Identifying factors that cause inventory build-ups and how to solve it

Abstract: Companies have put much focus on production systems to generate and maintain competitiveness which has contributed in less focus to logistics. The material flow is the process after the main processes and has therefore been regarded as “unimportant”. If the material flow fails, there can be consequences such as inventory-build ups or undersupply of material. Lean thinking is one strategy that may be applied to analyze and identify wastes, but the identification of problems has been harder to detect, while the ability to solve them has not improved at the same rate. Following two research questions has been asked to identify how companies should proceed to improve their inventory management but also what factors contribute to the inventory build-ups.  ·        What may cause excess inventory in manufacturing companies?

How can a manufacturing company reduce WIP´s? The research method is based on a qualitative approach with an interpretivist research methodology to help answer the questions. A case study was done at a manufacturing company to help answer the research questions. The data has been collected by observations trough section B1 and unstructured interviews with both management and operators. The collected data was later compared to the literature according to the inductive reasoning to be able to make suggestions for improvements. The DMAIC tool has been a central point of this research regarding the mapping of the current state and suggestion of a future state. The case study was conducted at Company X AB in the middle of Sweden which is a company that manufactures components and complete solutions. The focus on production has resulted in less focus on the internal logistics. With the low focus on the internal logistics, inventory build-ups have occurred. The results point to the OEE being a contributing factor to the inventory build-up. The availability of both machines was low and therefore caused the OEE to be low. The low availability was caused by long changeovers, staff shortages, and emergency reparations. The conclusions are that Company X must make improvements so that the factors of the low availability decrease in frequency and severity to reduce the work-in-process (WIP). The improvements should be approached with different lean-tools such as SMED, KANBAN, FIFO and 5S.