High Productivity Can Create Excess Inventory

“I need you to make a phone call,” I told Corina. She looked puzzled, feeling guilty about something she wasn’t sure of.

“There’s a lesson in this,” I continued. “It’s a counter-intuitive lesson that most people and organizations don’t learn until it’s too late.”

“So, you are talking about the difference between the company’s goal and my goal for the plant?” she asked.

I nodded, “Yes, the difference. There shouldn’t be a difference. But no one sat down and punched through all this, so there could be agreement. In fact, I would bet that you never sat in a meeting to truly clarify the goal for the plant. I would bet you assumed, by all manner of policies and directives, to produce as much as you could as efficiently as you could.”

I was nodding. Corina was nodding. “How much excess inventory is now hiding in that warehouse?” I asked.

Corina smiled, but quickly realized what had seemed to be good news wasn’t after all. “I would have to pull the reports, but I think we have about four weeks of production built up in the warehouse. I mean, we were building to forecast, but we weren’t selling to forecast.”

“Okay, let’s make that phone call.”

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