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Your suppliers offer discounts for bulk orders of fasteners, fabric, ink and other materials you need to make your product. “It looks good on the financial records,” says lean consultant Chris Ortiz, “but it costs a lot of money to carry those items. You are tying up six months of money in that inventory. One way to significantly reduce costs is to reduce inventory levels and challenge the way you order things.”
Ortiz refers to kanban, a Japanese word meaning ‘visual card’—a trigger to do something when necessary. “It’s like a stoplight,” he says. “You don’t go until it turns green. Think about the chaos of an intersection if that stoplight wasn’t there.” Companies who order bulk merely to receive a discount, he says, are “looking at short-term gain, not the long-term side effect.”
Globe Canvas Products keeps track of inventory through computer software and physical checks. “We count twice a quarter key items, which represent a small subset of our total stock,” president Kevin Kelly says. “Every quarter, we take a physical count of 80 percent by dollar value of our inventory, and that 80 percent takes us three hours to count. The other 20 percent takes 15 to 20 hours to count, so we don’t count that. If we spend three hours, we will capture 80 percent of what’s out there in value. Once a year, we count everything.
“It’s hard to find a one-size-fits-all routine in a custom shop,” he continues. “You have to blend solutions together to come to a happy middle ground that meets what you need to do critically.”