October 1997 • Volume 7 • Number 10
Dear APICS
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October 1997 • Volume 7 • Number 10 Dear APICS
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Inventory Storage By George Johnson, CFPIM
Dear APICS: I'd like some information about "point of use" inventory storage. Reply: The APICS Dictionary, 8th Edition, defines point-of-use storage as, "Keeping inventory in specified locations on a plant floor near the operation where it is to be used" (pg. 61). This concept has been popularized by the JIT movement. Calling it "focused storage," Harmon & Peterson (1990, pg. 163-171) indicate that the primary objective of the approach is to receive and store material as close as possible to the point of use. This yields improved management control to avoid surprise shortages and minimize inventory investment, in addition to reducing costs associated with receipt and storage of material. There is potential, for example, to eliminate the non-value-added (NVA) activity of (1) central material handlers who unload trucks and count received items, (2) the NVA activity of receiving clerks who accomplish receiving paperwork or computer updating, (3) stock keepers who count, move and store material, (4) storeroom clerks who count parts and perform paperwork or computer updating, (5) lift-truck operators who move material among the preceding, and (6) within-department material handlers who deliver to and pick-up material from operators. In the best plants one person can handle all these functions in much more simplified form. Kane (1990) asserts that when the concept is implemented effectively it has a major impact on inventory reduction and streamlines the flow of material throughout the manufacturing cycle. It also affects people, and Kane takes pains to point out that point-of-use storage and JIT are radical changes for most organizations. This requires excellent training, communication and preparation of the work force to get members fully on board. He also notes that other prerequisites to effective point-of-use storage include a commitment to quality, a stable master production schedule (MPS), efficient labor reporting, and reliable satisfaction of the final assembly schedule (FAS). Right-the-first-time quality is vital, because lean material operations have little or no cushion for bad parts. A stable MPS reduces variability in linked production processes, allowing level loading throughout the system and resulting in smoother flow, overall. Efficient labor reporting eliminates line stoppages and missed operations. The FAS must be fulfilled with discipline in order to meet the market rate of demand and satisfy customers. John MacMillan (1993) described his experience with point-of-use storage at a Honeywell plant. He indicated that the technique supported implementation of JIT, reducing material handling and its related transactions. It also reduced WIP inventory (and required floor space) dramatically because of its visibility. In the Honeywell implementation, eight point-of-use storage principles were developed as guidelines. These were:
The rationale for these principles was explained and then the author focused on results achieved at the plant. To tease you a little into reading the article, results included a WIP reduction from $13.5 million to $4.5 million; stockroom floor space reduction from 30,000 square feet to 6,000 square feet; and data transactions reduction from six per part received to three per part received; and the program was still improving. My associate Lou Malucci notes that in point-of-use systems, if something goes wrong, there is a significant chance the audit trail will be weaker than in conventional systems. He must have drawn this observation from his stock of experience-based "scar tissue." (He has a lot of experience!) You may read about point-of-use storage in the following references:
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