The Golden Key of Frequent Delivery Cycles
In the previous topic I discussed the goal of have a small amount of material at the workstations or Points of Use. How small is small? Toyota Material Handling has a goal of a few hours of usage, and Toyota Georgetown has virtually eliminated line-side material by kitting just about everything (as far as I saw on a recent tour). The primary motivation for this is not inventory reduction, but on space reduction and improvements in operator productivity.
There are two ways to not run out of material at a workstation. One is to have more material, and that is not a good option unless it’s a very small and inexpensive item. The second strategy is to deliver more frequently. This is a universal truth: if you want to reduce inventory you’ll need to deliver more frequently in smaller quantities. That’s it.
The Rule of Thumb
There is a ratio or rule of thumb relationship between the amount of inventory planned for a location, and how often you need to be able to deliver to avoid the risk of running out, even if usage varies. The ratio that we teach is 1-6. If you target 6 hours of usage of material, you need to plan for a delivery cycle of 1 hour. This does not mean that all materials are replenished every hour, since material will be replenished based on actual usage. But the delivery cart should be coming by once an hour (in this example), replenishing containers that were depleted during previous delivery cycles.
Needless to say, the more aggressive you want to be with inventory reduction at the workstations, the more frequent your delivery cycles will need to be. To sell this concept, which may seem like you are adding non-value-adding activity, you’ll need to be prepared to defend and maybe quantify the four-fold benefits: inventory turnover improvement, reduced store space at the workstations, improved operator productivity, and improved quality.