Inventory Excess

1. 3. 2018

On the basis of the existing literature, waste in the context of construction can be classified into eight types, namely defects, overproduction, waiting, not-utilizing talent, transportation, inventory excess, motion waste, and excess processing.

On the basis of the existing literature, waste in the context of construction can be classified into eight types, namely defects, overproduction, waiting, not-utilizing talent, transportation, inventory excess, motion waste, and excess processing. The definition of waste as well as its classification has been approached by various researchers. In general, researchers have commonly included defects and excess processing as some of the more common factors considered as waste (Senaratne & Wijesiri, 2008). Additionally, other factors have been mentioned in specific industries to broaden this classification. For instance, researchers have suggested “a broader definition of waste to include not only material waste, but also waste generated in a construction project such as waiting times, transportation times…” (Hosseini et al., 2012, p. 415). The lean approach for the elimination of waste, as described by Ohno (1988), is as follows: “All we are doing is looking at the time line, from the moment the customer gives us an order to the point when we collect cash. And we are reducing that time line by removing the non-value-added wastes” (p. 9). The lean approach towards construction adopts both physical and non-physical waste production.

The storage of products and parts in inventory does not result in additional increase in their value (Bhamu & Sangwan, 2014). On the contrary, holding inventory delays solving problems and ties up resources (Senaratne & Wijesiri, 2008). Researchers have divided inventories into two types, storage of parts and work in process. Work in process inventory refers to parts that are stored between different processes, while storage of parts refers to raw material imported to the production area from the warehouse for the purpose of production. In addition, researchers also include finished stock of goods as inventory. Inventory waste occurs when inventory is held by the organization for longer time then necessary to produce services and goods that are required by customers (El-Namrouty, 2013).

All the inventory that is held by an organization causes financial burden which, if tied up with inventory, is not possible for an organization to use for other purposes. Additionally, in addition to the direct cost associated with holding inventory, there are other costs that may affect the profit of an organization that are directly associated with inventory excess, including costs associated with storage space, transportation of the inventory, loss resulting from obsolete materials, storage containers, management of the inventory, insurance, and possible damage from handling (Jones & Womack, 2014; Lacerda, Xambre, & Alvelos, 2015; Mezgebe, Asgedom, & Desta, 2013). Excess inventory may also increase the production time, which may lead to dissatisfaction of customers and increase in costs (Ohno, 1988). The waste of overproduction is directly related to inventory excess. One of the reasons for overproduction is lack of coordination and communication between customers and production factories, which may result in storage of goods that may not be necessary as an act of safety (Forsberg & Saukkoriipi, 2007). As the additional goods have to be stored, the costs associated with them may overwhelm the reasons associated with their storage.

Researchers have identified various reasons that may contribute to the development of excess inventory. The main cause, as noted above, is overproduction waste, which refers to the production of goods before customer demands or more goods than required by customers. Researchers have highlighted the significant link between inventory excess and overproduction. Additionally, another reason for excess inventory is due to lack of consistency in the production workflow and poor layout that may result in buildup of inventory between different processes. Factors that hinder the flow of production processes ultimately lead to excess in inventory (Jimmerson, Weber, & Sobek, 2005). For instance, excess raw materials that are not in alignment with the needs of the customers, resulting from a lack of consistency between the customers and the organization, may lead to excess inventory. Inventory excess also results from buildup caused by slower speed of some production processes, that may negatively affect other production processes.

Researchers have suggested a number of strategies for reducing inventory excess waste. In alignment with the lean principles for manufacturing, an important step in reducing inventory excess waste is to create balance between the production of goods and the demands of the customers (El-Namrouty, 2013; Forsberg & Saukkoriipi, 2007). Such an action may reduce overproduction, which is the main reason for inventory excess waste. Additionally, a review of factory layout and the repositioning of the production processes in accordance with the layout can reduce the buildup of production processes (Senaratne & Wijesiri, 2008). The balance between customer demand and production processes can ensure there is no buildup of excess inventory. Researchers have also highlighted that excess inventory may lead to overlooking other production wastes (Forsberg & Saukkoriipi, 2007). Therefore, it is important to ensure there is reliability between the production process and the customer demands so that there is less need to maintain high inventory storage.

Author: Henri Suissa


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