Proceedings of the 2010 Industrial Engineering Research Conference

A. Johnson and J. Miller, eds.

Lean Manufacturing in Process Industries: Are WIP Inventories

Necessary?
Abstract ID: 813
Shellyanne N. Wilson
The University of Trinidad and Tobago
Trinidad and Tobago
Abstract
This research seeks to add to the understanding of the role of work-in-progress (WIP) inventories in companies
operating in lean process industries. By building on the output of previous work on lean in process industries, this
research applies constructs from four research areas: coordination theory; mix flexibility; form postponement and
logistical complexity, to develop a preliminary framework to investigate lean applicability related to the elimination
or reduction of WIP inventories. Preliminary testing of the framework in two companies indicates that the
framework is relatively comprehensive in assessing the relevance of WIP inventories. Further testing of the
framework is ongoing.

Keywords
WIP inventories, coordination theory, mix flexibility, form postponement, logistical complexity

1. Introduction
Although in as late as 2009, there still appeared to be no consensus on a definition for lean production, there is
general agreement that the basic philosophy underpinning the lean concept is the elimination of waste [1, 2]. Early
lean contributors such as Shigeo Shingo and Taichii Ohno have been credited with the identification of a number of
wastes that should be eliminated in order for companies to reap lean benefits. Seven of these identified wastes are
unnecessary inventory; transporting; unnecessary motion; waiting; overproduction; overprocessing and defects [3].
This research paper centres on one of these identified wastes: inventory. More specifically, this research paper
focuses on work-in-progress (WIP) inventory, where the main research objective is to investigate the need for WIP
inventories in process industries. Much work has been done in the past regarding inventory management in lean
production and further, researchers such as [4, 5, 6] have contributed to the understanding of WIP inventories by
investigating the optimal size of buffers and the optimal location of these buffers. This research paper will attempt
to add to the understanding of this aspect of the need for WIP inventories in process industries through the
application of constructs from four research areas: coordination theory; mix flexibility; form postponement and
logistical complexity. Based on a literature review, a preliminary research framework is proposed outlining reasons
for needing WIP inventories. The framework is subsequently tested in two case studies to assess the relevance of
WIP inventories.
The research paper proceeds as follows: Section 2 presents a brief overview of why WIP inventories are needed;
Section 3 reviews the key research areas to be investigated and introduces the preliminary framework; Section 4
outlines one of the two case studies conducted in two process industries and presents the results of the case studies
and Section 5 assesses the comprehensiveness of the preliminary framework and summarizes the research papers
conclusions.

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2. The Need for Work-In-Progress Inventory

Reference [7] defined WIP inventory as inventory found anywhere after the end of the first step in a manufacturing
process and before the final step in a manufacturing process. WIP inventory, just like raw material inventory and
finished goods inventory, is only considered waste when a company carries it in excess. This point is summarized
by [8] in the following statement: In essence, inventory is not excess when it is the right quantity of the right goods
at the right place at the right time. (p.100).
Based on Reference [8]s statement, it can be inferred that inventory: raw material, WIP and finished goods; is
needed under the right circumstances. This papers research thesis proposes that the reasons for needing WIP
inventories can be assessed in a structured approach by considering constructs from coordination theory, mix
flexibility, form postponement and logistical complexity. Relevant research in each of these research areas is
reviewed below.

3. Research Areas Related to WIP Inventories

Constructs from the four research areas identified above will be used in the development of a structured approach to
explaining the need for WIP inventories. The first research area that will be reviewed is coordination theory.
Subsequently, the other three areas: mix flexibility; form postponement and logistical complexity, and their
relationship to coordination theory are discussed with respect to their contributing role to the need for WIP
inventories.
3.1 Coordination Theory
Coordination theory is an approach to study dependencies or the relationships among activities, where the actions
carried out by one element in a system can directly or indirectly affect the actions or outcomes of another element in
the system [9, 10]. Reference [11] identified three basic dependencies: sharing dependencies or shared resources;
flow dependencies or producer-consumer relationships and fit dependencies. These dependencies are illustrated
below in Figure 1.

Figure 1: Three Basic Types of Dependencies (Adapted from [11])

3.1.1 Mix Flexibility and Coordination Theory
Mix flexibility, defined as the ability to change between current products [12], is one of the most widely mentioned
and researched manufacturing flexibility types; perhaps as it is one of the main flexibility types that can potentially
have a direct effect on customers [13]. The main reason for studying mix flexibility is product variety, which can be
produced by a company via the concurrent production of multiple products, the sequential production of multiple
products or a combination of the two above approaches [14].
Reference [15] argued that in addition to product variety and uncertainty, a plants manufacturing resource
configuration influences the companys mix flexibility requirements. Further, [16] argued that a companys mix

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flexibility requirements influence how a company achieves mix flexibility. In both [15, 16], the manufacturing
resource configuration considers the dependencies or relationships among elements in a manufacturing system,
where actions and outcomes of one element can directly or indirectly affect another element in the system.
One of the key dependencies relating to mix flexibility is shared resources, where multiple activities utilize the same
resource [11]. The relationship between [14]s view on mix flexibility and the construct of shared resources is
represented below in Table 1.
Table 1: Mix Flexibility and Shared Resources
Mix Flexibility Achievement
Type of Resources

Concurrent Production
Sequential Production
Combination of Concurrent and Sequential Production

Independent Resources
Shared Resources
Mix of Shared and Independent Resources

3.1.2 Form Postponement and Coordination Theory

Postponement, defined as moving the point of differentiation further downstream, is viewed as a means of managing
a companys product variety [17]. For this research paper, the focus is on one type of postponement, form
postponement, which includes delaying activities such as manufacturing and assembly steps, packaging and labeling
[17]. These delayed activities are related to Coordination Theory in the way that producer and consumer resources
are shared in the production of finished goods. Figure 2 shows how postponement moves the point of differentiation
in a manufacturing process.

Figure 2: Postponement and Producer Consumer Relationships

3.1.3 Logistical Complexity and Coordination Theory
Reference [18] defined logistical complexity as the number of manufacturing steps or number of different parts
handled by a factory. This definition considers dependencies among different manufacturing steps, and can be
related to coordination theory by examining the relationships between producers and consumers in the producer
consumer dependency type. As displayed in Figure 3, in a typical processing industry, where there are a number of
manufacturing steps, a consumer in Step 1 becomes the producer in Step 2, and so on.

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Figure 3: Logistical Complexity and Producer Consumer Relationships
3.2 The Preliminary Framework
WIP inventory exists for a number of reasons that can be grouped into the two categories of structural factors and
infrastructual factors as per [19]s manufacturing strategy definition.
In terms of structural factors, reasons for having WIP inventory include process layout; and the nature of the
manufacturing process with respect to utilization of the manufacturing resources in mix flexibility achievement, use
of form postponement and the degree of logistical complexity.
The process layout of a manufacturing plant may call for WIP inventories when material handling constraints or
space constraints prevent serial producers and consumers from feeding directly off each other. The WIP inventory
may exist only to manage the logistical challenge of serial operations that are located some distance away from each
other. The utilization of manufacturing resources in mix flexibility achievement would dictate if WIP inventories are
needed. WIP inventories may be needed when shared resources are utilized in the sequential production of multiple
products, where the WIP inventory would allow sufficient time for a shared manufacturing resource to perform its
operation on a selected part or product prior to the need to make a change to a second part or product. In terms of
form postponement, WIP inventories may be needed at the point of differentiation. Lastly, in terms of logistical
complexity, WIP inventories are needed when there is some inequality between the producer and consumer
relationships in serial operations that could lead to blockages or starvation of either operation.
In terms of infrastructural factors, reasons for having WIP inventory include the production planning and control
policies used in the management of demand uncertainty and internal uncertainty such as machine breakdowns,
which can often contribute to the need for maintaining some buffer stock to prevent disturbances from hampering
the companys ability to satisfy its customers.
Based on the above discussion, the preliminary framework (Figure 4) is presented below.

Figure 4: Preliminary Framework: Reasons for Needing WIP Inventories

4. Testing the Preliminary Framework in Case Companies

Case 1 is a company operating in the flour milling industry, which was part of a larger study that investigated the
achievement of mix flexibility. The study of Case 1 was conducted over a 12-month period that included a major
change in Month 6 in the processing and flour transferring resources used in the achievement of mix flexibility.
Case 2 is a company operating in the snack food industry, and was part of a study that focused on process
improvement. Because of space constraints for this research paper, only form postponement analysis for Case 1 will
be described in depth, while the rest of the results for Case 1 and the results from Case 2 will be summarized in table
form.
4.1 Case 1 Case Study Results for Form Postponement
Case 1 is a small flour manufacturer, involved in the processing and packaging of flour products. The company uses
3 wheat types in the production of its 10 different flour types, which are subsequently packaged in 9 different flour
sizes, under a variety of brand names. Case 1s total product offering amounts to 37 items. Initially, the 10 flour

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types were produced using a combination of flour milling operations, including single wheat milling, wheat
blending, wheat blends milling, base flour blending and flour blends blending. With the exception of the single
wheat milling, the flour milling operations started the differentiation of the various finished flour types. From
Month 6, the 10 flour types were produced using single wheat milling and flour mixing; as the company employed
form postponement to delay the manufacture of the finished flour types for production just as the flour was needed
for packaging. Figure 5 shows the results of the implementation of form postponement in Case 1.

Figure 5: Case 1 Form Postponement Analysis

Figure 6 shows the results of the application of the preliminary framework to Case 1 and Case 2.

Figure 6: Preliminary Framework Applied to Case 1 and Case 2

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5. Conclusion
The elimination of unnecessary inventory is one of the challenges faced by manufacturers who wish to implement
lean manufacturing. In order for the distinction between needed inventory and excess inventory to be made,
manufacturers should have a comprehensive understanding of the structural and infrastructural factors which drive
their plants need for maintaining the correct levels of WIP inventories. This research paper sought to add to the
understanding of a companys need for WIP inventories by investigating constructs from coordination theory, mix
flexibility, form postponement and logistical complexity.
A preliminary framework was developed to incorporate these constructs, and the framework was applied to two
companies operating in process industries. Because of page limitations for this research paper, only a brief overview
of the results could be presented. The results of the case studies, however, offer some support to the
comprehensiveness of the framework. Further testing of the framework is ongoing to determine if additional
structural and infrastructural factors should be added to create a final framework.

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