Functions of inventories

The primary function of a buffer stock is to damp variations of material flow by accumulating exceeding inputs versus outputs or slowdowns of consumption.

Conversely, a buffer stock will temporary take over the feeding when regular supply line fails to feed the process on time or in proper quantities, or in case of temporary increase of material consumption the supply line cannot instantly follow.

Hydraulic analogy

The way buffer inventories work can be easily explained with an hydraulic analogy. A buffer stock works like a reservoir (see figure).

Remember

A buffer stock can only work properly if it has been setup to damp variations in amplitude and times.
Bessides, setting up inventories carry costs.
The challenge is to setup well dimensioned buffers at lowest cost.

Myth of zero stocks

Pure financial approach and the search for cost reductions target inventories as candidates for downsizing. The success of Lean Manufacturing principles and just in time spread the myth a factory can operate with zero stocks.
Yet inventories are necessary and it would be unrealistic to eliminate them.

Example

Buffer stocks, correctly set up and well positioned will protect outputs.

In the above example, buffer stocks (blue squares) protect the output of the bottleneck R3 and shipments to clients.