9.9 Conclusion

Toyota has called inventory evil. Accountants label inventory as an asset. Which is it? Realistically, you could say it is both. Let's summarize both arguments:

• Too much inventory can cost you a lot of money, robbing you of your ability to compete. When you look at product filling a warehouse rack or sitting on a shelf, you are really looking at stacks of money. Further, excess inventory can hide inefficiencies and tempt you to become complacent—again, stealing your competitive edge.

• As insurance, inventory enables you to conduct business in a chaotic world. It protects you against customer demand and lead time uncertainty. It allows you to keep producing, selling, and delivering product when things don't go as you expected. Simply put, inventory is essential.

Your challenge is to get your inventory decisions just right; that is, right amount, right time, and right place. Of course, as we've discussed, doing this with certainty is impossible. But, if you do your homework—i.e., collecting the right data and running the right numbers—you can reduce your risks, keep costs down, and serve customers. You don't have to be perfect, you just have to be highly effective and efficient—in other words, better than your rivals.