OVER PRODUCTION involves making products in too great a quantity or before they are actually needed leading to excess inventory. The Steel Efficiency Review® process recommends operations and productions teams to make what the customer wants when they want it, pulling only what is ordered through your work flow. Overproducing causes business to tie up your cash flow in stock, raw materials, work in progress and finished goods. Business cash flow is critical and needed to run your operations and sales. Many businesses fail to eliminate OVER PRODUCTION as a waste as they simply can’t buy the raw materials required to service their customers because they have already put their cash into materials that are not required.
Another cost associated with OVER PRODUCTION is to do with the warehousing, storage and movement of the inventory that has been produced. All stock requires warehouse space; also people and operational equipment to move it around. In total these activities produce excess cost and a hit on cash flow for any business.
COMMON CAUSES OF OVER PRODUCTION:
- Large Batch Sizes
Large batches are produced due to long set-up times on specific machines or processes, so businesses try to maximize throughput producing excess stock thinking they are doing the right thing, rather than producing what the customer wants.
- Unreliable Legacy Processes
“This is how we have always done it!” is the common cause based on legacy and unreliable systems and processes. After 1053 SER® consultations, we have uncovered many businesses run excess batches of stock creating enormous amounts of products where they could easily reduce the batches and improve their flow reducing lead times and improving customer service.
- Unstable Schedules
There is a distrust of suppliers and their ability to supply what is needed. So businesses order more than needed.
- Inaccurate Information
Working to inaccurate forecasts and guessing what customers will want in the future can invariably cause stress to many operational environments. The wrong products can be produced in excess burning cash and disappointing key customers at the same time.
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