Tag Archives: eoq


Most often when we think of a wheel, it’s in the context of transportation, one of the more obvious and ever-present of the 7 wastes.   In fact, the first likely use of a wheel and axle was not for transport but for processing – actual work.  According to the Smithsonian, the potter’s wheel dates to 3500 BC.  The wheel and axle wasn’t used for human transport (chariot) for several hundred more years; and the idea of carting material apparently took several millennia after that!  The wheelbarrow was invented around 100 AD in China, and it took another thousand years more for it to appear in Europe.

cartwheelsFrom a human standpoint these conveyance devices are designed to reduce strain.  In a technical sense, it can be said they multiply our capability to do work; at least the force-times-distance kind of work: W= f x d.   Problem is, that although conveying material on wheels is embedded in our thinking as an improvement over manual transport it’s actually a mechanization of waste.  We may think the wheel has multiplied our ability to do work, but it really has multiplied the amount of waste we can create.  Odd.

Over the centuries additional wheels were added to the basic cart, enabling conveyance of even more material with less work [sic] in a single trip. Then, in 1936, the invention of the shopping cart at Humpty Dumpty supermarkets became the prototype for more recent improvements to conveyance:  A four-wheel, multi-level steel wire cart, this invention replaced a hand-carried basket, enabling shoppers to gather all groceries in a single pass.  The shopping cart, however, also required wider aisles and larger checkout counters.   Then the aisles were widened again, this time to accommodate pallet loading of the larger amounts of material needed to accommodate a new concept: EOQ.   Why buy just a little, when you can have so much more in an economy pack? Carriages became larger still to accommodate bulk quantity shopping.  All of these innovations were intended to make it easier for the customer to buy more – and, of course, to encourage them to buy more.

There are more than a few parallels in industry.  AVG’s, pallet jacks, forklifts, and conveyors are all “improvements” on the basic cart.  These machines typically require wider aisles, deeper and higher shelving, new training, and maintenance and, of course, more space to park the machines – kind of like the tail wagging the dog. Too often, rather than rethinking the cause of the waste, we automate around it.  Shigeo Shingo referred to these as “superficial improvements.”  An automatic guided vehicle (AGV) mechanizes the waste of transportation; or an automated storage and retrieval system (ASRS) facilitates the waste of storage.  Worker strain may be reduced by a superficial improvement, but the actual waste remains and sometimes even increases.  A stockroom manager, for example, lamented to me recently “I have less people now, but it takes longer to kit a job than when we did it manually.  The machine is a bottleneck and the factory waits for parts.”  Unfortunately, these expensive superficial improvements become sunk costs, hard to undo because they are depreciable assets. Thank you, management accounting.

One more insidious re-invention of the wheel is the stationery or almost-stationery wheel.  To the casual observer, these are the wheels that are on the cart that appears as if it’s for transportation; actually, that cart never moves except to move it out of the way.  Moveable storage becomes an option when material staged in front of a process has overflowed to a point that it must be staged in the aisles; funny that this is called “work in process.”  Of all uses or abuses of the wheel, this one is tops on my personal list: the appearance of conveyance.  We assume that if there is a wheel, then there must be movement.  Mr. Shingo’s comment that the “The worst waste is the one we cannot see” comes to mind.

Here is an improvement exercise for you to try in your own facility:  First take an inventory of carts and answer these questions:

  • What is the total number of carts?
  • What is the total floor space they occupy?
  • How many are actually used for conveyance?
  • How many are really only for storage or are kept on hand in case of storage overflow?
  • How can you reduce each of these numbers by half?

Please let me know how much production space you liberate.


PS GBMP, a licensed affiliate of the Shingo Insitute, is offering the following workshops in the coming months. The courses introduce the Shingo Model™ and Guiding Principles on which to anchor your current continuous improvement initiatives and to fill the gaps in your efforts towards ideal results and enterprise excellence. Consider joining us at an event near you soon. To read more and register visit http://www.gbmp.org/shingo-institute-courses.html

Here are a few testimonials from happy participants, followed by the schedule.

“Discovering Shingo with such a dedicated instructor helped our team gain a better understanding The Shingo Model. The workshops were engaging and we all came out of the classes with a much better idea of what we need to do as a company to continue to grow.

“The instructor made us feel that we were really learning from each other. When we were broken up into groups, he was always nearby and available to facilitate, but didn’t hover or impose his viewpoints – we came to our own conclusions as a group – and he was generous in his recognition of others’ input and viewpoints. 

“The Discover Excellence workshop was great. It challenged us to think differently. Going to Gemba at the host site was fantastic. I like that our instructor took part in the Gemba walks as a participant. We were all learning together and challenging each other’s assumptions or understandings of model, which in turn led to a much deeper understanding. 


Nice Round Numbers

I was working recently with a company that is targeting inventory reduction as a top priority.   I stressed that reducing the causes of inventory is a better perspective.  The analogy of inventory as a deep river that covers many rocks (wastes) is one most of us are familiar with, and one that I experienced firsthand early in my own Lean journey.

When our discussion turned to causes of inventory, there was an outpouring of reasons from the group:

  • “We run for absorption,” a production manager exclaimed.  “We don’t want idle machines or people.”
  • A buyer added, “We order earlier if we think there will be a delivery problem.”
  • A machine shop supervisor confided, “We gang parts with similar set-ups to improve machine utilization.”

These defensive postures provided too much inventory too soon.   The consensus however was that in these instances too much inventory was preferable to the alternatives.

One inventory planner however suggested a cause of excess inventory that had nothing to do with protection: rounding.  “There are so many ways to round order modifiers, but we don’t consider the consequences.   For example, if an EQQ is calculated at 27 pieces, I’ll round it up to 30.  Or maybe a safety stock of 187 pieces will be rounded to 200.”

roundnumbersThe list of round numbers continued:  anticipated yield (to cover defects), scrap factors (to cover breakage by the consumer), overage allowance, pan sizes (to cover standard package quantities) and minimum order quantities, safety stock and order point quantities, fixed and variable lead-times, and n-days stock on hand.   Every one of these quantities were rounded – always up.

The planner continued,  “These round numbers apply to each part, but when you put the part into a multi-level bill of material the modifiers are compounded!  It’s much worse.  A simple rounding of safety stock at one level, for example, pyramids inventory at every level beneath it.”

As she spoke, I recalled my own experience years before as a materials manager tracking down mysterious purchases of seldom-used parts.  No actual customer need had triggered the order of these parts.  They were driven entirely by order modifiers rounded up to nice round numbers.

I responded to the planner, “Good observation!  Perhaps we should rename order modifiers to order magnifiers.”

How many order magnifiers are there on your part master?  When was the last time you reviewed them?  Are they nice round numbers?  What portion of your total inventory is the result of nice round numbers?   Please share a story.


BTW – My next free webinar will be on Tuesday, February 11, from 3:00-3:45 p.m. EST.  The topic is “Tips for Manager Gemba WalksHope you can join me.  Click here to register.

You can learn about all of GBMP’s public lean training events here  – from benchmarking Plant Tours to Lean Accounting Workshops, Six Sigma Green Belt Certificate programs and more.

Thankful for Inventory

ThankfulI heard a tongue-in-cheek radio ad for a local tobacco shop yesterday extolling the secondary benefits derived from tobacco, namely the tobacco sales tax.  Supposing the moneys actually go to fund their publicized causes (road and bridge improvements, aid to expectant mothers and of course a mandated marketing campaign decrying the dangers of tobacco) we should be “thankful”, according the ad, for tobacco.   The bizarreness of this premise inspired the following parody:

Be thankful for inventory!

  • It’s an asset, like ‘money in the bank.’ Though not quite as liquid as cash, this asset can be used as collateral to borrow from the bank – perhaps to buy more equipment to build or store more inventory.
  • Larger inventory lots reduce the need for costly changeovers.   Optimizing these quantities is axiomatic to absorption and equipment utilization.
  • Inventory is a protection against machine downtime.   Who would risk deliveries to customers by producing only what is needed when pesky machine breakdowns are likely?
  • In slow periods, building inventory to forecast keeps our workers and equipment busy.   (And once we figure out how to forecast future needs accurately it will reduce overtime in peak periods as well.)
  • Purchasing economical lot sizes reduces piece costs, which of course increases profits.  Right?  Is a container load such a bad thing?  In any event, ordering overseas purchases would be problematical without pallet load lot-sizing.
  • Larger lots reduce sampling inspection costs and associated paperwork. Our quality system requires minimum lots to conform to sampling standards.  We’ve calculated the EOQs and these are our targets.
  • Larger lots reduce stock-outs.  If we are constantly running out of parts our customers will be affected.  We should be thankful for safety stock.  After all, safety is one of the most basic principles of Lean.

These premises unfortunately have about the same validity as those in the tobacco shop advertisement.   Inventory, like cigarettes, is an addiction with short-term perceived benefits but long-term negative consequences.  And bizarre as these premises may appear, they’ve all been uttered to me recently by well-meaning managers who struggle to see inventory as a symptom of many business problems.

Can you add to the list?  What are some other reasons that we are “thankful” for inventory?  Please share a couple.    And have a Happy Thanksgiving!


BTW:  My next free webinar is fast approaching.  Sign up here for “Tea Time with Toast Dude.”  The topic will be “Killer Measures”, traditional measures that can derail your lean implementation.  Hope you can join me on Tuesday, December 10 from 3:00 – 3:40 p.m. EST.  Read more & register.