Friday, June 20, 2008

Inventory has a Purpose

Inventory has a purpose, it's to hide problems.


Pete Abilla said...

Hi Mike,

Your post leans on the dramatic and oversimplifies things quite a bit.

The reason for inventory (yes, even Toyota has inventory -- in some places, a lot of it -- believe me) -- is to prepare for shocks in the system; shocks such as political instability, unreliable transportation, unknown demand, and weather.

The waste is not inventory, per se, but over-inventory.

The goal is to eliminate inventory all-together, but until then, we have Kanban to help us, warehouses to help us, and sales and operations planning (when it works).

Also, it depends on the need of the business. Take or a mega-retailer like that. These places are unique in Operations because they are multi-echelon facilities, where you have to balance service-level (promise ship time) and availability of inventory -- not easy stuff. This type of business is ship-to-order.

Build-to-Order shops are where you can really attack over-inventory and be more successful at it.

Mo said...

I like the original without any explanation. Pithy.

Mike Wroblewski said...

Hi Pete,

Intentionally guilty in the same spirit of zero defects, zero injuries and zero landfill waste. Regardless of the reason, inventory is waste and an opportunity for improvement.

Mike Wroblewski said...

Thanks Mo!