During the recent webinar, Inventory Fitness – Governance, Targets, and Segmentation, we took audience questions and answered them.
Here are some issues that people in industry face and are interested in finding a solution to!
Question 14 of 14
Question:
How can we apply policy-driven inventory processes for all products in the same plant, but in a flow versus discrete environment as in a food or chemical company?
Answer:
Oh, good question. And I came from the chemical industry. So, what’s interesting is when we look at continuous production, long batch production, short batch production, even discrete SKU by SKU production, even single SKU production, like when you’re making a nuclear submarine.
The calculations can be quite similar when it comes to inventory, and the policy can be eerily similar. Some of the math gets interesting. The permutations around a continuous process company might take, say, cycle stock to zero just because you’re manufacturing all the time. But the rest of the math, the overall policies, it comes out pretty similar. We do need, however, to take into account what type of manufacturing it is and what the production cycle might be.
Yeah. And building on that, one of the things that we see in process industries is that people tend to focus on what’s the campaign that we’re running. And so, when we think about that, the mathematics aren’t around what’s the individual sku that we’re trying to achieve, it’s how much does it cost us to run the campaign and what’s the resulting product that we get out of it.
That’s what happens from a mathematical perspective. From a policy perspective, it’s simple things like you may, from a process perspective, want to round up to the next hour. We did some work with a cookie company where people were rounding up and doing fifteen minutes of extra production. Well, over the course of three months, that basically filled up two warehouses full of cookies because that little bit of extra production made a huge difference in the inventory that was put on the shelf. And so, from a policy perspective, it’s about driving schedule conformance.
From a mathematical perspective, it’s about setting campaigns that optimize cost and optimize yield. In both instances, we have a lot of experience working with people in those areas and hope to do the same with you.
Remember, we’d be happy to chat with you about any of this in more detail.
And if you’re interested, check out our schedule for upcoming business process improvement courses that we offer throughout the year to help you achieve business excellence.