Inventory Control

Seven wastes in Lean

Seven wastes in lean are also known as the seven deadly wastes of manufacturing. They are identified and group as activities with no value. Their processes occur during manufacturing and limit profitability in a company. They are also termed as overproduction that occurs when a manufacturer creates more goods than it can sell and delay is second as it takes place when goods are stored waiting to be treated.

Transport is third and it happens because of movement of materials from one point of processing to the other. Waste in lean is over and is fourth. The process occurs if a lot is employed to a place that is not required. Inventory is fifth and it involves keeping and committing finances to parts and spaces that do not offer income.

Motion is sixth and it occurs when goods are shipped or moved more than the required. Making defective parts is last because the parts cannot offer any revenue unless it is worked on one more time.

Definition and Explanation of Bottleneck Machine

A bottleneck is a situation where efficient system performance is prevented by a single or maximum number of resources and machinery. It is an overcrowding part of the system where the entire chain process is slowed down. For an organization to increase its performance, any manufacturing has to enhance its bottleneck first.

A simple experiment conducted using a bottle, when fetching water out of a medium, the outflow velocity is limited and determined by width of the medium in which it exists.

Illustration of a bottleneck

An increase in the width of existing point increase outflow. These limiting factors in machinery and processing are the bottleneck point. Mechanisms or features of bottlenecks such as data processing software or processors influence the system designer’s prevention of bottleneck situations that limit performance or capacity by offering a crucial part or increasing high throughput.

An approach that lowers inventory costs and improves services to customers is reducing the replenishment lead times

Reducing lead times is an ideal strategy of reducing inventory costs and enhancing client relationship. This helps when considering raw material lead time and time connecting external parties who are the clients. This lead time is broken into reviewing time, time spent on manufacturing and transportation for it to be effective.

The need is identified at review time and an order is also raised. Lead times in manufacturing, the order is being processed until it is ready for shipment. Transportation lead time however begins when the order is ready to ship until it is ready for use by clients in the next destination. Improving manufacturing lead times and reviewing times reduce idle inventory and increases sales.

The step ensures that accurate stock is taken, handled well and eliminated. The company by doing so is able to keep track of what the client really wants. This will also enhance customer service and boost its profitability. Enhancing transportation lead time also reduces inventory held and builds client loyalty.

Costs related to Keeping Inventory

Inventory costs are classified as ordering, holding and stock-out costs. Ordering costs entail activities involved when placing an order, for example, transportation and clerical costs. It can also be calculated by evaluating Economic Order Quantity. EOQ= EOQ = √ (2×A×CP/CH), A=Annual demand, CP=Replacing cost per order, CH=unit holding cost per year.

Holding costs included costs incurred in stock keeping. The risks and opportunity cost of stock keeping as opposed to investment in other projects. Shortage costs accrue based on lack or insufficient stock safety. It also includes emergency change of shipment supplier as well as loss of client loyalty. However, the latter can be worked by calculating average monthly order, adding safety stock and dividing it by two.

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