Mitigating Inventory Management Issues in the Production Process

Jun 12, 2022

No matter what your company manufactures, the management of inventory throughout the manufacturing process is critical to the profitability and overall success of your organization. Sadly, some manufacturers fail to understand many of the basic concepts related to inventory management, while others don’t understand them well enough to know how they impact their organization or how to implement them. Our experience has been that those manufacturers who take the time to understand, embrace, and reinforce these concepts are those that have an exponentially greater chance at profitability and mere survival in today’s challenging and turbulent business environment. To help your organization better understand how these concepts impact your manufacturing process, we’ve listed some of the common issues faced throughout the industry and some potential solutions to help mitigate them.

Product Rejects can be the result of a variety of different sources but, most often, these issues occur with machinery malfunctions and employee errors. Lackluster maintenance and upkeep along with the improper cleaning of machinery and related components can contribute to production issues such as over/underfilling and sizing and the improper measurement of ingredients. Employees who are not properly trained on procedures can present another challenge as required steps in the manufacturing process can be missed, overlooked, or not followed in a prescribed order. Either way, it is critical that organizations be able to quickly identify these issues as they occur before costly, unsalable product begins to accumulate or make its way to the end consumer. Start by asking if your organization is measuring rejects and rework.  If not, we highly suggest developing a system to identify them.  From there, determine what the tolerable reject rate should be with the understanding that in most cases, it’s unrealistic to assume a zero-percent reject rate. Once the acceptable rates have been established, develop the framework that will allow you to quickly identify rejects and mitigate them by implementing strict and thorough machine maintenance, cleaning, and strong employee training and onboarding programs that ensure employees have the requisite knowledge to do their jobs. Finally, implement controls at the supervisory level that will help ensure processes are accurately followed and there are no short-cuts taken with these programs.

Product Giveaway can be a costly error as more product is given to the consumer than should be while pricing remains static. This results in compressed margins and lower overall profitability. Product giveaway can occur in many ways however, faulty calibrations of scales and other equipment, improper training on portion control, and of course, lackluster equipment maintenance seem to be the primary factors that contribute to excess product making its way to the end consumer. Start by asking if you’re currently measuring product weight. If not, consider implementing this critical step at various intervals in your production line. Implementing this step at various points in the production process can help identify issues early and allow corrective measures to be taken. From there, begin implementing strong controls and the proper systems, equipment, and tools designed to measure (e.g., scales) product.  Proper training of employees on portion control and ensuring they have the proper tools and equipment to effectively perform their job responsibilities is always a good strategy as well. Finally, understanding the replacement point of various parts and components of equipment, such as blades and mixers that wear down over a period of time, can help ensure the proper measurements, quantities, and consistency of product is being incorporated into the final product.

Product Waste occurs in just about every manufacturing process.  The “best in class” manufacturers understand and expect this. However, with some strong controls and some critical thinking, product waste can be mitigated and in fact, turned into a revenue and/or cost saving opportunity. Start by identifying the various forms of waste that occur in your manufacturing process and ask how (and if) you’re measuring it. If you’re not sure how to do this or where to start, consider closely monitoring and inspecting the dumpster and trash cans throughout your organization as this will usually give you a fairly good idea of what (and how much) is being discarded. Once you’ve identified the various forms of waste and quantity, consider how ordering and production processes play a role here. For instance, if you find that a large quantity of raw materials is being discarded, consider the impact that ordering a different size or cut would have.  Also, take close look at how and when raw materials are introduced into your production process.  Incorporating too much at one point in time or too early or late in the production process could contribute to unnecessary waste. If you find that during your product changeover process a vast amount of product is left, consider taking a closer look at the equipment, processes, and tools that contribute to this. Finally, think about some creative ways that you may be able to repurpose waste. Perhaps other parts of your manufacturing processes could benefit from another’s scrap or in some cases, other industries could benefit (and pay for) various forms of scrap from your organization.

Foreign Object Contamination can lead to financial ruin, especially for those manufacturers who produce a consumable product. Expensive product recalls, potential lawsuits, the overall negative consumer appeal of your brand and product, coupled with the shear administrative nightmare of a product recall can consume a vast amount of money, time, and resources from your organization. As such, it’s critical that manufacturers have strong programs and procedures in place to ensure that equipment is inspected before each production run. Lean Manufacturing tells us that Total Quality Maintenance (TQM) plays an important role in the overall effectiveness of any manufacturing process. As such, knowing the maximum machine hours, replacement points, and predictive maintenance intervals of each piece of equipment within your manufacturing organization can play a key role in reducing issues in connection with the end consumer finding something that they shouldn’t in your product.

Vendor Relations can play a key role in any inventory management planning and production process.  Even if you have the best inventory management system in the world, if you have contentious relationships with your suppliers it’s not going to matter.  As such, it’s critical that you don’t base your decision on price only.  Rather, look at industry reputation, quality, delivery methods/times, ability to service and other non-price factors that clearly distinguish one supplier from another. In addition, we generally recommend that manufacturers have a second and even third option in place for critical components, parts, and raw materials.  Finally, we recommend that you build strong working relationships with suppliers and even invite them on tours of your plant to see how their product is incorporated into your finished goods. In some cases, efficiencies in terms of delivery, quantities, schedules, and ordering methods may be achieved once your vendor understands your process and how his/her product impacts your organization.


While many of these concepts may seem basic, we still believe (and see) a fair number of manufacturers struggle with the various issues that can occur when these concepts are not understood, embraced, or reinforced at all levels in an organization. As such, we highly recommend manufacturers take a proactive approach to implementing these ideas into their organization to ensure profitability and overall success. To learn more about these concepts and how they can impact your organization, please contact Tim Reynolds at 828.322.2070 or