Decoupling inventory (or decoupling stock) refers to the finished products that are set aside to mitigate the risk of a halt in production if one or more components are unavailable. The process of decoupling inventory involves separating items within the manufacturing workflow in order to protect against the event of unexpected issues or complications within the supply chain.
Breakdowns in the supply chain can happen for any number of reasons: a lack of raw materials, a delay in lead time, or an absence of helpful automations. Regardless of the specific situation, if you encounter a disconnect between your supply and demand, decoupling inventory can prove helpful in avoiding stockouts. Having ample decoupled stock allows you to fulfill orders in the interim, supports greater inventory control, and brings assurance to each of your production stages.
In addition, decoupling inventory provides more freedom with how you run your business. In the event you need to change suppliers, decoupling goods provide a safeguard during this transition, and give you greater flexibility than you would’ve otherwise enjoyed.
When a production line stalls and work-in-progress products are left unfinished, it reduces the rate at which stock levels are renewed. Fortunately, decoupling your inventory holds onto different types of inventory to cushion manufacturing against potential issues with production. With decoupled inventory, retailers set aside extra stock to account for bottlenecks in the production process, to make sure they still meet customer demand (even if their production facility is underperforming).
Ideally, manufacturing equipment should always operate at capacity. However, on occasion, machinery has been known to encounter a complete stoppage — which can cost your company in terms of repairs, and contribute to lost sales in the meantime. The aim of a decoupling point is to prevent wasted time or frustrated customers by having enough finished products to overcome manufacturing challenges and reduce inventory carrying costs.