An inventory of incomplete products that acts as a safety measure if or when a part of the production system or supply chain fails.
How Decoupling Stocks Work
An issue in the development of a product can be devastating to a company. This applies to both internal problems, such as issues with machines needed to make the product, and external issues, such as a sudden shortage of raw material needed for a product. In many instances, these setbacks can cause a huge loss for the companies experiencing them—after all, if there are no products to sell, the company is not making money.
As a result, it has become common practice to keep a decoupling stock, also known as a decoupling inventory, when manufacturing a product. If there are any issues in making an item, this inventory is then used instead. The half-completed products of the decoupling stock, having already gone through the part of the manufacturing process that has been temporarily stopped, can then go through the rest of the procedure, ensuring that these products can still be sold and distributed. In the meantime, the company can then work to fix the issue without worrying about a loss in revenue.
Of course, the amount of time available to troubleshoot and remedy the problem in the production chain is limited to how large the decoupling stock is. Most of the time, the decoupling stock's size is based on how much time it will give the company to fix an issue while also factoring in other issues, such as how much of a product is usually distributed. Additionally, if multiple decoupling inventories at different production stages are kept, this may also be considered when deciding on the size of a single decoupling stock.
Example of Decoupling Stocks
You are in charge of the manufacturing and production of televisions for a tech company. For the sake of this example, there are three major steps in the development of a TV. First, there's the production of the plastic back of the TV; we'll call this step A. Step B is the filling of this plastic portion of the television with the appropriate wires and technology. Step C is the glass face application onto the television.
In between each step, A, B, and C, there is decoupling inventory. For example, between steps A and B, the decoupling stock would consist of just the TV's plastic portion. Suddenly there is a global shortage of the raw material used to make the television's plastic parts. As the manager, you could switch over to the decoupling inventories that contain the incomplete products that already have the plastic TV back, allowing you to keep producing televisions as you work to obtain more of the raw material you need.
This type of system works with more complex manufacturing processes as well. In this way, decoupling stocks are a vital safety net for companies and their production systems. Without them, production would cease, and money would stop flowing into the company.