Decoupling Inventory: What It Is and How It Works

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Production processes are said to be coupled when each one is interdependent on the other. It would, therefore, stand to reason that decoupling would provide a level of independence between processes. So how does this apply to inventory?

What is decoupling inventory?

Decoupling inventory involves separating inventory within a manufacturing process so that the inventory associated with one stage of a manufacturing process does not slow down other parts of the process. In simple terms, decoupling inventory is a safety stock of sorts.

Much like safety stock, it establishes a buffer between product demand and product supply and is used in work-in-process inventories. Where safety stock is seen as a buffer against increased external demand, decoupling inventory is the buffer against increased internal demand.

Decoupling inventory consists of inventory stock which is held to cushion manufacturing assembly against potential issues within the production line. Issues such as equipment breakdowns or unevenness in machine production rates affecting output because one part of the production line is working at a different speed to another.

If a production line stalls and work-in-progress products are unfinished, it causes a reduction in the rate in which inventory stock is renewed. Decoupling stock is generally used the most in ‘built-to-order’ production runs.

How does decoupling inventory work?

In optimised manufacturing, plant and equipment should always keep running. If machinery stops or slows down it can cost the company in terms of repairs, additional set up costs and lost time depreciation.

With production and assembly operations, work orders will pass from station to station where inventory stock is held to enable each station to adjust to stock variations. Such variations can be created by product mix changes or customised product cycles.

The strings of work that separate the processes, enables each station to deliver products slightly independent of the other workstations. The aim is to prevent lost time and the associated expense of having staff and labour-hire standing idle while the various process catch-up.

Pipeline versus decoupling inventory

Pipeline inventory is an external inventory which refers to the inventory stock in transit between manufacturers, warehouses, wholesalers or distribution centres.

Pipeline inventory can take weeks or months to reach its destination, particularly in a global supply chain. Any delays or damage will occur additional costs. Where the inventory has been paid for by the recipient, they a responsible for inventory that has been lost or delayed in the pipeline. If the recipient has not paid for the stock, it becomes the sole responsibility of the shipper.

On the other hand, decoupling inventory is internal inventory that is stocked for the sole purpose of keeping operations running in case of any shut down occurring. This includes cases where there is a block in the production line of specific areas are running at different speeds.

Decoupling mitigates issues if inventory is piling up at one part of the processes, causing bottlenecks or delays that slow-down other areas of the process.

Keeping the balance

Managing inventory is a crucial process in all manufacturing industries and is, without a doubt, the most challenging aspect of inventory management. How do you decide on the right quantities of decoupling inventory necessary to keep the various production stages running?

Inventory control systems are the best tool to meet production needs and reduce any downtime of staff and machinery.

Effective inventory management software solutions will help set targets, determine lead times, improving forecast accuracy and providing real-time transparent information. Enabling production managers to make informed decisions on what and how much decoupling inventory to hold.

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Melanie - Unleashed Software

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.

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