Implementing Lean thinking into your business centres around removing the waste and producing things only of value to your customer.
“Lean describes a system that produces what the customer wants, when they want it, with minimum waste, doing only that which adds value for the customer.”
Waste, know as ‘Muda’, has been clarified into 8 waste streams, to help you identify and remove the waste from the system. Here at Clarity, we use the handy anacronym ‘TIM Woods’ to help you remember them.
T – Transport
I – Inventory
M – Motion
W – Waiting
O – Over-Production
O – Over-Processing
D – Defects
S – Skills
In this blog, we are going to look at the second waste, ‘Inventory.’ Looking specifically at what it is, what causes it, and how you can reduce your inventory waste.
What is Inventory Waste?
Inventory waste is the production of something that is stuck waiting in the process. This can mean it is stuck as ‘working in progress’ or ‘WIP’ as it is commonly referred to. It can be stuck as a finished product or even as a raw material. While the inventory is stuck it is adding no value to the customer and is draining your cash flow as your assets are tied up in inventory.
Having a lot of inventory waste in your system can not only result in a lack of cash flow but also damaged or obsolete products. Items stuck in the process will have to be transported or stored while will increase the risk of damage. They could also go out of date or the customer could change their mind due to the delay.
How is Inventory Waste caused?
Another waste stream, known as Over-Production, can often be the culprit of Inventory waste. Inaccurately forecasting your customer demand will result in producing more products that required, which will lead to a waste in inventory.
A poor-quality product or design can also lead to inventory waste if your product fails to beat the competition in the market. This can lead to returns, which will increase your inventory waste.
Bottlenecks in the process due to missing parts, missing information, or slow production will increase your working in progress and raw material inventory waste.
A high level of Inventory waste can also hide other waste in your system, such as:
- Skills Shortage
- Machine Capacity
- Transport Delays
- Supplier Deliveries
- Long Set-Ups
- Level of Inventory
If you can reduce your inventory waste, this will highlight these other areas of waste allowing you to work towards a truly lean production system.
How can you Reduce your Inventory Waste?
In order to reduce your inventory waste, you must look at your workflow. Does it reflect your customer demand? Creating a value workflow that reflects and adapts to the pull of the customer will ensure that the system only produces products of value to the customer and therefore cuts the inventory waste.
Removing the bottlenecks from your flow will significantly reduce your inventory waste by cutting down products tied up in Work in progress (WIP). Creating a lean workflow such as the FIFO (first in first out) production line will help to ensure your process runs smoothly to avoid any build-up or WIP.
Kanban can be a helpful visual tool to help reduce your inventory waste of raw materials. The Kanban visual management solution provides a key colour-coded indicator to help you know when you need to reorder stock. This helps to avoid ordering too much raw material and also to avoid delays which will cause WIP inventory waste by waiting for raw materials.
Eliminate TIM WOODS with Clarity Visual Management
Here at ClarityVM Consulting, we coach clients both far and wide about how they can use Lean and visual management to achieve their goals, exceed their targets and make financial savings which would otherwise be lost to waste. We work with our clients to create a bespoke strategy that ensures Lean is set up for success before providing specific, high-quality visual management products to sustain the initiative and make Lean work in the organisation long-term.
You can read more about the work we’ve undertaken with our clients by browsing through our Visual Management Case Studies
Further reading on the Clarity Blog:
- Developing an Effective Standard Operating Procedure
- Assessing Goals and Auditing Strategies
- Aldeburgh Lifeboat Station – Saving Lives With Lean Thinking
- A Visual Management Definition You Can Rely On
- Kaizen Events: Clarity Consulting’s Secret Weapon
- Why Your Workplace Communication Fails (…and How To Improve It)
- Why Lean Programmes Fail
- 6 Simple Solutions to Battle Workplace Stress
- How To Make Your Process Improvements Stick Around
- How To Create A Culture Of Improvement In Your Workplace
- 6 Challenges For Effective Business Leadership
- Our Favourite Lean Quotes…
- Beat Procrastination and get Motivated
- How to improve the morale in your workplace