System model of production inventory control

Abstract

The primary consequence of just-in-time (JIT) production is reduction of inventory. The associated benefit is (a) improved cashflow due to less financial resource tied up in inventory, and (b) less storage space required hence more productive plant area. Coupled with lean production and total quality management (TQM), it may also be possible to (c) improve worker productivity, (d) improve product quality, and (e) reduce production waste. Thus there are strong financial incentives to move to JIT/lean production. However, existing methods cannot adequately explain the causality that leads to failed (or successful) JIT implementations. While it is generally acknowledged that qualitative variables exist and affect success, there are no structured system models that accommodate the qualitative variables. This paper describes a fresh theoretical approach to examining the larger organisational factors in which inventory control systems are embedded. A structured descriptive system model for production inventory control is described, including base stock, conwip, kanban, and hybrid systems. The model was then interrogated to produce lists of tentative critical success factors for implementation of these strategies in JIT and lean production, and propose explanations as to why it succeeds or fails. This demonstrates that it is indeed possible to use descriptive modelling methods to explore the effectiveness of JIT and lean production systems.