“We want to operate like Toyota, so let us reduce inventory to zero.” It sounds ambitious, but it combines a major decision with an incomplete understanding. A retailer waiting for an imported shipment is not an interconnected assembly line. A product with erratic demand is not equivalent to a component consumed at a predictable pace. Before reducing the quantity, ask what will make its replacement available when needed.
Toyota describes two pillars: detecting and stopping abnormalities, and coordinating production with actual requirements. Its explanation of Just-in-Time explicitly includes holding a minimum supply of parts in advance and replenishing what the following process withdraws. That describes coordinated flow, not permanently empty storage. The example and trial proposed below are independent educational analysis, not procedures taken from Toyota factories.
Try one item before changing the whole warehouse
Choose an item whose consumption and replenishment can be traced, with an acceptable alternative if the trial goes wrong. Do not begin with a material whose absence could stop the entire operation, or a seasonal product whose cycle is still unfamiliar. Record ordering, confirmation, dispatch, receipt and inspection times. Arrival at the gate does not mean an item is available for use or sale.
In a fictional example, a worksite consumes 8 units daily and normal replenishment takes 3 days. Demand over that interval is 24 units. Management initially proposes another 12 units as a buffer, giving a replenishment trigger of 36 units. Assume there are no open purchase orders or other commitments against the balance.
If the new delivery is delayed until the end of 5 days, the site needs 40 units. Starting that wait with only 36 units creates a shortage of 4 units before arrival. The buffer is not a guarantee: it is an assumption that fails in this scenario. A convenient number in a small spreadsheet is not enough to establish a general policy.
Find out where the waiting occurred
Record the cause of each delay instead of simply writing “supplier late.” An internal approval may have stalled, availability may not have been confirmed, or the shipment may have arrived and then waited for inspection. Each bottleneck calls for a different response. More stock can conceal slow approvals without fixing them.
| Observation during the trial | Question before changing the quantity |
|---|---|
| Orders leave the business late | Does the replenishment signal reach someone able to act? |
| Deliveries are timely but accepted quantities are smaller | Is supplier quality or the inspection process the issue? |
| Consumption exceeds expectations on certain days | Is demand linked to a season, customer or operating schedule? |
Separate normal consumption from exceptional withdrawals. A large, one-off project may need a separate purchase instead of a permanently higher weekly balance. Conversely, stop treating it as exceptional if similar demand has become a regular feature of operations.
Decide whether less inventory actually helped
Place the cost of waiting alongside the cost of holding. Monitor stockouts, incomplete orders, emergency freight and damaged quantities as well as average inventory. A lower stock value accompanied by more lost orders is not an unqualified success. A temporary increase before a known season is not necessarily poor management either.
Run the trial across more than one replenishment cycle, with a clear stopping rule if customer service or safe operations deteriorate. Do not reward the warehouse solely for a lower balance while another department absorbs the cost of urgent transport. Assess the whole process before deciding whether the approach deserves expansion to other items.
The transferable idea is not a fixed reduction percentage. It is the discipline of connecting a decision to what happens before and after consumption. That makes a global operating example useful without pretending that differences in context have disappeared. The official source describes Toyota's philosophy; this article claims no quantified financial return from it, no relationship with Wali and no use of Wali products by Toyota.
Sources & further reading
Visit the original source to explore the concept and its wider context.
General educational content. Appropriate treatment depends on your business and accounting policies; consult your accounting professional when applying it to business records.
