Decoupling Inventory

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  When something is said to be coupled, it would mean that the two items are connected and interdependent on one another.  In the case of processes and supply chains there can be both positives and negatives with regards to coupled inventory and decoupled inventory.  As you know, demand can fluctuate, shortages will occur, people call in sick and shipping routes are sometimes detoured.  There is a long list of issues that can disrupt both internal processes and supply chains.

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Many of these disruptions can be costly.  Decoupling inventory can protect an organization against inventory disruptions as well as allow an organization to continue functioning when supply chain failures occur.  Decoupling inventory is also a useful method to help minimize or level the playing field of some manufacturing or supply chain processes that move faster than other ones.  So, what does it mean to decouple inventory?

• Decoupling inventory is a technique that is used when extra inventory is set aside at different stages of a process or supply chain.  While holding inventory can be costly this technique is frequently used so that low-stock situations or breakdowns at one stage of a process doesn't slow or halt other operations. Essentially decoupling is a technique used to create independence between suppliers and customers.  Many companies decouple inventory to protect all stages of production.  This means that even when one operation has delays or gaps in inventory it does not affect other operations.  In the most basic sense decoupling allocates inventory at different operations to prevent bottlenecks or constraints.  Keep in mind that decoupling is a form of buffering.

How does this apply to a lean organization?

1. supermarkets are a form of decoupling. 
2. In place inventory is a form of decoupling.
3. Receiving in location is a form of decoupling. 

Remember, Lean organizations still have inventory, the difference is that they do everything possible to minimize the waste of inventory.
How does decoupling work?
  Decoupling works by strategically finding and establishing what are known as decoupling points.  For example:

• A make to stock environment may decouple by stocking end units.
• An assemble to order environment would decouple by stocking subassemblies, components and other needed items to complete the customers order. 
• A make to order shop would not decouple finished goods because they are made to order.  Instead they decouple by stocking raw materials.  This allows them to receive an order and pull materials right away.

Decoupling helps reduce both lead times on supply as well as other disruptions that may occur.
Examples:

1. Let’s say you are a food supplier and you operate a number of different lines. Your lines process a great deal of food every single day.  Now let's consider how quickly a breakdown can add up. Luckily, If you decouple your lines you can set aside some inventory so that when issues arise your lines can continue to run independently. For example if a machine breaks down, you can stop the line and repair it while still shipping your requirements like you normally would.
2. Another example might be an automobile manufacturer who assembles separate parts to create a finished good. They decouple inventory so that one line of assembly, like tire assembly, does not cause a constraint in other parts of assembly.  For example, dash assembly.

Challenge:

• Do you Decouple inventory? If so, how does it work?  Share your answer in the comments section below and receive a coupon to one of Lean Strategies International LLC's courses.

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