Solving Inventory Problems at the Source: A Case Study

Case Study: How We Took Control of Inventory on the Factory Floor

As a consultant, I've seen many projects where inventory problems cause bigger issues like missed deliveries, excessive working capital, and reduced margins. One project stands out where we had to implement a hands-on approach to inventory management to turn things around for a manufacturer struggling with inventory control.

The Challenge

The company was facing typical inventory problems: excessive stock, missed customer expectations, and rising costs due to inefficiencies on the factory floor. Key issues like long lead times, poor supplier coordination, and a lack of real-time problem-solving were driving the company off target. To make matters worse, unplanned events like demand fluctuations and factory quality issues caused stock levels to spike unexpectedly.

The Approach: Hands-on Inventory Management

To address this, we focused on managing inventory directly on the factory floor. The idea was simple: drive results daily by solving problems where they happen, using lean methodologies and daily management techniques.

We started by setting inventory targets and driving daily accountability for the results. This wasn’t just about fixing problems in the moment; it was about creating a system that sustains results long-term.

Key Steps We Took:

1. Going to the Source: We implemented regular walk-throughs on the factory floor to get a first-hand look at inventory issues. These walk-throughs weren’t just management-led; we involved the entire team, including planners and operators, to foster accountability.
2. Daily Management and Audits: We developed a routine of daily Kanban audits. The Kanban system allowed us to visually see where things were going wrong in real-time, whether it was a missed reorder point or a supplier shipping too early. The goal was to fix any issues within 24 hours to keep inventory flowing smoothly.
3. Root Cause Analysis: Each time we identified a problem, we dug deeper using root cause analysis techniques like the 5-Whys. This helped us get to the core of issues, such as oversized minimum order quantities (MOQs) or poorly implemented Kanban systems, and fix them for good.
4. Supplier Negotiations: We also needed to get suppliers on board. For many of our raw materials, suppliers had long lead times and large MOQs, which meant we had to hold more inventory than necessary. We renegotiated supplier contracts to introduce stocking agreements, reducing the need to over-order.
5. Continuous Improvement (Kaizen): A critical element of our approach was the mindset of continuous improvement. We implemented Kaizen events, where cross-functional teams got together regularly to review progress, identify new opportunities, and refine the processes. This fostered a culture of accountability and proactive problem-solving.

The Results

The results were impressive:

• Improved Inventory Turns: We significantly increased inventory turns, which led to better cash flow and reduced working capital.
• Better Customer Delivery Performance: By solving issues at the source, we improved on-time delivery (OTD) metrics, ensuring customers received their products when they needed them.
• Sustainable Results: The daily management and auditing process created a long-term system that could sustain improvements, rather than just delivering short-term fixes.

In the end, by focusing on where the work actually happens—the factory floor—we were able to bring clarity, accountability, and results to the inventory management process.