inventory management and strategies that support your...
TRANSCRIPT
Inventory Management and Strategies that Support Your
Business Strategy
November 2011
Phil Mitchell, Associate Professor
Department of Forest Biomaterials
North Carolina State University
Finished Goods
In 2006,
warehouse in
China for finished
furniture goods
1000 feet long,
80 feet high, 300
wide. Since
then, the size
has doubled.
Inventory Types (where it is held)
•Raw Materials
•Parts Inventory
•Sub-Assembly Inventory
•Work-in-Process
•Buffer Inventory
•White Woods Inventory
• Finished Goods Inventory
•Distressed Inventory
Increasing
Flexibility
Increasing
Cost
Inventory Concerns Need to be Balanced
• Replenishment lead time
• Inventory carrying costs
• Economy of scale / bulk buying
• Inventory forecasting
• Inventory valuation/future valuation
• Physical space requirements
• Maintenance of quality
Traditional Inventory System
The traditional manufacturing system operates on the “just in case” concept pushing product through the manufacturing system and providing inventory buffers between suppliers and the factory, within the factory, and between customers and the factory, hence called a push system. Batch manufacturing used by many wood products value added manufacturers is a push system.
Just-In-Time Inventory System
Also known as the Pull System, it was developed to provide what was needed, when it was needed, and in the quantity needed. A pull system initiates production in response to a present demand. It is a “don’t call me, I’ll call you” system.
A push system initiates production in response to an anticipated demand (forecast which is often wrong). Often this involves an MRP system. It is a “ready or not, here I come” system.
Inventory Reduction
From Meier 2005
• Which is less wasteful?
• Which is more comfortable to work with?
Ideal Environments for Pull
•Uniform use of product
•Regular, cyclical final assembly schedule
•Small lot production
•Quick setups
•Sufficient capacity
•Few bottlenecks
•High conformance quality
•Reliable processes
•Stable processes
•Few engineering changes
•Flexible workforce skills
Ideal Environments for Push
•Volatility in design
•products
•processes
•Uncertainty in the supply base
•Volatility in demand
•volumes
•order sizes
•customer modifications
Low Inventory Management Ideas
• Raw materials
• Vendor stocking plan
• Large quantity purchases
• Purchase exact quantities
• Buffer inventory (component supermarket): standard
blanks before machining; standardized parts before
assembly; assembled products ready to be finished
• Single-piece flow implies one piece at a time, creating
factory flow with no storage stop.
• Finished goods ready to ship – works best for volume
manufacturer that has few product options.