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Bruce Hamilton

Lean

Extra Space

The health of the stockroom says a lot about overall flow of value to the customer

Published: Thursday, May 13, 2021 - 12:02

This time of year the abundant ads for junk removal and cheap storage units remind us that it’s time for spring cleaning, an annual pastime that has perhaps been bolstered by the need to unlock extra space in the home during the pandemic. Businesses, too, have managed to find space to accommodate safe distancing, either by pushing unneeded items to dark corners or back-lot containers, or, occasionally, by chucking them. It’s the typical 5S lament: sorting and setting in order, but not sustaining the improvement. Which, of course, is why spring cleaning is an annual thing.  

Removing clutter from our lives is a good thing, be it personal or professional. But there’s a huge, often missed opportunity that is unique to business: inventory. We buy it, machine it, fabricate it, assemble it, paint it, or process it in some other way, and then we store it for eventual use (or obsolescence). According to Zipinventory.com, the ideal inventory turnover for a company is three to six times per year. Wow! The things we can learn from the internet.

Seriously, in our personal lives, we would never consider maintaining those levels of household inventory—not even in a pandemic. But it’s normal in business. After 50 years in manufacturing, my unscientific estimate for ratio of inventory storage space to production floor space is 1:1, maybe worse. Businesses mask this ratio with high-bay, high-density storage. Perhaps a fairer ratio would be cubic feet of storage; I suppose the ratio for that would be worse. And these storage optimization solutions come with their own set of problems. 

In one of my last factory visits of 2020 just before Covid, I asked to see the stockroom, as I always do. It’s like the heart of the business, with inventory flow analogous to blood flow. So, the health of the stockroom says a lot about the overall flow of value to the customer. The factory manager who was hosting my visit pointed to a 5S evaluation posted in the area and apologized: “This is a 5S mess. The aisles are cluttered, and it’s impossible to find anything. We can’t get these guys on board.”   

I chose my response carefully. “Perhaps the stockroom cannot organize because they cannot count on stability of material flow.” 

The factory manager answered defensively, “We’ve already doubled the size of our stockroom to account for variability. We gave them extra space, and it’s still a mess.”   

“Why do you suppose?” I asked him. 

Fact is, it’s tough—impossible—to organize inventory when you have no idea of what’s coming and going. In this sense, the stockroom is a reservoir reflecting every policy and habit that authorizes inventory. Increasing the reservoir’s size only enables that. I’ve lost track of the number of posts I’ve written about the punishment inflicted by outmoded policies and bad habits that may, in fact, achieve the dismal goal of three to six turns per year but at the expense of profits, cash flow, and customer service.

Here are a few three-minute reads from past years about inventory-related policy snafus that may help you to regain some extra space for production in 2021:
“Optimize This”: Who determines what is optimal? (2011)
Standard Units”: The relationship between time and quantity (2020)
Insignificant Digits”: Sometimes measures from the past should stay in the past. (2011)
Nice Round Numbers”: Want to pyramid your inventory? Just keep rounding up. (2014)
Profitless Part Proliferation”: How much of your inventory is redundant? (2016)

One to read per day for next week.

Happy spring. Stay safe and protect those around you—get your shots. 

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About The Author

Bruce Hamilton’s picture

Bruce Hamilton

Bruce Hamilton, president of the Greater Boston Manufacturing Partnership (GBMP), brings hands-on experience as a manager, teacher, and change agent. Prior to GBMP, Hamilton led efforts to transform United Electric Controls Co.’s production from a traditional batch factory to a single-piece-flow environment that has become an international showcase. Hamilton has spoken internationally on lean manufacturing, employee involvement, continuous improvement, and implementing change. Also, he has contributed to numerous texts ranging from visual control to variety reduction. Hamilton’s blog, Old Lean Dude, is an ongoing reflection on lean philosophy and practices, with an emphasis on keeping good jobs close to home.