Overproduction is what happens when idealism runs amuck. You have the orders coming in, and see no reason why they shouldn’t keep coming in and increasing, so you charge full-speed ahead.
Our hubris swells watching our finished widgets roll off the line. So much so, that it becomes easy to forget that sometimes they aren’t sold yet, and their production is a leap of faith. A leap that could, should customers not come through, leave you without a parachute.
This is the king of the Deadly Wastes. It’s the most dangerous. It not only ties up your cash flow, but makes you vulnerable to market changes, leaving you blind to other Wastes happening around you. When we’re overproducing, it’s harder to keep a rational distance to see other Wastes eroding your bottom line.
It’s a prevailing myth that it costs more to shut down an assembly line than to just keep producing. This is the deceitful heart of Overproduction. In Lean manufacturing, if you don’t have the orders, you don’t make the widgets. Period.
Just-in-Time (JIT) is a key pillar of Lean and, for businesses serious about cutting costs, a central goal. It’s elegantly simple:
- You carry just enough inventory to cover the bare minimum of expected orders;
- Build flexibility into your supply logistics; and
- When you get the order, you make the widgets. No more, no less.
JIT operates on a “pull” philosophy: the customer’s order pulls the product through the assembly line for delivery. Overproduction is the opposite: we push the product through the assembly line to pile up in hopes that if we build it, the customers will come.
Overproduction doesn’t act alone, it spawns over-inventory. Together, these two Wastes cripple your cash flow, clog your aisles with unsold product, and keep you anxiously wondering how to get rid of it all.
We overproduce for many reasons and it may be the result of another pernicious myth: that larger batch sizes are always better. Here’s how it works:
- You get too much raw material, and you want to practice efficiency by not storing it. So you pump a ton of money into producing it all, regardless of the orders you have.
- Bigger batches automatically mean saving money (keeping your machines running means you won’t waste time starting them up again), so everything goes into production!
- The product will definitely sell: why wouldn’t it?
This is how a desire for efficiency leads to massive Waste. It happens over and over, and the cycle needs to stop if businesses want to take control of their production again.
How long can you sell your product at full price? Once it’s stacked up on those back shelves, its value plummets like driving a car off the lot.
When you can predict obsolescence, like milk expiring, then you can build it into your production process and manage it. But technology, customer expectations, competitors’ tactics, and more can change rapidly and unexpectedly.
With a warehouse full of Overproduction, you forfeit your ability to adapt to market conditions. Instead of being proactive to changes, the value of your outdated product becomes a victim and you’ll have no choice but to discount or discard, the paralysis that Overproduction inflicts.