An oxymoron is a figure of speech that combines contradictory terms. We hear these all the time in common speech, things like “open secret” or “pretty ugly” or “definite maybe.”
Today’s example: “Inventory Management.” Here’s one definition of Inventory Management from the internet:
The overseeing and controlling of the ordering, storage and use of components that a company will use in the production of the items it will sell as well as the overseeing and controlling of quantities of finished products for sale. A business’s inventory is one of its major assets and represents an investment that is tied up until the item is sold or used in the production of an item that is sold. It also costs money to store, track and insure inventory. Inventories that are mismanaged can create significant financial problems for a business, whether the mismanagement results in an inventory glut or an inventory shortage.
“What’s so oxymoronic about that?” you ask.
For the answer, let’s think about what this leads to in traditional companies, namely complex software tracking systems that do inventory management and planning allowing people to look on a computer monitor to know how much inventory is on hand. Even today many companies invest in new ERP systems to better control and manage inventories.
Lean companies, on the other hand, focus on eliminating inventory. This in turn makes managing inventory simpler by using a robust Pull System. A Pull System is made up of various Lean practices, that when put in place, control and regulate production and inventory. Few if any of these Lean practices require ERP on a regular daily basis because most of these Lean practices are visual and use cues & signals.
A company can invest millions of dollars and countless hours in ERP systems in an effort to improve inventory management.
Or it can invest time and effort into developing Pull Systems to create single piece flow.
One alternative will perpetuate inventory management; the other will significantly reduce the inventory and generate lots of cash. What do you think will give your company a better Return on Investment? I’d like to hear your comments.