To inventory or not to inventory?

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Hey everyone,
I am wondering how many keep an inventory of finished goods on hand versus making things on an as ordered basis. I've read in articles dealing with lean not to keep a large inventory. Thanks.

KJ

Pat Gilbert

Custom obviously not

Having a supply on hand is essential to good service. Having too much = BK

There is a furniture factory who is still in business today ( 10s of millions in sales) in So Cal who's main selling point is next day shipping so the retailer does not have to keep a big inventory..

Two major selling points are price and service, the latter requires smart thinking but not necessarily more expense.

KJ

Member

I know I'm going to feel like a moron after u find out but, BK???

Pat Gilbert

bankrupt

chipbored

As the lean way of thinking goes. Any work in progress laying dormant is money you can't invoice for and inefficient to stop/start work on.

We don't keep any inventory of produced items. All made to order.

We do however keep an "inventory" of pre finished parts that are guaranteed to be used in about 1 month.

An example is rips of melamine for cabinet rails and drawer backs. It's efficient to cut a whole bunch at once and speeds up production when kitchens are being cut, but we don't pre edge them because it is inefficient to edge them and take them back to the saw to be cut again and stacked with cabinet parts that are going to be edged anyway. If our cabinet depths were all the same we would do the same thing but they always vary so I just wait for the order to come in and cut them then.

Hope that helps.

Maybe it would work for you to keep some sort of inventory if you are guaranteed to sell it and experience lulls in production that could be filled by making the inventory items.

KJ

Member

Gottcha Pat.

Thanks chipbored for giving me a different way to look at it.

Pat Gilbert

To me finished goods would be something a customer would actually pay for?

KJ

Member

Correct. Moulding for example. Stock a few profiles and call them "stock" profiles. That type thing.

Pat Gilbert

That is not what I would call a finished good unless you are selling the molding like a lumber yard would?

Around here you can get custom runs in about 2 weeks, unless your lead time is shorter than that, what is the point?

Derrek

Back when I first started out and wasn't manufacturing everything, we offered our product in white only. We stocked certain parts and cut others to order. As soon as we started to manufacture and brought in other colors, that became an impossible task.
I also used to buy all my colors in a full units to save $1-2 per sheet. I then learned that some colors we would sit on for months and tie up cash. I realized that my supplier was already storing it and will deliver it the next day so we don't stock very much panel products, or even hardware.
From "the Toyota Way" The more you stock, the less likely you are to have on hand what you need.

David Waldmann

Member Member

What kind of business/product are you talking about?

Batch size should be determined by demand (including projected demand) as well as setup and run times. It's a balancing act, and each business needs to determine the best application of the principles for their situation.

If I had to make 4 or 10 LF of moulding from scratch every time someone ordered a frame I'd be out of business either from lost sales due to price needed to meet costs or lack of profit selling at a competitive price.

Then again, with nearly 2000 profile/wood/finish combinations available, I am not going to have 1000 LF of every one in stock. We make the raw moulding in larger batches (dependent on average sales and balancing batch size against turnover), and finish to order.

If you do reproduction replacement turnings by hand you will want to do them to order, but if you make chair spindles with a back knife machine you may want to do more than a few at a time.

KJ

Member

You guys are giving me a lot to consiser. Every time I check the site I realize how much I don't know.
'The more you stock the less likely you are to have on hand what you need." I love that. I have got to read that book!

chipbored

Also put these on your reading list

The Goal: Eliyahu Goldratt
True 32 Flow Manufacturing: Bob Buckley
2 Second Lean: Paul Akers

KJ

Member

I've read the Goal, once I started it I couldn't put it down.

Larry

I would add this to your reading list. Translated version. Not a quick read either. But very interesting story of the developement of the Toyota system.

Toyota Production System: Beyond Large-Scale Production ...
Amazon.com, Inc.

Rating: 4.7 - ‎46 reviewsIn this classic text, Taiichi Ohno--inventor of the Toyota Production System and Lean manufacturing--shares the genius that sets him apart as one of the most ...

KJ

Member

Thanks Larry,
I'll check it out.

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