inventories and high customer service.

World-class organization’s view on inventory

  • Low inventory is compatible with high service and low cost.
    • Very few trade-offs are needed.
  • However, must be the businesses top priority.
    • Only effective organizations can succeed.
  • Many elements must be executed well.
  • There is a correlation between high service levels high working in inventory turns and low-cost.

The critical element is time

  • World-class corporations consider Service improvements, inventory improvements and cost reduction to be mutually supportive of one another.
  • A key ratio to always consider. P-time ratio: Is production/delivery.
    • P = raw material to production.
    • D = order to delivery.
  • The goal is to continually reduce production and delivery TIME.

Inventory management techniques

What are our objectives as inventory management professionals? Minimize the total cost of ordering, carrying inventory while maintaining and increasing customer service performance.

The challenge of all inventory management techniques

  • We are tasked with creating a world class factory or organization; responsive to customer demands, operating with fast cycle times, low inventories, and supplier partnerships.
  • We must Challenger ourselves to think outside of the box.
  • “Insanity is doing the same thing, over and over, but expecting different results.” Albert Einstein

We need to break the cycle of past bad inventory management techniques

Focus on Utopia.

  • Daily receipts
  • Daily production
  • Daily shipments
  • No plant inventory at the end of the day
  • Replenish DCs with minimal inventory
  • +300 inventory turns.

How to break the entropy cycle

People do what’s inspected, not expected.

  • Visual KPI’s
  • Daily Gemba walks to review results
  • SQDC meeting, safety quality delivery cost.
  • Friendly competition; quarterly “good guys-bad guys” report
  • High leadership priority
  • Use KPI to help find the “rocks”.
  • Remember if this was easy, someone would’ve done it already.
  • And the key thing is to; Knock the Training Wheels off! And Start!