Many companies use inventory to combat such problems as late deliveries, defects and various other problems. And, while it may help to mitigate these problems, it can also create other problems. You see when companies create inventory buffers to meet customer demand, they tie up cash, take up space and cause inventory to accumulate throughout the production processes as well. There are two distinct strategies that have been used for some time now to combat inventory build up:
These two strategies are customer focused strategies that focus on pulling materials, rather than pushing them through a production process. This in turn helps eliminate many of the causes of inventory build up all throughout a company's value stream. To do this however, you must be able to understand and find where and why inventory accumulates. We will focus on why inventory accumulates. Just remember, these reasons are general by nature and you may have some more specific reasons for inventory accumulation in your organization.
As we’ve discussed in before, a pull system reverses the flow of materials and information and triggers the production of items and information that is based on real customer demand. For example a kanban system can assist in pulling demand through the value stream as workers begin to adapt to the new system. As time goes on suppliers begin to understand that building to the demand of customers can create flow that is based on real demand. This in turn makes work easier and drives waste out of an organization. One way that companies can gauge their progress of pull implementation is to regularly observe how flow is within an organization and watch as work in progress inventory begins to lower.
Now before we go, we’d like to ask you a few questions that you can answer in the comments section of the community or in the upcoming assignments section: