Alberta is in an unprecedented economic time. The impact of the COVID-19 crisis on the energy and other sectors is already rippling out, and individual businesses are facing a perfect storm of money-sucking problems.
We’re re-doing our “Deadly Waste” articles—and we’re taking it up a few notches to help you adapt to this storm. The cost-saving ideas in these articles may be uncomfortable, but growing pains can hurt even when we know it’s for the best. We hope this helps.
Overproduction is the deadliest of the wastes. It takes away your ability to adapt and business and dovetails into multiple other wastes.
It’s also one of the hardest to squelch successfully, but well worth the effort. It requires a long look at the products or services you’re offering and whether or not they’re the right ones, at the right time, for your customers.
Don’t Get Comfortable
If you’re like most of us, a comfortable business position is now a thing of the past. But it’s not all bad: instability can make you adaptive, and adaptation is how you’ll survive.
Overproduction is a waste that stems from getting too comfortable. It’s a waste that comes from the optimism of being so confident you’ll sell more, that you produce more.
Comfort is expensive because it freezes your cash. Every widget you produce and extra material you order is a handful of cash that’s frozen until a customer thaws it out. If you take a loss on it or throw it away, it stays frozen.
As you know, cash represents a lot more than buying power. Cash represents the flexibility and the adaptability you’ll need to get through this. You’ll need all the cash you can get right now, and that means trimming back production to rock-reliable numbers.
Do You Have to Push?
Overproduction happens when optimism leads to gambling on increased demand. That brings forward bigger batch sizes (which entice us with discounts on raw materials), and the cash freezes begin en masse.
Trying to “push” a product onto the market is a challenge during good times, and almost impossible during these times. The secret behind eliminating overproduction isn’t easy, and it’s not quick, but it is effective. It’s converting to a “pull” system.
If you have to push your product or service onto customers, it’s time to take a step back and try to recall the last time they actually asked for it. When was the last time they were enthusiastic about your offering? Or the last time someone asked you when they could expect a restock?
Are they in love with your product or service, or have they formed a habit? Habits, even necessary ones, are in danger of being replaced.
There’s never been a better time to think about your products and services in a new way. What will your customer love? To find out, you can ask them, you can infer from everything around you, and you can see what your in-house potentials are.
If you create or focus on a product or service that your customer loves, you won’t have to push it on them: they will pull it out of you.
Time is Money
Overproduction is about more than building too many widgets. It’s the most capricious waste because it overlaps closely with so many others, and often quickly leads to over-inventory.
It’s also closely related to over-processing. Overproduction is running too many tests, too many iterations on a file, and putting excessive resources into a construction project.
Time eats as much cash as materials do. When the time gets excessive, the cash freezes into the product. Take a look at each of the individual products and services you’re offering and ask yourself, “if this were gone, would anyone miss it?”