Definition
The portion in the Kanban Calculator that is quietly amplified by parameters, causing inventory to be higher than actually needed; four sources: Safety Stock setting, rounding and per-box capacity, Daily Usage and demand data, and lead time. This inventory is all on the books; it's just that "why it can't be reduced" is hidden in the parameters.
In detail
Hidden Inventory is inventory amplified by parameters in the Kanban Calculator, originating from four parameters: Safety Stock settings, rounding and container capacity rules, Daily Usage and demand data, and lead time. It solves the problem of "inventory won't come down but no cause can be found"—the inventory itself is on the books; the problem lies in the parameters used to calculate it. Typical output is adjustment recommendations after reviewing these four parameters item by item.
Example in practice
The team found that kanban inventory for a certain part number was persistently high, and reviewed the four parameters one by one: safety stock was set too conservatively, box capacity rounding added half a box too many, daily usage data used an old peak value, and supply lead time left margin based on the worst case. After adjusting the parameters, the number of kanban cards decreased, and inventory dropped accordingly, without touching a single physical unit of inventory.