Why Your Manufacturing Business Needs to Know About Decoupling Inventory

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When it comes to manufacturing, to reap the benefits of economies of scale, the plant and machinery should be running at optimal levels. Stopping machinery can be costly to a business for this reason. However, some halts in operations may be due to the lack of availability of a necessary input. Often in a production line, one machine or operation uses the output of another machine or operation. The speed of different machines may not always synchronise with each other. When this happens, the production line stalls and products remain unfinished, which reduces the renewal rate of inventory stocks. To alleviate this, manufacturers should keep sufficient inventory inputs for machines in order to keep the plant running. This type of work-in-progress inventory is called decoupling inventory.

Why decoupling inventory is important

It is important that decoupling inventory is created and adequate stock levels maintained as a means of ensuring that production is not obstructed due to events that adversely affect the efficiency of two related operations within a production process. Typically, this means anticipating and preparing for potential breakdowns within one operation that in turn could slow down production for the related operation.

Decoupling inventory may have to do with a supply inventory of replacement parts that are kept on hand to deal with breakdowns, or even the accumulation of a certain backlog of work-in-progress inventory that can be used to keep the second operation up and running while issues are resolved with the related operation.

How decoupling inventory works

To understand the concept of decoupling inventory, consider two specific operations that are part of the production process. For example, the spinning operation and the twisting operation of yarn. One operation may spin and prepare fleece for use in twisting wool that creates the finished product of yarn that customers will ultimately use in creating fabric formations for various products. If the spinning equipment should break down, this will negatively affect the operation of the twisting, leading to downtime that causes the plant to fall behind in its daily production quota.

In order to minimise this domino effect triggered by the breakdown, decoupling inventory helps in two ways. Replacement parts can be used to repair the spinning equipment to help get the machinery back into production faster, which will minimise the effect of the incident on the ability of that department to supply materials for the twisting operation. In addition, the production quotas for the spinning department may be set at a level that actually builds up a reserve of materials, meaning that the twisting operation is able to continue as usual even as the spinning machinery is being repaired. This buffer allows the spinning operation to be back at full capacity before the twisting operation runs out of materials, effectively allowing the production process to continue without interruption.

Decoupling inventory can help mitigate against production disruption risk

Decoupling inventory helps to avoid losses when some sort of adverse circumstance occurs in one interdependent operation of a plant. By using the inventory stock to contain and resolve the problem, the business can continue to work towards meeting its commitments to customers without delay, which in turn means that cash flow is not slowed down due to production issues.

Managing inventory stock is a critical process in manufacturing. To help determine sufficient quantities of decoupling inventory necessary to keep various production stages running in the event that an interdependent operation is compromised is to use effective inventory management software solutions. Not only will these solutions help meet production needs and reduce plant downtime, but can help set production targets, determine lead times, improve forecasting accuracy by providing key information in real-time.

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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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