Lean Inventories Do Not Excuse Failing to Deliver

Low inventory levels do not mean failing to have products available for customers. Now, if you manufacturing in huge batches and can’t respond to customer feedback then it might mean failure to predict customer demand does mean failure to deliver. But lean thinking has shown how to avoid this problem. People need to adopt lean manufacturing practices and gain the benefits of low inventory levels without the costs of failing to deliver what customers want.

Sorry Santa, We’re Out of Stock

The “it” gifts this year could swiftly vanish from store shelves, as retailers, with nightmares of Christmas 2008 markdowns dancing in their heads, have slashed inventories to some of the leanest levels in recent memory.

Retailers themselves are battle-scarred by last year’s fourth-quarter fiasco. Following the financial meltdown of September 2008 and amid the most severe economic crisis since The Great Depression, consumers retrenched.

That’s when stores hit the markdown panic button, slashing prices upwards of 75 percent. The result was the worst holiday selling season since 1970, according to The International Council of Shopping Centers.

But although leaner inventory levels should drive profit margin gains this holiday, “retailers might not have enough inventory to fully satisfy demand,” said Citigroup retail analyst Deborah Weinswig, in a research note. It is a risk they are willing to take.

“They would rather lose a sale than take the markdowns they had last year,” said Goldman Sachs analyst Adrianne Shapira.

The retailers need to design their systems with lean thinking in mind (not lean – as in cut expenses without thought). And they need to work with suppliers using lean manufacturing principles.

Related: Be Thankful for Lean ThinkingGuess What? Manufacturing in the USA is a Good IdeaTesco: Lean ProvisionZara Thrives by Ignoring Conventional WisdomOperational Excellencelean manufacturing articles

2 thoughts on “Lean Inventories Do Not Excuse Failing to Deliver

  1. Sounds like a lack of a customer focus. What did they do to understand the demand of the market? Where they too concerned with there own numbers to look at what the customer wanted. I agree lean thinking helps you avoid this type of sitution when done right.

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  2. I think kanbans were developed for the purpose of assuring that you always had what you need. I think the intent of standardized work in process is to assure A MINIMUM swip to allow uninterupted production in support of demand. It has been my experience that a lot of people want to ‘go lean’ to ‘get the inventory out.’ You can only do this after you reduce lead and increase stability. To much internal focus (like inventory levels and costs) without an external view – preferably from the customers frame of reference – kind of defeats the ‘intent of lean.’

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