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Topic Title: Determining inventory level between processes
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Created On: 10/27/2017 04:32 PM
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10/31/2017 12:20 PM
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Josh Williams

I am tasked with determining the amount of WIP parts between two processes. Traditionally, it has been arbitrarily determined. For instance, a production supervisor would decide to that they should have 1 skid of parts minimum and 5 skids of parts maximum. How can I mathematically determine the amount of WIP parts that are optimal between two processes? Thanks.
11/02/2017 10:44 AM
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Mark Rosenthal

If the two processes are linked and well synchronized, you need very little or even no WIP. You want to strive toward 1:1 flow, with any WIP being in a FIFO lane, but might not be able to get there right away. Just keep in mind that you want your improvement thinking to always move in this direction - don't go backwards.

There are three general cases that require WIP, and you want to think of teach of them separately.

  • Cycle Stock would be used to buffer cases where the delivery or consumption of WIP is periodic. For example - if you have deliveries every hour, and your process uses one piece every minute, you will have WIP cycling between 60 pieces and zero.

    In this case, the math is very straight forward - you need enough WIP to carry you through until the next delivery.

  • Buffer Stock would be used to buffer "normal" variation in output or consumption. This is a little trickier because there is randomness to it. The key is to have enough WIP in place that you don't starve the system due to the normal, expected fluctuations in cadence.

    You really have to look at your sources and magnitude of random variation and make a decision how much of that you want to buffer as "normal."

    For example - you are trying to maintain level production but customer demand fluctuates from day to day, or even hour to hour. It isn't even, even if the average over time is consistent. Thus, you need some extra WIP so you can maintain level production and still absorb this variation.

  • Safety Stock is for abnormal emergencies - a machine breakdown for example. You should NOT mix safety stock in with buffer stock. You want to know when the variation has gone beyond what you expected - things are no longer "normal." How much you need depends on how long you would expect recovery to take.

    For example - in a company I worked in, we got deliveries every day from suppliers on the other side of a mountain pass. In the winter, sometimes the highway would close for a couple of days due to weather. We would keep two days of safety stock for those times, but would only use it if we knew why.
  • 11/02/2017 10:44 AM
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    Michael Thelen

    Roughly = (Time to replenish + time between deliveries) / Takt time

    I'll try to find more detail later, but running out the door! :)
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