More! Sooner! Faster! When these expectations begin to drive processes, companies are likely to slip into overproduction. As a result, they end up with more product than needed.
Accumulating inventory before it is needed is an unwise use of resources. It ties up cash that could be used more effectively. It also causes other wastes such as extra transportation and motion. Additional equipment and manpower are required to track the added inventory, along with the necessary storage areas, warehouses, and storage containers. Utility and administrative costs are typically higher because of the need to track and manage the additional product.
Causes of overproduction include:
- Manufacturing products to keep people working
- Purchasing extra materials and supplies
- Overproducing one product at the expense of another creating inventory imbalances that can cause missed shipments to customers
- Push systems or batching violate the principle of continuous flow. Instead of producing exactly what the customer needs, products are pushed through the process, resulting in higher WIP and means other processes must be put on hold.
- Processing paperwork before the next person is ready
- Using larger equipment than necessary causes overproduction in order to justify a significant capital investment
- Unstable schedules and working to forecast and not actual demand
- Long machine setup times
Ways to eliminate overproduction:
- First, develop a value stream map for the value stream. Show customer demand and material you order from suppliers. Next identify the production steps and the amount of inventory between each step.
- Increase flow by using smaller batch sizes.
- Decrease long machine setup times using single-minute-exchange-of-die (SMED) techniques.
- Decrease downtime of required equipment
- Use smaller, dedicated machines
- Place equipment into working cells
- Reduce raw materials
- Use kanban to enable pull
- Reduce work in process (WIP) and finished goods inventories
- Eliminate material storage areas and warehouses
Utilizing lean is a journey that requires creating both flow and pull. You want to start by creating flow by reducing and then eliminating all the WIP. Measure your inventory turns and work to continually increase it. A company that turns its inventory 18 times annually will deliver more value to its customers than one that turns its inventory 6 times annually.