Definition
A way of automatically decrementing perpetual inventory records based on the bill of materials, normally triggered by invoicing, used to eliminate wasteful inventory transactions; implemented in two phases — first within the cell, then plant-wide once inventory has come down.
In detail
Backflush is a processing method that automatically decrements inventory records based on the Bill of Materials (BOM), usually triggered by shipment or invoicing (not completion), without recording each material issue and return transaction. In a lean accounting system, it solves the problems under traditional work-order systems of too many inventory transactions, book-to-physical discrepancies, and wasted management effort, supporting Cellularization and Just in Time logistics by simplifying transaction processing. Unlike work-order material issues under standard costing, Backflush eliminates the receipt and issue records for intermediate semi-finished goods, but requires an accurate BOM and small inventory variances. Implementation usually proceeds in two phases: first pilot within a cell, then extend to the whole shop floor after inventory is reduced. Outputs include a simplified inventory record process, a reduced volume of inventory transactions, and more timely inventory data.
Example in practice
A machining factory adopted Cellularization, with each cell producing multiple products, but Finance still recorded material issuance for every operation line by line under the traditional work order system, resulting in a large number of inventory transactions and major book-to-physical discrepancies. Finance and Production decided to implement Backflush: after one-piece flow within the cell had been achieved on the Gemba, first Backflush only within the cell: at shipment or invoicing, automatically deduct raw material and semi-finished goods inventory based on the BOM, and no longer open and close work orders for intermediate steps; after inventory came down, then extend it to the whole shop. After implementation, inventory recordkeeping workload dropped significantly, Finance could close the books faster, and the shop floor was no longer dragged down by cumbersome paperwork.