Back to Volume 3 | Winter 2018

PPI Position Paper: Understanding the True Cost and Impact of Inventory

Executive Summary

One of the most significant differences between conventional project management and Project Production Management is the view of inventory. In large capital projects, a usual practice is to amass as much inventory as possible, because “schedule will be met if everything needed is already onsite.” Almost no consideration is given to the potential implications of such a decision, with respect to execution or financial risk. The position of the Institute, as described in this article, is that the timing of ordering and receiving inventory and authorizing Work In Process (WIP) is one of the most strategic decisions in project execution and delivery. Project Production Management (PPM) provides the technical framework to optimize inventory and make the right decisions regarding ordering and receiving inventory.

Keywords: Work In Process; Inventory; Cashflow; Throughput; Variability

Author: 
Edited by Ram G. Shenoy, Ph.D., Executive Director, Project Production Institute, rshenoy@projectproduction.org



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