WITHOUT INVENTORY FLOW AND FIFO DON’T MIX

The purpose of lean manufacturing is simply to eliminate waste and increase value for customers and shareholders. The theory is to have optimum linkage and flow throughout your value stream. The rate of your production should match the rate of the demand. Sounds easy enough unfortunately there are always two assumptions made that typically derail the project from the start.

  1. The Customer demand will be level or will allowed to be leveled.
  2. Shared resources can be managed easily.

I’ve found these two assumptions the most common reasons lean implementation fails.

Level Demand

If you’ve dealt with customers at any level you know demand is going to be anything but linear. Naturally there is a simple solution “level loading” production so that line will operate at a steady and predictable rate. So what’s the issue here? One word “inventory”, as manufacturers competes globally margins are lower and available cash is limited. If customers demand isn’t linear than it will be necessary to accumulate and hold finish goods inventory for a period of time. This is typically not acceptable so organizations revert to old methods of delivery, wait until the shipment comes due then try to muscle out the shipment with expediting and overtime.

Shared Resources

A machine or department that is utilized for multiple products or lines is known as a shared resource. Typically your lean event is focused on particular product or family of products. Shared resources like to manage priority first in first out (FIFO) which loses much of its effectiveness when downstream work centers are late or out of sync.

Too often used during lean events is the “Presidential Motorcade Model” a phrase I coined. If you’ve ever seen a presidential motorcade you know all the streets are cleared and the President is given the right of way. In doing so the President makes great time and the secret service can flawlessly predict arrival times. But think about the rest of us? Should we citizens also plan the motorcade model when we travel? Of course not, the streets are a shared resource with speed limits, stop signs and many other drivers on the road at various times and multiple intervals.

You can see were I’m going here. Too often lean implementation teams operate unconsciously under the assumption that the program their working will always get priority. This isn’t going to happen for long so it becomes necessary to put buffer inventory at the shared resource centers to maintain flow. But again that notorious word “inventory” rears its ugly head.

Conclusion

When putting together your lean plan calculate understand and agree in advance how much inventory you will carry along with a robust strategy to manage your shared resources. Optimizing a non-restraint work centers in your value stream simply creates inventory. So if your shared resources are the bottleneck it’s the area that requires optimization.

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