The What Why and how to optimize the Work in Progress (WIP)

 

The saying ‘what is not track is not manage’ would apply aptly to work in progress(WIP). For the reason that businesses tend to neglect tracking of the WIP on the factory floor, ostensibly due to their tendency to focus on other priorities, say, cost. It becomes challenging for such of them to manage it across the programs, business units, etc. This article discusses briefly what is meant by WIP, why it is needed to optimize it, and how to achieve that optimization.

What is WIP?

WIP refers to partially manufactured goods, which are still in the production process. It excludes raw materials and finished products. WIP measured at the end of the accounting period by assigning a valuation to the amount of inventory. Lying on the production floor and reported on the balance sheet as a separate line item. But the challenge lies in the fact that it is hard to apportion an accurate cost to a WIP item. Which are interlinked to each other, maybe at various stages of completion at the end of an accounting year. There has been an increasing emphasis on bringing down the amount of WIP units in the production process, and the rationale for such insistence is described below:

Why has WIP to be optimized?

  • It leads to less clutter in the production area; this can also result in reducing the chances of piling up of ‘defective products.’
  • High WIP results in planning for extensive inventories and also may lead to your team getting into the habit of spending lots of time to determine what next. With optimization, the cost and time overruns can be avoided.
  • One of the tenets of the just-in-time system of manufacturing keeps the investments on WIP to the minimum. WIP is also linking to the ‘lean operations’ that provides substantial near-term opportunities in optimizing WIP buffer targets. By enabling setting up early in a program life cycle when manufacturing performance is still highly variable but have not been revisited over time to reflect production improvements. Viewed from this angle, we can also state the full potential value for WIP is tied to lean operations, which makes it a compelling case for optimization.

How to Optimize WIP? 

No doubt, what comes first in mind is a plethora of technological solutions, as Inventory Management and Optimization, which directs themselves specifically to WIP management improvement. While their utility cannot be undermining, solutions have limitations that they focus on the WIP flow, which would impact only a few stages of the production process. It does very little to enable the workforce to address issues that affect inventory while the production is occurring in an ongoing manner. They do not address issues that are relevant to your revenues, which are the fulfillment of customer orders, managing supplies, etc.

What then we need is a comprehensive approach, which would drive solutions and value to the WIP. Optimization can be done by applying a ‘Manufacturing Operations Management’ (MOM) approach. It connects the shop-floor automation systems to the overall enterprise software through the application of Quality Management Principles. Wherein tools of planning, scheduling, dispatching, (in short production execution applications) are applied in an all-encompassing manner to achieve the WIP optimization.

In addition to the above, the following three specific techniques would help your business to optimize the WIP in a better manner:

  • Tracking of WIP levels with forecasting

As pointed at the beginning of this article, what is not track is not manage. In addressing this topic, it is necessary to put in place a forecasting mechanism, which would go towards lowering the WIP levels, which synchronized to demand. A reasonably well laid out ‘predictive performance tool’ would aid in lessening the buffer sizes that avoid overstocking and ensure the maintenance of the continuous flow of the materials.

  •  Address bottlenecks hampering production

By nature, most of the manufacturing operations entail exceeding the capacity when compared with the demand required by line production. It is here the principles of lean manufacturing (LMP) come into play. They would help to sustain the sharing capacity between units at periodic intervals. It would reduce bottlenecks and improve the process of WIP optimization.

  •  Improvement of the Workforce

Due to investment constraints, it is not possible to introduce additional machinery to scale down WIP, but this can d by optimizing the deployment of the workforce. However, for this to be effective, it is necessary to establish the operational capacity of the operator concerning the demand.

We can conclude the article by highlighting some takeaways, which have practical utility. WIP has taken as a top-issue by the management. Because even though it considered as an ‘asset’ in the balance sheet, in reality, it is an idle asset that has more negative implications for your inventory, delivery schedules. It is necessary to monetize it for better cash flows and to improve the revenues. It has to note when not given sufficient attention, and it affects the working capital as it is not taking as collateral for granting credit by the financial institutions. Piecemeal approaches to handle WIP issues may result in your business making a hit, and this calls for a holistic approach to tackle the challenges posed by the complexities of WIP.

Keywords: WIP, PRODUCTION, OPTIMIZATION, OPTIMIZE, MANUFACTURE, MANAGEMENT, INVENTORY, ADDRESS, APPROACH, production process

 

 

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