To run any business cash flow rotation is very-very essential things. Out of each waste inventory waste is the only waste to hold liquidity as a form of raw material, work-in-progress, and finished goods. If the flow of material is continuously rotating from raw material to finished goods and on time dispatched to the customer so cash inflow is received continuously otherwise its blocks the cash rotation cycle for any business.
Now you are more clear about why lean manufacturing is forcing you to minimize inventory levels in each and every stage of your organization. In the business world, it’s not easy to minimize inventory for any organization because there are several factors that affect minimizing inventory.
In this article, we will discuss what is the possibility to minimize inventory at the organizational level. Work-in-progress inventory possibility to control by the organization. Raw material and finished goods inventory level are mainly depending on management decisions and maintaining inventory levels with several criteria.
What did you learn from this article?
- Ways to measure inventory waste.
- What are the structural steps to minimize inventory waste?
- Practical implementation guideline for transportation waste minimization.
- Points to be studied and discussed during the brainstorming sessions.
- Important points for comparing current Vs upgraded material handling process.
Inventory Waste
Measures
- Measure Inventory in terms of unit (MT / Ltr. / Kg / Quantity)
- Cost of Inventory.
- Inventory measure with Inventory KPIs.
Structural practical steps followed to minimize inventory waste
- Identify proper measures for inventory waste.
- Monitor inventory waste on a timely basis & review.
- Analyze the inventory in detail mode (workstation-wise) and developed a Pareto chart for better analysis of where we put efforts. Also meanwhile focused to bifurcate inventory into fast-moving, slow-moving and non-moving inventories.
- Based on Pareto analysis focused on major inventory areas and use lean tools such as line balancing, one-piece flow, and pull flow.
- Check the inventory waste difference between the before and after processes.
- Conclude the study and standardize the updated process.
- Measure the inventory KPI on a continuous basis to easily identify processes out of control.
Review the current organization system and check on a daily basis any structural system availability to measure inventory. If any structural system is not available plan to measure and monitor inventory as per above mention inventory measure and also review the inventory KPIs article for better understanding. Identify the possibility to bifurcate inventory within internal stages for monitoring purposes.
Points to be discussed during the brainstorming session to minimize inventory waste
- Identify inventory measuring multiple KPIs and analyze internal stage-wise.
- Check the ground level condition and identify major inventory available areas and list down actual causes for inventory availability at the particular areas.
- Review the time loss and cost parameters for managing inventory.
- Identify the number of manpower used to manage inventory and the possibility to reduce manpower.
- Identify the cost of material handling to manage inventory.
- Review the space occupied by inventory. (current and proposed)
- Calculate the cost of carrying inventory and monitor.
In most of the automobile manufacturing industries assembly lines are designed based on single-piece flow or one-piece flow mode and that is the key reason for minimizing inventory on workstations. Once you go to ground level and visit the area where the majority of the material is available, you found certain causes as per listed below.
- Issue of Line balancing.
- Due to machine breakdown.
- Due to manpower absenteeism.
- Due to power off issue etc.
Many of the other causes of inventory availability you found during shop floor visits. In bottleneck operation the majority of chances to inventory availability. Review each and every actual cause and plan a brainstorming session for generating a proposed plan to minimize inventory levels.
If we discuss material consumable items review certain points for improvement as per mention below.
- Analyze the inventory in slow-moving, fast-moving, and nonmoving inventory.
- Place the item order based on monthly consumption.
- Verify the usage of nonmoving items, if it is not required put them in to sell.
Conclusion
Lean manufacturing suggests the following FIFO (first-in-first-out) concept to minimize internal inventory waste. There are several lean manufacturing tools to be applied in operational processes to reduce manufacturing throughput time and inventory level.
Days on hand, inventory carrying cost, slow-moving inventory, and dead stock are the important KPIs for monitoring and measuring inventory at the organizational level. Balance each operation in line, Continuous flow and waiting due to imbalance lines are the important factors for WIP minimization.
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