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Considerations for Finished Goods Considerations for Finished Goods Every product stage can fall into one the categories of finished goods,

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Presentation on theme: "Considerations for Finished Goods Considerations for Finished Goods Every product stage can fall into one the categories of finished goods,"— Presentation transcript:

1 Considerations for Finished Goods Considerations for Finished Goods Every product stage can fall into one the categories of finished goods, semi- finished goods, or Work-in-Process.

2 Considerations for Finished Goods Introduction As operations in the warehouse conclude, the last thing to consider is the current state of your items; be they finished goods, semi-finished goods, or Work-in-Process. It is important to understand the distinction between each as they all have different storage and outbound implications.

3 Considerations for Finished Goods Finished Goods Working backwards from the customer, finished goods are first. Finished goods are items that are ready to be loaded on to the truck. –In reality though what is usually referred to as finished goods still has steps to complete before getting out the door. These finishing operations can include boxing, shrink wrapping, recombining boxes, labeling, and quality assurance. –Actual finished goods with all these steps complete are rarely stored at all and, as such, have little implication since they should be exiting the organization shortly.

4 Considerations for Finished Goods The Not-so Fine Line The finishing operations illustrate that the line between production and logistics is not as sharp as one might think. The trend towards more last minute customization further blurs that line.

5 Considerations for Finished Goods Semi-Finished Goods While finished goods have this set definition, semi- finished goods are items that are stored inside the plant in generic form, and retrieved for customization. –Some items stored as semi-finished goods are: Cosmetics which are compounded in bulk, then distributed into a variety of containers Semi-raw tube or sheet material that is cut to custom dimensions And Commercial trucks that are painted with the customers colors

6 Considerations for Finished Goods Management Responsibility The difference between WIP and semi-finished goods is in the eye of the beholder. –What category the item falls into is based not on its physical nature, but on a management decision. –While storing semi-finished goods can reduce the cost of mass customization by supporting delayed differentiation, unless management is vigilant, this strategy can easily degenerate into the mass production practice of warehousing WIP.

7 Considerations for Finished Goods Work-in-Process It is common in factories not practicing Lean for Work- in-Process to be stored in a warehouse between every two operations. –In a Lean organization, there is no warehousing of Work- in-Process. It is held on the shopfloor by production on lineside shelves, in input and output buffers, or in supermarkets for waterspiders to pick from.

8 Considerations for Finished Goods Overview Every product stage for every item can be analyzed to fall into one of these three categories towards the end of production. Delineating WIP from semi-finished goods and finished goods will provide insight and many improvement opportunities.

9 Considerations for Finished Goods Volume Expansion One final aspect to understanding the different stages of production, from WIP to finished good, is natural volume expansion of an item as it gets closer and closer to being a finished good.

10 Considerations for Finished Goods Raw Refinement Versus Finishing Finished goods rarely occupy the same amount of space as the materials they came from. –In activities like extraction, refinement, or smelting, the finished goods are smaller than the raw materials. –In most processes finished goods contain more air and bulky packaging.

11 Considerations for Finished Goods Entrance, Processing, and Exit All the materials that come into an organization eventually leave it, either as finished goods or scrap. –In some cases, scrap is limited to disposable packaging materials and defective products. –In other cases, a large portion of the material itself is scrapped as part of normal operations.

12 Considerations for Finished Goods Example: Frying Pan Assembly Take for instance, a frying pan assembly. Not only does a finished, packaged frying pan take up 20 times more space than an aluminum disk, the contents must be protected from handling damage.

13 Considerations for Finished Goods Consequences of Volume Changes If this is the case in your organization, you may have to consider the following consequences: –Warehouse space that can hold a month of raw materials may only hold a day of finished goods. –Shipping from the organization may involve many more trucks than receiving. –And plant location, where if there are 20 trucks delivering to customers versus 20 trucks arriving with raw material, than the plant should be located near the customers or the raw material extraction respectively.

14 Considerations for Finished Goods Conclusion As the full understanding and ramifications of each stage in the process becomes clear, combined with the knowledge of volume expansion, you become empowered to improve your warehouse operations.

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