Slow Down! Debunking 7 Myths About Overproduction Waste

By: Virginia Shram

January 10, 2022

Overproduction

“Waste” is a loaded term that is at the core of many management philosophies in manufacturing. Taiichi Ohno, an industrial engineer at Toyota, popularized the key term as part of his business methodology called the Toyota Production System, which later inspired the Lean Manufacturing trend in the United States.

Ohno theorized that there exists 8 separate wastes in industrial production. In English, the acronym DOWNTIME covers the eight different wastes he originally identified:

  • Defects — errors and failures
  • Overproduction — making more product than can be sold
  • Waiting — time spent waiting on machines or direction
  • Non-Utilized Talent — employee skills that aren’t capitalized upon
  • Transportation — distribution and logistics
  • Inventory — unsold product costs money to sit in warehouses
  • Motion — misapplication of resources and movement within assembly line
  • Extra Processing — over-engineering that provides no value

For now, let’s take a deeper look at the waste of overproduction, starting with common examples of overproduction myths that need to be interrogated. After each debunking of waste overproduction myths, there is a related Lean tool to help redirect that process towards improvement.

Myth #1: With the current supply chain issues, I have to keep more inventory in stock!

Truth: Don’t forget that even if you aren’t providing perishable goods like fresh vegetables or time-sensitive medications, manufactured items can still expire in many ways. They can literally pass the legal available date of final sale to become valueless, for one. Goods can also fall out of fashion or feel “outdated” while they sit in inventory waiting for the demand to match the supply. Even regarding non-perishable, long-lasting goods, certain outer materials can degrade in quality over time and inner mechanical parts can rust or wiggle out of place, which harms a company’s reputation for quality. In this example, there is also a huge possibility for increased transportation and inventory costs (two other important wastes) if the company decides to hoard more raw materials and finished stock for the future.

Next Steps: Instead of having to constantly play catch-up with the supply chain, conduct a Bottleneck Analysis, which is a lean tool that helps structure visualizing workflows. You can’t control the supply chain, but you can control the time it takes to adapt your workforce to shifting supply chain opportunities. Therefore, find out your bottlenecks in production where quick process time is needed, and you will have an easier time adapting to the greater market.

Myth #2: I'm using state-of-the-art Smart Factory forecasting technology so I know exactly what the future demand will require of our supply.

Truth: Tech is great, especially with the exponential benefits of IoT-enabled Smart Factory tools, but it’s easy to get sucked into the spiral of updating technology in order to keep up with innovation rather than demand. Make sure that your tech augments the ability of your equipment, or at least is able to summarize data for management’s consideration. Don’t be the business equivalent of the technophobe who has to have the latest smartphone even though they don't make use of all the applications.

This example also shows how companies can get overconfident with their technological upgrades. By relying too much on technology itself rather than the information that technology provides, you risk a sense of false confidence in prediction algorithms that can be the death of even a very profitable company.

Next Steps: Streamline and coordinate your industrial tech so that it simplifies things for human personnel first and foremost. Overall, make sure that your Smart Tech operates functionally in a Just-in-Time (JIT) environment, so that the pull of demand has a greater impact than the not-as-reliable push of oversupply.

Myth #3: We’re a seasonal business, so overproduction isn’t our biggest issue — any stock left over just adds to next year’s stock.

Truth: This example is similar to Myth #1 in that overstock can “expire” as trends cycle and the leftover stock loses value over time. In this case, overprocessing is another waste that can come from overproduction. All of that leftover inventory, in order to be sold next year, needs to be documented and stored away in some kind of easily retrievable warehouse system. All of this organizational work, time, and money that goes into this overprocessing squashes any profit that would come from selling old goods, so why waste it at all?

Next Steps: Since this business thinks it needs to overproduce because of their niche (seasonal operation), it is clear that they need to rethink their whole business strategy. There’s just so much waste! It’s neither a scalable, nor an efficient setup, and management needs to reassess yearly sales and production cycles in order to understand how to level out all kinds of processing. Tools like a Root Causes Analysis (RCA) can help get to the foundation of an issue when looking at the big picture, like yearly production and a smaller sales cycle. Other tools, like Value Stream Mapping, or a Plan-Do-Check-Act (PDCA) Cycle, are useful for implementing broad, sweeping organizational changes and tracking their effectiveness.

Read More: VKS: The SOP Maker

Myth #4: We have to overproduce a certain amount of stock in order to account for inevitable defects that occur during production.

Truth: A known waste should never be an acceptable sunk cost when considering budget. If there is always a constant portion of output that fails quality checks, then the solution is fixing that problem rather than avoiding it and adopting it into your standards.

Next Steps: Before any philosophical management theorizing, you need to fix your entire system by optimizing your error-proofing. This starts with equipment and the operators of that equipment, so employ the Poka-Yoke tool, which helps direct attention to human errors for the sake of resolving and error-proofing them.

Myth #5: Stopping the entire production line is more costly than producing a little more product than necessary.

Truth: This example is a myth because it is only true with very short-sighted vision. Of course it is extremely pricey to halt all production on an assembly line, and it seems like it’s not worth it for a single item with a defect. However, this time really adds up, and there’s no chance that a company with this philosophy will only encounter a single error.

It is important to remember that there are two costs associated with keeping the production line going: the cost of the defective product, and the opportunity cost that is swallowed when the assembly line chooses to continue building a defective model rather than diverting its resources towards creating a new item without defects. Altogether, producing a reliable amount of product that goes straight into the trash because it “fits the business model” is a very unwise practice.

Next Steps: Because this is a technical problem with managing the operational machinery, a couple of highly technical tools are especially helpful here: Takt Time, SMED (Single-Minute Exchange of Die), and Overall Equipment Effectiveness (OEE) charts will be invaluable for assessing the quantitative potential of your production process because they focus on the coordinated workflow of your system as a whole.

Myth #6: I have to wait for my new hires to settle into our established workflow before I can apply their skills.

Truth: The dangerous part of this assumption is that the workplace already operates under perfectly lean margins. When new employees are introduced to the team, they bring with them additional undiscovered skills that could be applicable in ways that you are not aware of yet. This is in addition to the fact that new hires were brought on because there was a significant gap in knowledge, skill, or direction that they will provide the company with.

The danger of this example is hampering growth by not utilizing employee soft skills. Additionally, by not assessing the state of standardized work before new hires are introduced, these new employees can fall into traps of redundancy, where they adopt the inefficient routines and habits of those around them.

Next Steps: Foster two-way communication by actually connecting with and encouraging employees in their efforts to spot existing problems or introduce new ideas. By using a platform that standardizes work instructions with an interactive interface, like our work instruction software, you can easily officially introduce new quality standards that would be otherwise difficult to convince workers of. Other lean tools, like keeping track of tasks using a Kanban system, are especially useful in both creating a sense of teamwork and in imbuing a sense of responsibility.

Myth #7: Our shop floor is perfectly lean, so we don’t have to worry about overproduction on the assembly line!

Truth: It’s great that in this example, the company has optimized the shop floor including the assembly line, but that there’s still a possibility that there’s overproduction at the management and administrative levels nonetheless. Overproduction doesn’t just happen on the assembly line; unnecessary or duplicate reports, emails, memos, and meetings are all potential sources of overproduction waste, because they add no value and consume time and monetary resources.

Next Steps: The main lesson from this debunked myth is that there should be a dedication to kaizen, the lean management principle of continuous improvement. If management is having trouble finding areas of improvement, the 5 Whys lean tool can help unearth lingering problems by delving deeper into the motivations for existing standards.

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