And You Forgot About Overproduction
Times of crisis and chaos are when markets realign. Companies will go out of business and market shares will transform much more quickly and radically during a true crisis than is ordinarily possible. This is when lean companies will take advantage of the turbulence to strengthen their position. This is when the truly critical principles of lean thinking come to the fore.
Crisis and basics, basics and overproduction
In the rush to meet the demand of some extraordinary boom periods of the past decade and a half – the dot.com boom, the China phenomenon, the loose credit of the sub prime mortgage debacle – perhaps the most basic principle of lean thinking has been overlooked. As the various forces of the past decade have added capacity around the world, what’s been lost has been attention to the waste of overproduction.
Remember when you first heard about overproduction? Surely you didn't get it right away. Did you? After all, "overproduction" is a bit of a funny term. Of course, you don’t want to make more than you need, so what’s the big deal?
Honestly, it took me a long time. I can't remember exactly when the light went on. Perhaps more than a particular "aha" moment, it was a matter of little by little.
The seven wastes and the company that kaizened them
Some years ago I had the pleasure of working and learning with a company that made quick progress immediately upon starting its lean initiative in manufacturing. The leaders learned the various TPS basics, including the seven wastes and all the rest. Well, not “all.” Among the things they learned included the principle of doing more with less. And eliminating waste.
In their early enthusiasm to apply the thinking to everything, they quickly decided that, since less is more, six must be better than seven, and they decided to “kaizen” – to eliminate – one of the seven wastes. Interestingly, of the seven, they chose … overproduction.
In addition to learning that less is better, they also took a close look at the seven wastes and decided that the concept of "overproduction" was covered perfectly well by the waste of "inventory." And, yes, certainly overproduction results in inventory, so if we focus on eliminating inventory we will also eliminate overproduction. Two birds with one stone, so to speak.
I’ve encountered many companies that have added an eighth or even ninth waste (usually something around waste of human potential, sometimes "time" or "environment"), but this was the only time I’ve seen a company specifically decide to reduce the number (though I have seen companies abandon consideration of ALL the wastes). And it’s fascinating that, of all the wastes, they decided on overproduction as the waste to eliminate from their list of wastes.
The processes and practices of lean thinking align around objectives which are designed to prevent overproduction. That’s how a lean company shortens the lead time to provide products and services for customers. Being mindful of avoiding overproduction creates flexibility and generates cash, which in turn provides value for customers and prosperity for companies.
Ohno made the seven wastes famous, of course, but in later days he talked about regretting it. There was never anything magical about the number seven. Rather, the types of wastes are many and no matter how you strive to eliminate them, you will surely be left with traces of those seven. And to thoroughly eliminate those seven, you will surely have to thoroughly change your production system. And the key to building a system to thoroughly eliminate the sources of all waste can be found in the path to eliminate overproduction.
overproduction never meant just "not making too much" any more than "pull system" meant just "going to get what you need when you want it." overproduction means aligning supply with demand, to get the "right item in the right amount with the right timing". That means knowing your demand, really, really well. It also means knowing your "supply", your capacity, your capability really, really well. And that's how the JIT tools help you, they help you get to know your real demand and real capability deeply thereby enabling you to work to steadily align them. That’s hard today, with currently installed capacity, and even harder tomorrow, with capacity that’s still under consideration to meet demand that, at the end of the day, will vary.
I'm suggesting that most companies, even "lean" companies, forgot about overproduction over the past few years. Maybe your company is different, but honestly, I never hear anyone talk about overproduction anymore. Or, not until very recently when companies suddenly found themselves with huge capacity and inventory problems.
Not only do people not talk about it anymore, they don’t focus on it anymore when designing their operating systems. Or when they set their operating patterns. Or when they capacitize – when they hire employees and purchase equipment.
Et tu, Toyota?
Even Toyota, you know, seems to have forgotten about overproduction. It's my guess that they are reminding themselves – or were reminded by circumstances (facts, gemba, genchi gembutsu, reality) – in no uncertain terms today. The photos of Toyota vehicles at the docks and reports of growing inventory of completed vehicles tell part of the story. Stories from suppliers of "Big Three style" ordering patterns were even more disturbing to me. The steady replacement of simple old card Kanban with e-Kanban has also makes me very uneasy (maybe I’m just old-fashioned).
What about you? What about your company?
Maybe we can do a little sharing here. There are different ways of raising or re-raising consciousness, ways that should begin on the plant floor ("better to act your way to a new way of thinking…"). But, perhaps the best way we can play our part here in this space is to share experiences. Did your company forget about overproduction? Did it ever focus on overproduction? (I’m saying most didn’t.) Is overproduction understood at your company?
Lean Enterprise Institute, Inc.
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