I’ve always been fascinated by the A&E TV show “Hoarders.” Maybe it’s because my own closet still holds sweaters that I’ve had since the tenth grade, dresses that I haven’t touched in four years, and jeans that will never fit again. I wouldn’t go so far as to say I’m a hoarder (though my family might beg to differ), but I definitely hang on to things I don’t need just in case maybe, some day in the distant future, a need for one of them arises.
I’m not alone with this compulsive need to keep things I don’t need for the sake of the possibility of needing them in the future. Everyone has something they feel this way about, with reasons ranging from sentimental (like mix tapes from the 1990s when you don’t own a cassette player anymore) to practical (such as canned foods everyone refuses to eat that you bought three years ago).
And it’s not just individuals and households, either - businesses do this too.
Inventory that doesn’t directly fulfill customer needs is excessive, and should be reduced to the minimum level necessary to consistently supply customer demands and meet the needs of the value stream. Excess inventory in organizations can come in the form of supplies used in production and by staff, as well as finished products ready for customer consumption.
In fact, inventory is one of the seven wastes of Lean. What are the others? Read all about them here.
Why would an organization have excess inventory?
- Fear of running out of supplies
- Anticipating unusually high customer demand of product
- Accidentally, as a result of not knowing what inventory is stocked or where it’s located
There are many reasons why a company might hold more inventory than is really needed. For one, having an unreliable production process with a lot of downtime or having suppliers that cannot deliver reliably would lead a business to hold inventory to protect them against this variability. Over time, the business should work to reduce variability in production or supply, allow them to reduce inventory. Some organizations hold excess inventories to protect themselves without going back to address the root causes that lead them to hold inventory.
Why does it matter if there’s excess inventory?
Lean organizations make sure that they're reducing excess inventory wherever possible, because they know that excess inventory means:
- Increased costs in ordering, stocking, or producing extra product
- Less storage space being available
- Increased potential for damage to the product or supplies
- Possibility for product expiration
- Additional resources required to manage it
A real life example of a Lean organization reducing excess inventory:
An employee at Kettering Health Network, a KaiNexus customer, noticed that the supply closet in her office was disorganized. While everything was neatly arranged on the shelves, it was impossible to tell what was there, what had run out, what needed to be ordered, and what wasn’t being used by anyone. The photo to the right is how it looked before.
The solution she came up with for fixing this problem was to institute a system in which small supplies are organized into labeled bins. This makes it easy for staff to quickly find what they’re looking for and notice when something is running low, so that more can be ordered.
The photo to the right is how it looks now.
Because of this change, the organization doesn’t need to worry about excess supplies being ordered because of a bad process; they know where things are, and don’t have to order more when they can’t find what they’re looking for. They also now use index cards to indicate what’s running low and needs to be reordered. This is a great example of using front-line employees to identify opportunities for improvement that reduce waste in their daily processes.
Take a look around your own workplace - what opportunities for improvement can you find to reduce excess inventory? Leave a comment and inspire our readers to follow suit!
Want to learn what you as a leader can be doing to create a more Lean organization? Sign up for our free upcoming webinar.
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January 27 at 1p EST
In this webinar, you'll learn how to:
- Create (and sustain) a culture of continuous improvement
- Encourage, inspire, and facilitate improvement
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Last year, our Dr. Greg Jacobson and Mark Graban gave a webinar entitled, “Leadership Behaviors that Create a Culture of Continuous Improvement” and it was our most popular webinar of the year. They covered 25 behaviors, but that just scratches the surface.
In this new webinar, Greg and Mark will share some additional behaviors, illustrated by real stories from our work with KaiNexus customers.