Manufacturing inventory management can be difficult because of the vast number of processes and materials that go into making a final product. For those managing inventory, it is important to understand the different types of inventory and how to best manage them in order to keep excess costs down and to deliver products on time. For manufacturers in particular, having in-depth knowledge of what pipeline inventory and decoupling inventory is can ensure demand is met and losses are kept to a minimum.
Just as a pipeline pumps liquid from one area to another, pipeline inventory refers to the stock that is transported to the manufacturing area for production. In terms of manufacturing inventory management, pipeline inventory is stock that isn’t physically in the company’s possession yet. Pipeline inventory is typically kept in possession of the shipper until the receiver has paid for the items, but if the receiver pays prior to receiving the shipment, it is at a loss to the purchaser.
Classifying stock as pipeline inventory is important for manufacturing inventory management because of the risks associated with items in transit. With specific classifications such as this, managers can better understand their stock levels and potentially cut down on areas that are costing a company.
Decoupling inventory refers to incomplete stock that is kept in case of delays or machine break down in the production line. In terms of manufacturing inventory management, decoupled inventory acts as a buffer to allow for continuous production of the final product, despite any issues earlier on in the production line. Decoupling acts as a buffer against internal demand fluctuation, as opposed to external or customer demand. The goal of this is to ensure higher and steadier production rates.
Which technique is right for your business?
Both pipeline and decoupling inventory are used to provide insight for manufacturing inventory management regarding the impact of intermediate stages of production.
While pipeline inventory can occur in many stages throughout the productions process, decoupling typically occurs in a factory or the business facilities. Because of this, pipeline inventory can involve several businesses as the product is handed over or sold, while decoupling tends to be an internal operation.
At a base level, pipeline inventory represents a type of inventory, while decoupling is a method of production management. Pipeline inventory can, therefore, be viewed as a stock classification, while decoupling can be described as a technique to ensure steady production rates.
Pipeline inventory is important to record or keep track of because of the higher risks of product loss or damage and should therefore be tracked using effective inventory management software. Likewise, decoupling inventory may be idle for extended periods of time, meaning that adequate recording of stock levels is important to ensure products don’t become redundant. Understanding the difference between pipeline and decoupled inventory is critical to ensuring optimal manufacturing inventory management.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.