Part 5 in our TIMWOODS Series
Piles and piles of production all around you. No, I am not talking about inventory, I am talking about WIP, finished goods/staged jobs—Overproduction. Overproduction is making products in too great a quantity or before actually needed, leading to excessive inventory. Considered one of the worst wastes in some circles, overproduction can obscure all of the other problems within your processes.
Walking through or working with many operations, this is a waste I see often. It can go unnoticed because focus can be on any number of other areas; or you think you are working to keep ahead of your customer, but are you really?
Costs of the waste of Overproduction
How many businesses have you walked into and, seeing items produced ahead of time, thought, “wow, they will never survive like that.” You don’t walk into a McDonald’s® and see the fry bin piled high with cooked French fries. That never happens because they focus on delivering hot fries every time and do not want to waste cost. So why would we be any different? Overproducing causes you to tie up your capital in stock, raw materials, WIP, and finished goods. Your cash is king and what you rely on running your business, big or small—if you are going to be competitive, offer that additional service or add automated equipment, don’t tie up cash paying charges to your bank for using your credit line. The other waste in the cost of overproduction is space, including the storage and movement of the material. And remember, it took someone in your operation to do this, unless you have a robot.
Causes of the waste of Overproduction
Why do we get into this habit? I always get a pretty simple answer to this, “we always have done it that way.” Or the better answer I may get is, “we want to stay ahead of our customers.”
It really does not matter if it is always done that way or if in the interest of customers, it still boils down to recognizing that it is a waste and needs to be tackled and corrected. Some companies produce large batches because the setup times on their gantries takes so long that they figure the large batch will offset the setup by maximizing the throughput. But this reduces scheduling flexibility in operations and, by making batching changes and changes at the table, you can reduce batch sizes and increase throughput. Some companies distrust suppliers and order more than they need, and sooner than needed, to ensure that they have it when needed—this additional stress that we place on our suppliers often causes them to fail, becoming a self-fulfilling prophecy. The best practice is to work with the supplier or source from another to correct the issue—but most companies will not take that initiative.
The biggest issue comes within our own operations and involves the scheduling from our design teams, our inventory processors/pullers, to our delivery teams. We distrust the reliability of our own processes and plan to allow for interruptions in the flow of production, often scheduling a few days or even weeks between successive operations just in case there are issues or changes to the production plan. By design, we plan many of our delays and inventory, and many of our own ERP and MRP systems add to this problem. We also work to inaccurate forecasts; we guess what the customer will want in the future and invariably make mistakes, thereby building product that is unwanted and not building what the customers really want. I often tell clients that scheduling, along with batching, throughout the operation is one of the most important functions. It can provide you with success and profitability that is often hidden; many times we just look at adding a new forklift, saw, or automated table, and never look at scheduling.
How to eliminate or reduce Overproduction
The first step is to recognize you are overproducing. You need to understand that we are often planning our own delays, so go out and see the large batches being produced and ask why. Once you understand some of the issues, I have always used simple Lean 5S tools with customers to begin walking through the various cells in an operation. We identify the value stream using tools like a value stream map, process map, spaghetti diagram (like we heard at the BCMC Show), and then many other tools I use. And don’t forget, it is not just out in our yards or production plants—this includes the office. You may end up rearranging portions of your work place, creating smaller, simpler process cells, or even using a dedicated machine for a process. Doing this, you will find you eliminate much of the waste of overproduction in your processes, and you will also highlight other areas where continuous improvement is needed that were hidden by all of this inventory.
Many operations I work with believe that shutting a production line down due to lack of orders is too costly or will cause personnel issues. This is generally how waste of overproduction begins. In a lean manufacturing environment, zero orders equals zero production.
Here’s a typical scenario I will see at a component plant. There’s an hour left in the first shift, all batches have been produced, and the production line is standing around. The supervisor decides they should build something in order to keep the line from shutting down. The second shift, not being as experienced, generally builds easier trusses or only floors or a combination thereof. The first shift builds an hour’s worth of product in a batch. The second shift comes in and finishes the rest of what was scheduled and has two hours left in their shift. But the supervisor needs to decide—do they begin building into the first shift schedule, which is not common work and would be produced at a less productive rate, or end the shift? Most operations will continue to build. See where this is going? If there are no orders or you are ahead of your schedule, shut down the line. Have the production workers clean or work on continuous improvement ideas. If you continue to have available time at the end of the day, you may need to adjust your manpower.
Waste reduction to improve profits
Eliminating or reducing the waste of overproduction in your process or manufacturing will continue to help you realize the benefits of a lean operation. These benefits will cause your costs to be reduced significantly and increase your competitive advantage in your market. Or, use those reduced costs to add service benefits for your customers, benefits your competitors do not have, which becomes a marketing advantage for you. By not overproducing, you get closer to a Just In Time (JIT) operation, making only what your customer wants when they want it, thus reducing waste. And remember, if we can be of assistance to you, if would be our pleasure to help you, give us a call!
Ben Hershey is the CEO of 4Ward Consulting Group, LLC, the leading provider of Lean Management and Manufacturing Consulting to the Structural Component and Lumber Industry. A Past President of SBCA, he has owned and managed several manufacturing and distribution companies and is Six Sigma Black Belt Certified. Ben has provided consulting to hundreds of Component Manufacturers, Lumber Dealers, and Millwork Operations, and is highly recommended throughout the industry. You can reach Ben at ben@4WardConsult.com or 623-512-6770.
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