Is it possible to believe in lean manufacturing and not believe in lean inventory? The more I see, the more I’m convinced it is. I believe strongly in the dogma of waste reduction — the practice invariably makes manufacturing processes better. But I’ve lost my faith in the concept of just-in-time manufacturing. It’s bunk. It doesn’t work.
Inventory is working capital, and working capital shouldn’t sit around idle. I understand this, and no rational person would rail against a system that seeks to minimize expenditures until they’re absolutely necessary. But just-in-time is like world peace — everyone wants it, but the most brilliant minds in the world haven’t figured out how to achieve it. The problem in both cases is complexity. Too many constituents are involved, all with varying agendas and beliefs, and we can’t bring them together and teach them how to sing. Or deliver products on time.
Toyota is the father of just-in-time principles, and even it can’t get it right. In light of that, I think it’s time we decoupled lean and just-in-time. If you’re a manufacturer, work to reduce rework and scrap; improve worker ergonomics to reduce injury; implement a streamlined conveyance system to move work through the production process; slash the number of tasks it takes to complete each step. And even implement just-in-time line-side — use call buttons to trigger replenishment of bins, etc. But don’t pull your hair out over inventory. Your customers won’t wait for you to ramp up to fulfill their order, and your forecast won’t save you because it isn’t correct. The answer is a buffer. What I hear time and time again is that the cost of a buffer is well worth eating when you can promise delivery from stock. Without that assurance, you may well lose the order, and that’s a heavier price to pay in terms of dollars and reputation.
For the vast majority of the manufacturing world, inventory is simply the cost of doing business. There are other tactics in the lean playbook to focus on. Put your resources behind those you can achieve.
8 Comments
JIT is just one amongst many priciples/guidance of LEAN MANUFACTURING. There are noultimate rule, how deep to implement it (JIT). It depends from case to case of production environment. In case of interactive MES, why not to implement it, especially, if we have production of different subassembly in floors under the same corporate umbrella. We have to balanced the material flow to the pace of main assembly lines to achieve steady moving of material, taking into account efficient use of logistic and transport resources. The inventory needed is only for buffering the sequence of dependent processes with different pace. For each item of final produst we have to achieve the during its production and its usage.
Peter Tovšak, GORENJE d.d.
I agree with the concept of stocking parts. The problem we have had and continue to have is customer commitment to parts made beyond “firm orders”. We have a claim now for obsolete parts that was determined as invalid even though the manufacturing process was weeks longer than the “firm order” lead time allowed. Cost us several thousands in processing costs. Often cannot meet deliveries if wait to begin making parts (let alone buy raw material) for repeat items until release becomes firm.
Lean manufacturing driven by real-time MES and tight integration to corporate ERP is the better way to go in our marketplace. JIT may work in Japan or China where the suppliers are located close to each other and oftentimes sister companies under the same corporate umbrella. I know of one application here in the US utilizing real-time MES, sequencing and tight integration with the customer order processing and manufacturing systems that comes as close to JIT as I’ve seen.
I wholeheartedly agree and have been saying such for years. We need to use all our advantages; one key one is space. It is something Japan has very little of per capita, but we have a lot of space and very low commercial real estate costs because of the economic crash. It is time to banish warehouse taxes and encourage people to use the space we have. An empty warehouse is like an empty hotel–the resource is perishable. It should not cost an arm and a leg to the Gov’t to have buffer inventory. We have a chance to set some things right, let’s make this change too.
I’ve seen that the amount of inventory buffer that many organizations maintain is far too high – often based on entirely spurious thinking like a knee-jerk reaction to a stock problem that happened a long time that somehow has become policy imbedded in stone. I think that lean pushes you to question just why you have the amount of invested working capital you do and then pushes you to try to reduce it. Obviously working within the 4-wall is easiest but there are certainly ways to reduce inventory buffers through the extended supply chain. The buffering however needs to reflect the realities of changing demand patterns and the stability of the process. It’s a balancing act. I would not however say that a make-to-stock model is the only model possible and that high inventory is just the cost of doing business.
I think the de-coupling has already happened, de facto. JIT implies supplier factories being near customer factories. Materials, parts or assemblies, are supplied daily or hourly to the customer factory. For this to happen, the supplier factory or DC needs to be within 24 hour delivery time from the customer factory.
With the massive off-shoring of production, JIT has been replaced by Lean which, to me, is minimization of inventories when the lead times are way too long to even think about JIT. To add to Gary’s point, when the lead times are long… forecasting errors will increase and dominate. Thus, JIT becomes passe.
Gary makes a good point. Just-in-time encompasses many different activities, many of them beneficial to production activities. Basically what I tried to get across in my post was that beyond the four walls of the factory, my faith in Just-in-Time breaks down. I don’t believe the same system that makes work cells and workers more efficient (delivering materials and components just in time) can be mapped to the customer delivery chain. I don’t believe Toyota can truly deliver a finished product to the end customer just in time. It’s an admirable goal, but one that too many good lean practitioners have failed to deliver on adequately.
Do you understand the purpose of J-I-T?
Not just reducing inventory, but reducing time until errors are discovered, making problems apparent, engaging and aligning people so they see that their effort is important.
Inventory or Batched product is a risk in many ways.
It does isolate processes. sometimes good, oftentimes bad.
GF