Using bottlenecks to control production inventory

In this paper, we investigate how to best optimise the level of Production Inventory or Work In Progress (WIP) in a factory. Using a simulation model of the factory, we show that a level of inventory can be optimised by controlling the buffer levels of the key bottleneck workcenters. By firstly identifying the key bottlenecks, and then systematically reducing the maximum buffer level for each bottleneck, results show that the throughput does not drop rapidly from it's high levels until the WIP is halved. Conversely, the production lead time decreases rapidly and levels out around the point of the optimum WIP level.