Tag Archives: Inventory

The Relation between Inventory, Customer Takt, and Replenishment Time

Kid with GlassesInventory is helpful for a fast delivery of goods. If you have it in stock, you can deliver to the customer right away. In that respect, more inventory is better. Yet, at the same time, inventory creates cost, some visible, some more hidden. Hence, one of the goals of lean is to reduce inventory and therefore reduce cost. During my research I stumbled on a very interesting relationship between inventory, customer takt, and replenishment time. Let me elaborate … Continue reading The Relation between Inventory, Customer Takt, and Replenishment Time

How to Reduce Your Inventory

InventoryReducing inventory is one of the goals of lean manufacturing. In my last post I described why we need inventory in the first place, and why too much inventory is bad for you. Now let’s look at how we can achieve a good inventory level. First, an important statement: Inventory is not a lever that you can pull. It is more the result of other good lean improvements. In fact, merely pulling this lever and reducing inventory will actually make things worse. To gain the true benefits of lower inventory, other measures have to be taken. In this post I would like to describe what happens if you simply reduce inventory, and how to do it to achieve a lower inventory without causing mayhem in the process. Continue reading How to Reduce Your Inventory

Why Do We Have Inventory?

Typical WarehouseInventory is expensive. Depending on your environment, inventory will cost you between 30% and 65% of its value. Toyota is known for (among other things) small inventories. Whereas Western companies often have weeks’ or even months’ worth of inventory, Toyota’s inventory is measured in hours.

It is no surprise that inventory reduction is high on the list for many companies. In fact, the term “lean” by itself implies lower inventories. But why do we have inventory in the first place? And why is (too much) inventory considered evil in lean manufacturing? In this post I would like to tell you the reasons why we have inventory in the first place, and why too much is bad. In my next post I will explain what happens if you simply reduce inventory, and discuss in more detail better approaches on how to reduce inventory. Continue reading Why Do We Have Inventory?

The Three Fundamental Ways to Decouple Fluctuations

Waves on shoreManufacturing systems have fluctuations. Material may arrive sooner or later. Production may be fast or not. The customer may order more or less. Generally, the less fluctuations you have, the more efficiently you can produce. Toyota puts in an enormous effort to control fluctuation, but even they have fluctuation. In this post I would like to show you the three basic ways how you can decouple fluctuations: inventory, capacity, and time. Continue reading The Three Fundamental Ways to Decouple Fluctuations

A Eulogy for Little’s Law

Water Tank Littles LawOne of the most significant fundamental relations in lean manufacturing is the relation between the inventory, the throughput, and the lead time. The inventory and the throughput are usually easy to measure. The lead time, however, is more difficult. You would need to take the time when a part enters the system and then take the time again when a part leaves the system. Luckily, the lead time can easily and accurately be calculated using Little’s Law, one of the most fundamental laws in lean manufacturing (and also many other places). Continue reading A Eulogy for Little’s Law

Theory and Practice of Supermarkets – Part 2

grocery store market supermarket retail shop
How to use supermarkets correctly …

In my last post, I described how supermarkets work in theory. But while knowing the theory helps, actually creating a working supermarket is much more difficult. Are there situations where supermarkets are not so useful? (Hint: Yes!). And what is needed to have a working supermarket? Let’s find out! Continue reading Theory and Practice of Supermarkets – Part 2

Theory and Practice of Supermarkets – Part 1

Supermarket in Brazil
All about supermarkets…

Kanban, FiFo lanes, and supermarkets are the backbone of many pull system. Some people even define lean production through its use of kanban and supermarkets. Yet why are supermarkets so useful? First we will look at what exactly makes an inventory into an supermarket. My next post will then give tips and hints on the practical use of supermarkets on the shop floor. Continue reading Theory and Practice of Supermarkets – Part 1

Why Pull Is So Great!

Rope pulling
Pull your production! (even though the term “Pull” is quite misleading)

One of the most significant insights of the Toyota Production System is its concept of pull production. While often misunderstood, the essence of pull production is a clearly defined limit on the work in progress. Push or pull actually has nothing to do with the direction of the information or material flow. But why does this limit on work in progress make so much difference? Why do pull systems vastly outperform push production systems? Continue reading Why Pull Is So Great!