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!

O.L.D. 

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.