Setup Operations in the Past
The term excess inventory will be used to refer to production quantities which, for one reason or another, are larger than the actual number of units needed to fill orders. Many factory managers consider diversified, low-volume production to be their single greatest challenge. This view, however, confuses characteristics of supply with those of demand. From the standpoint of demand, diversified, low-volume production means that many kinds of products are desired, and the quantity of any given kind is low. Setup operations have traditionally demanded a great deal of time, and manufacturing companies have long suffered from the extreme inefficiency this causes. A marvellous solution was found to this problem, however: increasing lot size. Large-lot production in response to large orders is fine, but most large-lot production in fact results from combining repeated orders for small volumes of goods, giving rise to excess anticipated production. Inventory is often called a necessary evil, there are so many advantages associated with it.