How Point-of-Use Inventory Can Make a Chinese Factory More Productive

Have you observed a production operator stand up, look around, and walk away from her workstation to get more materials? This is a sign of a poorly-conceived logistical organization.

In that configuration, operators have to walk to the upstream process, or to a central warehouse, and look for the right materials. If they are readily available, the operator might come back with a container. But often the warehouse staff logs the request, gets the materials, and delivers a little later.

Think of all the inefficiencies in this setup:

1. The production operator has to stop what she is doing, and falls out of her concentrated attention (which might take a while to get back into).
2. The operator spends time walking. This is an opportunity for smoking, sending a few Wechat messages, shopping on Taobao, etc.
3. Someone has to point to the right materials. It might disrupt an operator from the upstream process.
4. In case the warehouse staff is requested to help, it also disrupts their routine jobs.
5. The operator might still have to wait before getting a replenishment.
6. There are safety and quality risks in having operators pull/carry heavy containers of parts.

Now let’s look at the alternative (called “point-of-use inventory” or “POU inventory”). Inventory is available close to point of use. Ideally, production operators simply have to extend their arm and pick a new component. When inventory gets a little low, an internal logistics operator notes it and delivers what is needed. (By the way, simple IT tools can help detect it and send a request to the right person, to save labor time and avoid shortages.)

People often don’t realize a few things about point-of-use inventory:

• There is usually a need to free up space in the workshops before more materials can be store there. We often run a 5S program as preparation before putting POU in place. Reducing work-in-process inventory also helps a lot.
• The internal logistics team has to grow. Typically, they set up a “milk run” type of route. They pick up components on their way and deliver them to downstream processes.
• At the same time, less material is stored in the central warehouse. Whenever possible, deliveries from suppliers have to be routed directly to the workshop that need replenishment.
• This can be the start of a total rethinking of logistic flows inside and outside the factory. Some suppliers can be asked to deliver smaller quantities more often, in order to bypass the central warehouse and remove the need for double-handling.