Inventory is recognized as one of the seven types of wastes mainly due to the fact that it ties up cash. Following lean manufacturing principles , one can easily see the value of a reduction in high dollar items to a minimum inventory level. But what about low dollar or cheap items?
Does it make sense to expend effort on these items to move to a one piece flow?
How much inventory is too much?
Some of you would say its not worth the effort while others would argue that we should eliminate all waste. Where should we draw the line?
One way to help answer these questions is to look at inventory from a different point of view. Instead of dollars, let's look at inventory in time or days of supply. While working for a company a while back, I complied an inventory listing of all active part numbers and sorted by days of supply. The results were eye opening and I recommend you doing the same thing at your company.
Guess what the longest days of supply for an active part number was found at this company?
It was 46 years. Yes, 46 years. I could hardly believe it myself especially with the company being only 20 years old. To make matters worse, it was a metal part. I wondered how long it would be before it starts to rust. Of course, there is a high degree of probability that a design change would make the part obsolete sometime within 46 years. In this case the part was purchased in volume, at a discount, and considered low dollar at this company (less then $3,000 total value) .
From this perspective, now how much inventory is too much?
You may think this is an obvious point, but you would be surprised at the number of companies that overlook it. When on the lean journey, it is not enough to just point everybody in the same direction, you must have measurements/goals that point in the same direction. This includes the Purchasing Department.