Is inventory a wasted opportunity?
Lean principles focus on eliminating waste and promoting value-adding activities. In theory, this should mean Lean inventory management aims to reduce warehouse levels to zero.
But that’s not practical – or profitable. It also oversimplifies Lean principles, which divide activities into value-adding or non-value-adding.
Idle stock adds no value. But material moving through the production line efficiently, spending minimal time in storage and not hogging space that could be used to create a saleable product, falls into the value-adding category.
So, we apply Lean principles in manufacturing inventory management to:
1. Add value – First, figure out what the customer sees as valuable so you can focus on maximising that value in the following stages
2. Create a flow – Streamline inventory management processes to eliminate idle time and get your product moving
3. Pull on demand – Once the flow is in place, implementing a strategy to pull stock when a customer requires it (rather than push-based on a producer’s prerogative) follows naturally, optimising stock levels
4. Be responsive – Flexibility comes when employees can focus on continuous improvement instead of resolving issues, and it means responding to demand, innovation, market changes and suppliers
5. Perfect the process – Continue reducing cycle times, improving product quality, trimming fat and cutting costs; while your operation may never be perfect, the pursuit of perfection is motivation enough
These are the 5 principles of Lean inventory management in manufacturing, and they apply no matter the size or complexity of your organisation.
Ultimately, it’s about optimising how raw material moves through the pipeline to deliver the best quality product and yield maximum ROI.
What are the characteristics of Lean inventory management?
You might have implemented some Lean inventory management optimisations already without realising. There is a litmus test for Lean.
If you have examined part of your supply chain and made adjustments that have these 4 attributes, then congratulations! You’re already on your way:
1. Managing inventory in response to demand, which looks like supply-driven forecasting
2. Reducing waste and unnecessary costs, usually by cutting idle time and rolling out better ordering protocols to avoid overstocking
3. Standardising processes as aa first step to enabling
4. Collaboration across the business, so everyone is informed and working to the same targets
How to implement Lean inventory management in manufacturing
Getting the benefits of Lean, including cost reduction, product improvement and flexibility to innovate, demands a multi-pronged approach. You need to scrutinise each stage of the supply, storage and production chain to detect and eliminate non-value-adding activity.
Maintain good supplier relationships
Collaborating with your suppliers ensures you can streamline ordering without overpaying for essential materials.
Use an ERP system to track inventory (and everything else)
Jobman, an ERP software for manufacturers, includes a fit-for-purpose inventory management module. Our system provides all the data you need to make informed decisions, identify value-adding opportunities, and continuously improve inventory management.
Hold emergency stock
It might seem counter-intuitive, but holding small amounts of the most valuable stock allows you to survive in an emergency. For example, prolonged order delays or sudden demand spikes.
Why Australian manufacturers lean on Jobman
Our users rely on the data Jobman provides to trim costs and maximise profits. Jobman’s intuitive inventory control functions support Lean principles, while the full range of features brings your manufacturing business together into a single user-friendly interface.