If you are in manufacturing these days and have not heard the following words – “ We have to reduce inventory”--, you probably cannot hear at all. Even companies who do not have a lean culture focus a lot on reducing inventory.
Projects will be created to reduce inventory. Gigabytes of data will be analyzed to see where it could be reduced. Consultants will be brought in to develop inventory reduction strategies. Targets will be set and mostly missed. Eventually a delivery will be missed and the same people will ask why we did not have enough stock – especially “Safety Stock”. Seems familiar.
The problem lies with not realizing the simple fact that inventory is an outcome not the process itself. Companies focus a lot on the outcome and hence, fail. If your lead-time is 50 days on average, your inventory will have to be more than 50 days’ worth. Things get worse if your demand is uneven. I have seen companies set target of 20 days’ worth of inventory when their supply chain/ production has a lead-time of 40 days. Think you can win the game! It’s a mathematical improbability.
Focus more on reducing the lead-time and set the inventory for that lead-time. You’ll win the game everyday. If you have not paid attention so far, here I go again: You cannot reduce inventory below the stocking levels required for you current lead-time.
In case, you have figured out a way to keep less than the lead-time’s requirement and still have not missed any deliveries, please let me know. You have found a way to make gold out of thin air.