( Part 1 of 2 – to be continue  in June eScope) 

By: Eliot Dratch

One important measure that can quickly tell you about your company’s ability to turn inventory into cash, is the Dock-To-Dock time (DTD).  From a lean perspective, it is not enough to know if you are turning your inventory 6, 8, or 10 times/year.  We want to be able to understand how long it actually takes to turn raw materials into cash.  It might take 2 weeks, 2 months or 2 years – and that metric will tell you a lot about your process efficiency, or lack thereof…


The first thing I notice in many plant tours is the large amount of raw material inventory that is being stored.  Obviously, some businesses are very cyclical and buffer inventory and safety stock will always be necessary.  But the goal of a lean inventory management program (one part of the lean journey) is to enable the company to produce the products that your customers want in the amount they want. The first goal is to develop a method to achieving greater effectiveness with working capital and freeing up the cash that you are using to purchase raw materials. The next goal is to run the materials through production so fast that the inventory doesn’t have time to become a liability. So, this requires engineering the order-to-delivery process so that it will have benefits not only for inventory reduction, but for customer service too.


The beginning of an inventory improvement project is to measure the Dock to Dock (DTD) time. That is the total time it takes the material to move through the plant from receiving the raw material to shipping the finished good. By tracking this DTD for several months, you will better understand the business patterns and we will be able to set inventory reduction goals that are reasonable and achievable.

Typical goals of a lean inventory reduction project would be to:

1) Reduce clutter

2) Have better organization

3) Reduce the out-of-date stock

4) Make the area visual so you can see what is normal versus abnormal

5) Simplify the workplace with less total parts to manage, and most importantly

6) Have fewer dollars tied up in excess inventory. Some excess inventory will probably become damaged or obsolete and have to be written down or written-off entirely.

Additionally, there are material handling and storage costs involved every time you pick up and move that inventory. So, it would be smart to reduce your inventory to levels as low as possible.


The requirements to reduce your inventory are that you stabilize each part of the production process by using standard work, organize your workplace using the 5S techniques, understand your demand rate so that you can level-load your manufacturing schedule as much as possible, learn to quickly change the product that is being manufactured, develop highly reliable suppliers, maintain reliable equipment and base your decisions on accurate information in the bill of materials and inventory levels.


About: Eliot Dratch

Eliot Dratch is a past Education Chair of the ASQ Orange Empire 0701 and has taught Quality Management classes for the section (CMQ-OE refresher course) for over 10 years. He works as a Sr. Quality and Lean consultant for CMTC, California Manufacturing Technology Consulting. He holds an MBA from the University of Redlands and an MS in Organizational Leadership from Chapman University.  


He can be reached at (949) 304-8804