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Point of Use Inventory

 

Point of Use Inventory is a lean concept where the inventory (both material and information) is stored at the actual point / location / place where it is going to be used rather than a central warehouse or any other location. Two biggest benefits of implementing it are
1. Separate real estate is not required for storage.
2. Brings down the overall inventory level as compared to traditional way of having a central warehouse.
It is sometimes also known as Point of Use Storage (POUS).

 

An application-oriented question on the topic along with responses can be seen below. The best answer was provided by Vastupal Vashisth on 5th February 2019.

 

Applause for all the respondents- Vastupal Vashisth, Hari Shyam Gupta, Krishnamurthy Rao, Prashanth Datta

 

Also review the answer provided by Mr Venugopal R, Benchmark Six Sigma's in-house expert.

 

 

Question

Q. 132  Explain the term Point of Use Inventory as used in Lean Management. How does POUS help reduce classic Lean waste/s. 

 

Note for website visitors - Two questions are asked every week on this platform. One on Tuesday and the other on Friday.

 

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Point of Use inventory, as the name itself suggests that it is the storage of raw materials/consumables at the work stations where they are used and it is one of most useful Lean Concept.With this system, we used to deliver the quantity of products you need, where you need it and when you need it. All materials and information are stored near workstation so they can be accessed more quickly by the workforce. It is one of the most efficient and economical system giving us a clarity about our raw materials/consumable which we are using is matching to our inventory or not.

 

POUS help us reduce classic lean wastage. In our Lean Journey, we see that there are seven types of waste which are identified as TIMWOOD, Transporation, Inventory, Motion, Waiting, Over-processing, Over-production, Defects. To start the process of standardization of work at a work center first we need to address material storage locations and we should be able to quickly the benefits of POUS. 

Biggest waste in TIMWOOD is Transportation and Motion which is eliminated and reduced by using the concept of POUS.

  • Transportation is a type of waste which does not add any value because it does not contribute to transforming the final products. POUS technique helps to minimize the transportation waste. 
  • Motion is also reduced by the technique of POUS. it involves the double handling, reaching of parts and stacking of parts 

In any factory, we can reduce non value adding activity, excess movement of material from one place to other by using technique of POUS.

 

 

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                           Benchmark Six Sigma Expert View by Venugopal R
 

While most of the excellence ambassadors will be familiar to the concept of ‘point of Use Inventory’ as used in Lean, and the advantages to control the wastes, I am expressing some thoughts on certain practical challenges one would face when trying to transform an existing workplace to POUS approach.

 

Undergoing the experience of executing a transformation of an existing conventional workplace to a POUS system, will provide relevant learning that will help to set up an operation as POUS right from beginning.

 

  • One of the common challenges will be the workplace layout – whether the existing layout supports POUS?; or is it possible to modify the layout suitable with little effort?
  • The geographical location of the part suppliers – are they located near of far? For suppliers who are located far or overseas, each consignment would be of a minimum lot size to make the transportation costs practicable. I have seen suppliers setting up exclusive operations near the customer organization as part of long term relationship. The question is… how far one could succeed with such major changes, and in what period of time? Many factors influence the possibility of overcoming the transportation / handling cost related challenges to make POUS a reality for most of the supplies.
  • Another important factor is about the Quality of the supplies. In a POUS system, we will not have much opportunity to evaluate the Quality of incoming material before being used for production. We neither want to compromise on Quality nor want it to be a show stopper for POUS. Hence, assuring “Quality at source” by ensuring clear understanding of requirements and assuring adequate process capabilities become an essential pre-requisite.

 

We would certainly have some more important factors to be addressed to ensure an effective POUS system, apart from the above.

 

Thus the whole implementation may be viewed as a systematic Black Belt DMAIC project, when taken as a transformation initiative, or as a DFSS project when taken as an initial setup. There are clear output and input metrics to be identified, monitored and improved.

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Point of use Inventory is the Inventory held at the location where it would be used/utilized. POUS is generally fixed as a minimum quantity that would be utilized and replenished at any point of time. Since the quantity is minimum, and is replenished only upon reaching a Re-order quantity, it helps to minimize the Inventory held in a location at any point in time..

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Point of use inventory management system as opposed to the traditional accounting based inventory system is all about providing just the quantity of product (which includes information or service)  you need more importantly where you need and when you need.  In summary, provided just in time.

 

How Point of Use inventory management contributes to  reducing Lean wastes? 

 

a.  Reduces the time spent on traveling of materials or to and fro flow of information.  A robust point of use inventory management system plans for its materials or information to be stored at right place and hence reduce the transmission or transportation time. 
b.  A well planned point of use inventory management system reduces inventory tracking errors.  In other words it keeps it simple to focus on what is required by when and plans for it. 
c.  With this methodology,  owing to present the right materials or information at right time,  an important factor of shelf life comes into play.  With a tagged expiry or material or information turning to non useful,  a greater focus of material analytics comes into play in this model. 
d.  With providing right information,  product or service at right time there are minimal non value addition steps probably waste that your process should be focusing on. 
e.  Since you plan to supply your material or information just adequate to the process,  chances of overproduction is removed


With most of about points in place, point of use inventory management system helps drive a stream lined process which results in removing extra processes and non value added stuff which in turn keeps your process lean.

 

 

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POUS is a Lean concept that helps reduce the number of intermediate stations or steps between receiving the material and getting it to the work location. Our expert, Venugopal, has mentioned how it may not be so easy to implement POUS. However, it can motivate us to look for vendors that supply good quality material, in the correct lot sizes and at a price that enables us to set up POUS.

 

The chosen best answer is that of Vastupal Vashisth for clear definition and clearly mentioning the wastes that can be reduced. Another must read answer is that of Prashanth Datta. Do think, if POUS also helps reduce "waiting" and how does it work in tandem with 5S to get your mind jogging!

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