Inventory – 7 Types of Waste
What is Inventory
Inventory is one of the seven types of waste. It is the opposite of a just-in-time delivery as the material is available far before usage. Though liquid firms often do not see the risk of keeping inventory small firms feel the pain all the more. Inventory is fixed capital which has to be payed far ahead of receiving the money it will costs by selling the finished good finally to your customer. It drives your plant into an increase of necessary material handling time and handlings devices (forklift, …) as you have to stuck and move pallets around as well as to an increase of required space to store all the parts.
How does Inventory occur?
Incoming stock occurs by pushing parts into your factory. Each machine breakdown or deviations from production output increases your stock level a bit more. Same applies to unreliable processes and unstable production and deliveries scheduling. As parts are coming anyway though you do not need them right now.
How to eliminate Waste of Inventory?
One of the central keywords of eliminating stock is pull-principle. Pull-principle describes the way of ordering parts or scheduling upstream processes. The benefit is to not order material in cases of a machine breakdown or line stoppage. We call it consumption-based order process.
As in many cases low-runners increase your stock level as they are ordered in bigger batches a leveled production planning can increase inventory turnover and leads finally to a decrease of stock material. By producing every product every day forecasts become far more precisely and also the effect of machine breakdowns reduce.
To increase visualization supermarkets combined with smaller boxes and reduced batch sizes are also beneficial. Once the shelve is fully loaded high stock levels becomes a pain and forces the team to handle a lower inventory level of that part by increasing delivery frequency or harmonizing the production process.