Monday, April 2, 2012

Inventory: The Enemy of Making Problems Visible

The 4th P of P4 is Elevate your Problems and make them the root of your learning as a learning organization. We've talked about several ways to do this. Defect and scrap data, customer complaints and team member suggestions are all great sources of wonderful problems.

One of the 8 wastes is the sworn enemy of making your problems visible. That waste is INVENTORY.  Why do we have inventory of finished goods? Because our process is not capable of servicing our customer fast enough.  Why do we have inventory of raw materials? Because our process is not capable of servicing our customer fast enough. Why do we have inventory of work in process? Because our process is not capable of servicing our customer fast enough.

By removing the inventory, our problems become very visible.  This is what we refer to as a "JIT (just-in-time) condition".  My Italian half calls this agita (queezy stomach). This is the condition which gives us the will to use our lean tools to see waste to make our processes faster.  And remember, at least 90% of all of our processes are one or more of the 8 wastes. Remove the waste, speed the process, decrease how much you need to keep around "just-in-case" you get an order.  All of you lean people know from experience that the first major benefit of your lean journey is a HUGE reduction in inventory, which translates to improved cash flow. More businesses fail due to poor cash flow than poor sales!

Your inventory will be greatly reduced when you set up supermarkets (finished goods) and kanban (raw materials), but do not expect this to happen without new problems surfacing. Go after these new problems rapidly by turning them into A3. 

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