We Are Not As Rich Anymore

We are not rich anymore

We had the luxury to afford high inventory, holding cash and living with waste. Our boats can't sail in rivers of wastes anymore. We used to enjoy high levels of water/ cash, our boats sailed smoothly without hitting the rocks in the bottom but once the water levels decrease the boat will be in trouble due to the rocks. That is exactly what happens in our factories and businesses. The water represents the inventory level and cash required to keep the business running and the rocks represent the supply chain and factories’ problems. The more water you need to keep business running, the longer your lead times for orders processing, when you have a high level of inventory you will never detect your factory problems or improve performance because you simply hide your problems (rocks). But remember that inventory is not for free - you pay for financing it, risk of obsolescence, aging, damage, the land and the facilities you need to store it. Once you have a lower level cash and lower inventory you can see problems like breakdowns, long changeovers, high rates of defect and also the frequent downtime. We aim to decrease our inventory levels in order to eliminate the cost and detect our problems and solve them instead of living with them.

#inventory #cashflow