4/12/2024 0 Comments Inventory turns vsm![]() ![]() This is the first video in our Transforming your Value Streams Course where we cover topics such as cycle time, takt time, and other lean thinking concepts in much more detail. If you enjoy learning by video check out our Value Stream Mapping Overview video below. And be sure to check out our Gemba Talk video on this very topic! Value Stream Mapping Overview ![]() If you’re interested in learning much more about lean thinking topics like this please be sure to explore Gemba Academy’s School of Leanwhere we now offer more than 1,000, highly engaging, training videos as well as many other learning resources such as quizzes, downloadable templates, and many other lean thinking tools. Gemba Talkīe sure to check out our Gemba Talk video on this very topic! Learn More In other words, our average inventory “turned over” 10 times. So, for example, if we have an annual cost of goods sold of $50,000,000 and our average inventory during this same time frame is $5,000,000 our inventory turns would be 10. The key is to use the cost of goods sold, or COGS, meaning what we paid for the material, not what we sold the material for. ![]() There are actually a few different ways to calculate inventory turns but the most common method is to divide the Cost of Goods Sold by the Average Inventory Level. Inventory Turnsįinally, inventory turns help us understand how frequently our inventory “turns over” or is used after it’s been purchased. Takt time cannot be measured with a stop watch. So, if our customer wants 240 toaster ovens and we have 480 minutes to produce these toaster ovens, our takt time is 2 minutes per toaster oven (480/240). To calculate takt time think touchdown, or T/D, since we simply divide the net available time by the customer demand. When we speak of takt time we’re attempting to understand the rate at which we need to produce our product in order to satisfy customer demand. The word takt is German and literally means pace or rhythm. Value stream maps are excellent tools for determining the Production Lead Time. This is often called the “call to cash” time since it helps us understand the time between taking the order and receiving payment for the delivered goods. The PLT represents the total time – value added and non value added – it takes a product to make it through an entire value stream. I actually prefer to call this Production Lead Timeor PLT for short. Now, you can get fancy and segregate value added cycle time from non-value added cycle time if you’d like.Ĭycle time can be measured with a stop watch. This task may be to assemble a widget or answer a customer service phone call. ![]() Cycle TimeĬycle time describes how long it takes to complete a specific task from start to finish. If you have a different twist you’d like to share give us a shout out in the comments section below. In any event, here’s my take on these popular terms. The key is to understand the concepts of the terms… that way when someone describes a term you’ll know what they mean no matter what they call it. Your help to clear the definitions & formulas for the above is highly appreciated.ĭepending on who you talk to you may hear these terms defined differently.įor example, what some people call cycle time others call production lead time, etc. Vaibhav, a reader of Gemba Academy’s blog, emailed us the following question.Ĭan you please help me understand the definitions for the following terms? ![]()
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