Reduce Inventory Waste with a Lean Operation

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As the world shifts towards a sustainably viable means of producing and distributing, companies dealing with inventory are increasingly pressured to limit their inventory waste. Creating a more efficient manufacturing and distribution process doesn’t just benefit the environment; keeping lost profit to a minimum and improving business image are both attractive aspects of limiting inventory waste. Defining the appropriate reasons for keeping inventory and accepting what the limits of a sustainable stock count look like is the first step to eliminating wasted inventory.

Identifying the types of waste and how to prevent them can pinpoint what aspect of inventory management your business needs to work on and choosing a suitable reduction protocol can help keep inventory waste to a minimum.

The financial impact of inventory waste

From the moment a piece of inventory is purchased, there is a monetary value associated with it. Idle stock signifies potential profits tied up in your storage facility. While there are reasons for keeping inventory, such as to avoid stock outages, the consensus for modern inventory management is that lean inventories are generally more economically successful. The risks associated with idle stock include the increased chances of product damage, products becoming obsolete or expired, the cost of storage, and the chance of losing products among the rest of your inventory.

Types of waste

The first is the waste of transportation. For example, this could include shipping through a third party or importing materials from overseas. The key issue with this is that excess transport does not add any value to the product. For most companies, this can be resolved by reducing storage locations to one key facility and streamlining supply chains.

The waste of slow operations and increased waiting time occurs when processes aren’t synchronised. For example, if the first process in the production line takes too long, the second process cannot be productive for the amount of time it takes for the first to catch up. Improving the coordination of machines and staff can increase workplace productivity and result in higher quality stock.

Waste of motion highlights the excessive movement exerted by both people and machines in the business. By methodically organising manufacturing processes, businesses can minimise excess movement and increase productivity and lessen unnecessary movements.

The waste of overproduction links back to the presence of idle stock. Minimising the rate of overproduction is crucial because the presence of excess stock can shroud other production problems. The waste of over-processing products sees unnecessary steps being taken that don’t benefit the customer. For example, the painting of unseen areas on the product uses resources and offers no value to the product. This can be reduced by standardising instructions to ensure that processes only achieve what is useful and necessary.

Waste of defective parts not only hurt profits but can damage business reputation. By instilling clear procedures and expectations, and adequately training staff for jobs, defects can be kept to a minimum.

The waste of resources includes the inefficient actions of employees, such as leaving lights and heating on when unnecessary. Because of the workplace environment and the knowledge that someone else pays for these resources, employees are likely to be less frugal with electricity. However, the cost of running a facility plays a major impact on the financial aspects of a business.

Permanently reducing inventory waste

An effective way to ensure your business stays efficient after key areas of wastage have been addressed is to implement new management systems. With improved technology, real-time inventory management systems can offer up-to-date data levels. This can help avoid stock outages, excess stock, idle product, and ensure product quality is maintained.

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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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