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Backflush

Backflushing is an accounting method that can also be used to manage inventory. It is also known as “postproduction issuing.” When an item is purchased by a customer, the appropriate materials and other resources are issued to the order. The inventory levels in the system of all components on the bill of materials are also reduced. When the inventory reaches a prescribed level, an order is placed.

There are some good and bad reasons for using a backflushing system for ordering. First off, it is simple. There is little to do—when the part is shipped, the system takes care of the ordering.

Unfortunately, backflushing has some significant drawbacks.

  1. It relies on precision. All of the BOMsmust be completely accurate, or inventory levels will deviate from what is in the system.
  2. Scrap is not factored in. If an extra part has to be grabbed, a transaction is required to keep the system current.
  3. Loss and shrinkage are unnoticed. If parts go missing, you find out when you run out of parts.
  4. All usage must have a transaction of some sort. Any usage that is not in the system (perhaps for engineering or testing or internal use in a kaizen) will throw off the numbers if it is not recorded.
  5. Confirming inventory is confusing. Your system may say that you have 25 items left. That would include items that are in finished goods or are work-in-process. It would also include all the lost materials.

The alternative to a backflush system is kanban. It makes the management of inventory more visual. It is not necessarily simpler to set up—there is still some science to making sure the sizes are right. It is, however, much more apparent when something is running short.

 

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