In a previous post on how to implement lean manufacturing I discussed the seven wastes, within this post I will discuss the waste of Inventory. The build up of stock and work in progress that fills our factory floors and our warehouses.
If you wish to learn how to implement lean manufacturing you must try to get as close to single piece, just in time flow as you can. Producing what the customer wants when they want it. Today many of you will be looking at your factory and saying that you cannot ever achieve that, but as every advance in technology arrives and every little thought occurs to your operators and engineers you move that little bit closer to achieving that ultimate goal.
I am sure that the book printers never thought that they could print just one copy of a book as requested by the customer, but the technology now exists in a number of large book stores across Europe and the US. The customer can select the title he wants and the machine prints and binds the book of his choice while he waits (sorry another waste – but the customer could always do his other shopping while the book is printed.) This eliminates all of the wastes associated with the keeping of inventory.
A few years ago I went to a manufacturer of board games in the UK, they were looking for a handout from the government to purchase a new machine to help their struggling business. At the time I was working for the Department of Trade and Industry providing help to manufacturers in the UK, and although we had no grants available I suggested that maybe it would be possible to find some way to free up the required money from the business.
I walked around the business and was shocked at what I saw, the business had been in operation for over one hundred years, an old established family run business, but it was filled with inventory. Over half the factory was filled with stock, finished packaged games. Over half of the people were employed moving around the seemingly randomly arranged warehouse picking orders for toy stores around the country and overseas.
I spent time in the manufacturing area and the stores and tried to consider how I could remove the need for so much inventory. The cost of which was in excess of one years turn over of the business, and I also discovered that not only was a whole years turnover invested in the stock but they also disposed of five to ten percent of this every year as it became obsolete or damaged. But the management felt that the only way to satisfy their industry was to supply from stock as they have done for many decades.
I used my watch to time the various operations in the company (not overtly I hasten to add; most people do not like someone standing over them with a watch), the results were a shock, it took longer to find and pick the product from stock to ship to the customer than it did to manufacture it and put it into stores! The company could manufacture faster than they could pick stock!
The company was cash starved and needed a fraction of a week’s turnover to purchase a new machine (to make more inventory), but tied up over a years cash in inventory, and that was just the finished stock, not the component parts for the manufacturing. This was hardly how to implement lean manufacturing.
The factory could afford to close it’s manufacturing for the next year and still supply it’s customers, then turn from supplying from its inventory of finished products to producing to order. The company would have half the people and need half the space, or if there was demand they could use the staff and space to increase their turnover.
They had no idea how to implement lean manufacturing techniques, or that they could do things differently than they did. Unfortunately trying to persuade the current owner of the business in his late seventies that he was doing it wrong was like trying to keep the tide out, it did not matter how many diagrams were drawn or figures computed, he had to have his inventory – the factory closed one year later with everyone losing their jobs because they could not compete.
So many companies have inventory because they think they need to have it, they use it as a buffer to hide all of the other real or perceived problems in the factory. The inventory allows them to continue if they have quality or reliability issues, but does not force them to tackle the real problems.
Inventory is often depicted as the sea, with all of the problems of the business being submerged rocks on which your ship of progress could be wrecked. As you lower the level of inventory you have to tackle each of these rocks before you hit them, be that your long lead times, reliability or quality problems or whatever else you are hiding beneath the inventory.
Lean manufacturing as we know it has mostly come from the Toyota Production System (TPS), the engineers there would lower the inventory levels regularly, or remove people from the system just to uncover these rocks. Tackle the problems that were uncovered and be left with a more efficient cell (I am sure the operators probably shuddered every time they saw the engineer approach the shop floor, knowing what was about to be done!)
The waste of Inventory is probably the biggest waste of all when you are learning how to implement lean manufacturing due to it’s ability to hide every other waste. I will post another case study shortly to highlight this. Use this link to go to the full list of wastes for waste reduction.