Whatever drives you to overproduce, sooner or later will hurt your business in more ways than one. Have you ever been plagued with excess levels of unneeded inventory, greater requirements for capital funds, slow moving and obsolete stock, and product damage? These are all key side-effects of overproduction.
What factors create overproduction? We have found the simplest of triggers are poor and slow communication with our customers and in turn their customers creates unwanted stock. Forecasts and changes in demand aren’t communicated in time and accurately therefore causing overproduction.
Unforeseen quality issues that need to be shielded by producing more good parts, creates a level of overproduction. By making a greater number of better parts we cover up poor quality, the need for rework and any other issues in the manufacturing process – being machines or staff.
And the unqualified need to sweat the asset, by producing excess product that may not be needed. Conflicting measures and targets can cause this, even in the smallest of companies.
With our recent SER® visits we have found that overproduction will often increase motion and transportation waste. As the excess production of steel stock will directly result in less efficient warehouse layout and increased movement to and from storage locations. So we challenge the notion that in a “make- to-order” environment, there should never be overproduction. Every item produced must be earmarked for a customer.
We have uncovered that our customers can develop and implement tighter controls on scheduling and forecasting to reduce overproduction. Our SER® findings have identified changes can be undertaken to transform “make-to-stock” systems to “make-to-order” systems. As our customers shift to a “pull system”, driven by their customer – overproduction is naturally eliminated since manufacturing and processing is originated by customer demand.
We have also examined that by increasing the communication between ourselves and our customers; by working together as partners we can reduce overproduction as changes in forecasts are managed tightly and more quickly. Our SER® consultants have identified that any activity that shortens lead times will allow for the reduction of steel stock and a corresponding reduction in overproduction.
Finally, quality improvements will also allow for lower overproduction. In particular, for our customers who serve the Transport and Automotive sector it is critical to minimize any form of over producing and manufacturing parts. Re-designing incentives or key performance indicators, will help to decrease the amount of stock being produced for no good reason other than hitting a target. We have found if overproduction in business is rewarded, it will continue.
The STEEL EFFICIENCY REVIEW™ team.