‘Point of use’ is simply the practice of storing any inventory you have at the point where it will be used.
This is in contrast to inventory that is stored in a warehouse, or at some other secondary location. In those cases, it can be difficult to see if there is a mismatch in the usage and the amount stored on hand. Despite the best efforts of the material management team, there can be lapses. Often, the best person to tell if there is too much inventory on hand is the person who is using it on a daily basis. If she is trained what to watch for—for example, a lot of parts still left in one bin when the other bin returns—then the operator becomes an additional resources in the war on excess inventory.
Another benefit of storing inventory at the point of use is that it drives down quantities out of necessity. Real estate along the assembly line is in hot demand. There simply isn’t space to store a lot of inventory.
With rare exception, I encourage manufacturers to keep as much of their inventory on their production lines as possible. For one thing, having secondary locations and warehouses creates a need for whole new processes. Someone has to manage the location, replenish the line, build twice the racking and shelving, and update additional labels or kanban cards with each change.
When inventory is expensive, has long lead times, or large order quantities, it may make sense to have a secondary location that feeds multiple point of use locations on the line. You will often see this for fasteners. Many work areas may need the same bolts or screws. In most cases, though, secondary locations add work that does not exist with point of use inventory.