The myth of "zero stock" has long since been dispelled. This objective is not feasible when it comes to meeting customers' demands for short lead times, given processing, assembly and procurement times. The question is: where should stock be positioned in the production flow? And then, what is the right stock level?
Here are some of the key ideas that can help guide management choices, and which are valid in all types of industry: wood, luxury goods, metallurgy, capital goods, etc.
Identifying and differentiating constraints
Upstream flow constraints often concern raw material processing. Times are often long, resources inflexible, and adjustments time-consuming and complex. Of course, SMED can greatly reduce launch sizes, but these are often much higher than short-term customer requirements. Setting up an intermediate stock enables us to clearly separate the constraints of each flow, and to quantify the stakes of improvement in terms of reactivity and stock value in relation to the resources to be put in place. This is the first step towards implementing action plans, while preserving customer service.
Differentiate products as late as possible
It is also interesting to position an intermediate stock before the choice between several options, which is known as delayed customization. This management method makes it possible to reconcile launch sizes in the upstream flow (see constraints above), and the delivery of low-volume customized orders. Sales forecasts and production management are simplified. This is typically the case for packaging, colors and, in many cases, assembly.
Eliminate finished goods inventory
The positioning of an intermediate stock can greatly reduce, or even eliminate, the stock of finished products, as long as the response time of the downstream flow is compatible with the customer's lead time. And this is very often possible. Production in the downstream flow is then pulled: we are then in part-to-part or make-to-order (assembly) mode.
Like any other stock, the creation of an intermediate inventory has its drawbacks:
- intermediate storage packaging (for handling products in the downstream flow)
- the creation of an additional level in nomenclatures, often necessary and recommended
Harmonize physical flow and flow modeling
In all cases, it's preferable to manage a deliberate, calculated inventory that reflects the company's real problems and constraints, rather than to be subject to a "fuzzy" inventory, "pushed" according to internal and external emergencies.
Once stocks have been positioned at the right points in the flow, we focus on managing them as effectively as possible:
- act on constraints to reduce or eliminate these stocks,
- derive flows from actual customer consumption
- determine the right stock levels
