Finished Inventory and Why You Don’t Want It

Note:  This blog is the third in a series on the “Seven Wastes of Muda”.

In the previous post, The Costco Conundrum – Supply Inventory, we considered the impact of front-end inventory (things waiting to be processed); and we examined how Enterprise Content Management (ECM) with configurable workflow can eliminate what the Toyota production System calls “The root of all evil” – inventory – at the front end of court processes that use files and documents. 

“Finished” inventory is no less a target for management responsibility for eliminating waste (Muda in the Toyota Production System (TPS).  (See Introduction to Waste.)  Some of the same psychology applies.  It sure seems more efficient to keep lots of finished inventory on hand and then move it in large batches.  And it sure seems like you’d want inventory on hand in case a buyer came along.  As it turns out, once again, the results are counter intuitive.

When the Detroit auto executives made the visit described in The Costco Conundrum, in addition to seeing that parts and supplies were arriving at assembly stations only as needed, they were also shocked to see a major difference at the end of the assembly line.  In Detroit, finished vehicles rolled off the assembly line into a massive parking lot, where they sat until they were shipped.  The cars awaiting shipment constituted “Finished Inventory”.   The lot – and the management of the cars on it – consumed considerable resources (cost). 

At Toyota, vehicles were not produced until Toyota knew where they were going to be shipped.   Each vehicle was immediately dispatched as it rolled off the line.  There was no storage lot, and thus no overhead, for Finished Inventory.  And, when dealers or direct buyers got their cars, they were truly brand new, not having sat on a lot at the factory for days, weeks, or months.  (Of course, Toyota had a lot fewer vehicles to unload at the end of the year, so their discounts were not as good as Detroit’s, since they didn’t have to dispose of unsold product.)  The savings resulted in considerably less overhead cost per vehicle, which allowed lower sales prices to customers than Detroit could offer.

Consider how these same forces come in to play with “processed” files and documents in the court.  After they are processed, they are stacked into outgoing piles (“Finished” Inventory), where they await transport to the next step of processing.  Thus, the first item processed does not go out until the last item in the batch is completed.  In some cases, events will have moved ahead so that the previous document processing is rendered moot or, even worse, has to be “undone” and redone.  Think about a Warrant for Failure to Appear, signed by a judge, which waits for a few days in an out-box, during which time the subject of the warrant comes in to court.

Once again, ECM with configurable workflow can eliminate this Finished Inventory.   The processed electronic document or file is instantly routed to the next processing point (or points; as more than one thing can happen at the same time) based on the business rules imbedded in the workflow.  There need not be any “latency” – when the judge e-signs the first document, it can go on its way without waiting for the rest of the documents to be signed. 

By eliminating inventory, Toyota dramatically reduced its costs AND improved its quality.  Ancillary benefits included greatly enhanced flexibility in the face of change and faster fulfillment of customer orders and requests.  ECM with configurable workflow provides the means for courts to achieve a similar level of benefits.  Indeed, while inventory reduction is rarely expressed as part of the initial business case for ECM, it often turns out to be one of the areas of greatest positive impact on operations and cost.

 

 

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