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And You Forgot About Overproduction

John Shook
3/23/2009
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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.

In the excitement of all that rush to add capacity, to keep up with hoped-for demand, to stay ahead, where was consideration of the most basic of TPS principles? Where was 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.

Rethinking overproduction
But, you know that overproduction is a waste not just because it creates wasteful inventory. Right? They are actually very different things. Related, of course, but very different. Right?

Here’s a basic idea: The key to building a system that thoroughly eliminates the sources of all waste is to eliminate overproduction.

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?

John
John Shook
Senior Advisor, Lean Enterprise Institute, Inc.
5 Comments | Post a Comment
Rob van Stekelenborg March 23, 2009
John,

I am sure you know more about Toyota then I ever will, but as a once supplier of Toyota I was always puzzled about their Production Control approach.

For a supplier like us it still looked very much like a traditional push system (and the dealer delays and stocks also of Toyota cars don't give me a lot of confidence that it is different). It had volume agreements, then mix agreements and finally sequence agreements pretty much firmed up with of course differing horizons, but still firmed up.

What Toyota as a customer was different in, was its ability to keep its schedule compared to other car manufacturers. But still, adhering to a push schedule still is a push schedule.

I have never really understood either why I only saw a true kanban between the line storage locations and the buffer stock of parts, and not between Totota and suppliers. The manifests come from the plan, not from consumption and I was only happy they adhered to the plan. But again, still a plan.

Toyota was good in coaching us on most topics, but I dare to say (also to provoke some discussion) that we as a supplier were better (i.e., more true to the principles) in using heijunka based upon shipment replacement and kanban than Toyota.

I am looking forward to your comments to this,

Kind regards,
Rob van Stekelenborg
John W March 24, 2009
The only truly effective way to eliminate overproduction is to be able to produce quickly in lots as small as your customers desire. In an earlier attempt at a posting I spoke of a hollow metal manufacturing company that does exactly that. Their operations are design, program, shear, punch, form, spotweld, weld, grind, finish (paint), verify, certify and ship. Lots are one and multiples of one. Lead time is single digit days versus weeks for competition.

They use the Toyota “happy accident” method of operation from 35 years ago. The entire shop is replanned twice daily. The only overproduction is in building some orders early to avoid any late shipments.
Anonymous March 25, 2009
The major issue that I have found with Overproduction is the fact that it is used to cover other issues such as inability to achieve flow, smooth demand, it covers up downtime issues and has a tendency to hurt efficiency in regards to man hour input.

I have found that there are two critical areas to address. The first is "know your flow". Doing a Value Stream Map once per year is not the answer. Value Stream Maps have to be the living source of information for managing a production line. Pertinent and "real time" information needs to be recorded on the tool and as changes occur the Map should be updated.

Next, as John metions, we need to go "old school" on how we are adressing our Standard Work. E-documents and spreadsheets are great but when we let technology get in the way of Gemba we start to get off the path of true kaizen.

In a previous career path I worked in Office Furniture production. We saw two similiar instances of downturn over the las 20 years. The first was the crash of the Dot.com era of which we were not prepared for when it occured. We learned our lessons, developed good elemental Standard Work and drove flexibility throughout our Production System. When 9-11 hit we were much more capable of flexing to meet lower demand.

Pain is the greatest teacher.
Steffen H. March 26, 2009
Is it conceivable that Toyota has simply grown too big? Perhaps they have reached a critical mass where they are no longer manageable to the same extent as when they were strongly Japan focused and only an up and coming competitor to the big three in the US and other parts of the world? Also, the proverb "too many cooks spoil the broth" certainly applies to Toyota as well. Perhaps greed also captured parts of their management,which again lead to risky bets on future volumes? It is only human! However, that said, I cannot imagine a company better positioned to learn from this crisis than Toyota. Assuming the world will still need automobiles in some form in the future, Toyota is already now better prepared than most of their competitors. Finally, US companies should start to grasp the fact that throwing money at something does not guarantee success. This is a lesson which Toyota learned many years ago.
Marty Yuzwa March 31, 2009
When training the 7 wastes, I have noticed some of the redundancy too. However, I look at it the other way around. If I were to eliminate one of the 7 wastes, I would eliminate inventory. I see inventory as a symptom of the other wastes: overproduction, waiting, rework, transportation, etc. all cause inventory. You know when you have these wastes because you see inventory pile up. The other six wastes are all actions. Inventory is the only one that is not.