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The Waste of Inventory

Business Process Management

Inventory waste occurs when the on-hand supply of any product or component is in excess of actual customer demand. This excess inventory mimics productivity, yet does not have the same positive result since it is really just taking up space. Accordingly, inventory waste results in increased costs, while encouraging overproduction and valueless processing. Common causes of inventory waste include:

  • Poor monitoring systems
  • Poorly managed or unreliable supply chains
  • Production speed pacing
  • Long or unreliable set-up times
  • Unclear expectations of customer needs

What Inventory Waste Looks Like

Keeping a good stock of products and materials can be a good thing during times of high demand, but excess inventory can be a drain on company finances in the long run. This is particularly true in cases where the excess inventory has an expiration date of any kind, like food, medicines, and paperwork. Following are more examples of what inventory waste may look like in your business:

  • Storing excess parts, pieces, and products
  • Creating, printing and storing documentation ahead of need
  • Producing and storing excess promotional materials
  • Collecting and running more servers than are needed

The Solution

Businesses in any industry can reduce or eliminate inventory waste by carefully monitoring supply versus demand, reducing processing gaps, and improving customer need forecasting systems. This often requires excellent communication and a willingness to refine workflows and processes.

The following suggestions can be adjusted to suit any working environment:

  • Create and use checklists to ensure that customer need criteria are met before inventory is ordered or produced.
  • Provide clear procedures for tracking customer needs and buying trends.
  • Create systems for reviewing suppliers to ensure consistency and reliability.
  • Implement processes for counting and tracking inventory.
  • Ensure that responsibility for ordering inventory, or increasing production rates, is clearly distributed to a single team or individual to ensure that overstock is not a result of miscommunication.

Get more helpful information for reducing waste with the previous post in this series: The Waste of Transportation, and the next post: The Waste of Motion.

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