Inventory Management: Manage Inventories to Manage Cash Flow

Inventory Management: Manage Inventories to Manage Cash Flow

What is Inventory

- Stock of items kept to meet future demand

- Purpose of inventory management

  • What to order
  • How many units to order
  • When to order

Types of Inventory

Water Tank Analogy for Inventory

Why Do we keep Inventory?

Reasons To Hold Inventory

Meet variations in customer demand

  • Meet unexpected demand
  • Smooth seasonal or cyclical demand

Pricing related

  • Temporary price discounts
  • Hedge against price increases
  • Take advantage of quantity discounts

Process & supply surprises

  • Internal –upsets in parts of or our own processes
  • External –delays in incoming goods
  • Transi

Reasons To NOT Hold Inventory

Carrying cost

  • Financially calculable

Takes up valuable factory space

  • Especially for in-process inventory

Inventory covers up “problems” …

  • That are best exposed and solved

The sea of inventory

To Expose Problems: Reduce Inventory Levels

How to Manage Inventory?

Internal Logistics Flow

Internal Logistics Flow – Extended Overview

What is Push Flow

What is Pull Flow

Internal Logistics Flow –Overview


A supermarket is a storage area working to the following rules:

  • Fixed location for every part number (PFEP);
  • Easy picking access (ground storage level);
  • Allowing Visual Management;
  • Assuring the FIFO principle;

Designed to enable Flow and easy handling of:

  • Small Containers;
  • Containers on Wheels (Rollers);
  • Trolleys.

Traditional Storage vs Flow Supermarkets

Where to keep ?

How to keep ?

Apply 10 Golden Rules of Storage

1. Air free storage
3. Bend free
4. Count free
5. Search free
6. Heavy material at ground
7. Fast consumables near entrance
8. Climb free
9. Adequate lighting
10.Adequate ventilation

What is a KANBAN

The word KANBAN means card;

It is a card(oradocument) that representsan Order of material from one Customer to one Supplier;

The basic information printed on the KANBAN is:

  • Materialidentification(andcode).
  • Customeridentification.
  • Supplieridentification.
  • Quantitytobesupplied.


Order to KANBAN:

2 types of orders can be transformed in KANBANs:

  • Customer orders;
  • Replenishment orders.

The KANBAN is a subset of the order (called Order KANBAN).

Logistics Box:

  • Shuffling the Order KANBANs according to Production start day, and Leveling the monthly load;
  • Respecting the daily production capacity agreed in the Production-Logistics contract (Capacity Leveling);

Leveling Box:

  • Pacing the Mizusumashi picking cycle, and Scheduling the daily load;
  • Respecting the production capacity available in the picking cycle.

Line Sequencing:

  • Visual scheduling the production lines.

Pull Planning

Embrace KAIZEN™

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