Lean manufacturing types consider "waiting" one of the seven deadly wastes. But could it be a social value that also delivers positive financial results to a company?
A couple months ago we told you about Ruger, the gun-maker that has embarked on a rather aggressive lean program. As a public company that must report traditional P&L’s and balance sheets to traditional Wall Street analysts, its stock took a hit. We know by now that the initial stages of a lean transformation can create a negative traditional accounting results, and Ruger is paying the price for improvement. A major focus of Ruger’s lean activities was the reduction of inventory.
Gun-maker Smith & Wesson has a similar problem, although it’s questionable whether they are attacking it as seriously. Although sales are up, profits are lagging due to excess in-store inventory created by product mix and lower demand. That excess inventory was one of the reasons why the company lowered guidance for 2008, causing the stock to fall 29%.
But why do stores need all that inventory? In many states there is a waiting period for gun purchases, on top of the waiting period for the initial permit, ranging from three days to as long as six months. So in those states some dude goes into a gun store (or Wal-Mart), plops down some cash for one of the apparently large number of boxed guns behind the counter, and walks out. A few days later he comes back to pick it up, obviously assuming the false god of the almighty algorithm has returned a favorable background check.
I bet the lead time to manufacture a gun is just a few days, if not hours, assuming of course that one piece flow methods are being used. Why doesn’t the gun store order trigger a signal to the gun manufacturer to actually make the gun and ship it, getting it to the store right around when the deer-hungry dude comes back? Or perhaps even shipped directly to his house to avoid additional transportation waste… although I’m not sure I like that for an item like guns.
Unsold inventory would dry up around the country, benefiting the retailer as well as the supplier, as they’d be tied more closely to actual order/demand patterns. Less inventory is less cash tied up, less space used up, and a less tempting target for bandits.
Gun stores and chain sporting goods stores use large inventories as selling points. They advertise huge selections to bring customers into the store. I have noticed that while there are often huge inventories, there are not so many of each model or type available. Gun retailers have huge numbers of SKUs to deal with, but relatively few of each.