I would to share about inventory from point view of me. So, what is inventory? Globally, inventory is a buffer in company's site to cover the fluctuates demand. Sometimes, inventory is a waste for company, because it not moved, it spends holding cost, spends maintenance cost, not gives value, consumes place, and also gives discrepancy for production (when we cannot manage it well).
However, in fact we need inventory to make sure fluctuates demand of customers keep filled and not missing.
The number of inventory in a company should be determined by the supply of suppliers. Supplier with long lead time will drive company to build inventory more for coverages. What is lead time? Basically lead time categorized to delivery lead time and manufacture lead time.
Delivery lead time is a time which needed for supplier to deliver its parts from supplier's site till its customer site. It means supplier has build stock in their site.
Manufacturing lead time is a time which needed for supplier to manufacture parts (including waiting supply from its suppliers) and deliver it to its customer site. It means, they have no stock or their stock is low or they need to produce the parts in their site which wait supply from the tiers. Sometimes, manufacturing lead time is enable for supplier where the function only as a distributor, not a manufacturer.Therefore, they need a long time to wait parts for their manufacturer.
(Figure of Lead Time)
Based on the figure above, we can imagine when company stocks less parts in its site, meanwhile their supplier lead time is long, it means their production line will be stop frequently.
Therefore inventory is a useful waste for company. But, we could make the inventory be lean and optimized which will be explained in Inventory Optimization.
Created by: Eka Angga Riandhika