Keeping
inventory to a minimum forces companies to
remove these production problems. In order to
reduce inventory level, the speed of production
needs to be improved. This can be achieved
through reducing setup time (Horngren et al.,
2009). When setup time is short, products will be
manufactured in smaller batches, which reduce
inventory level and enhance the company’s
responsiveness to uncertainty in demand (Horngren
et al., 2009). The speed of production can also be
improved through reducing lead time. Production
is organized in manufacturing cells to minimize unnecessary movement between operations and material handling costs, thereby reducing lead
time, work in process, and production costs (Reeve
and Warren, 2008; Horngren et al., 2009)