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Overproduction: Understanding The Waste of Overproduction

19th August 2019 by Clarity | No Comments

Overproduction is widely regarded as the worst of the 8 wastes in Lean manufacturing. Simply put, overproduction is making products in too great a quantity, or before it is actually required in the process. Thinking about overproduction from a ‘Just in Time’ perspective, as in, making what is needed, when it’s needed and in the quantity needed, it’s easy to see why overproduction is considered the worst as it goes against this entire principle.

 

In this post, we are going to delve a little deeper in the waste of overproduction, explore some examples and hopefully coach you on how to expose and eliminate overproduction in your workplace.

 

 

Understanding overproduction

 

Overproduction is the most serious of all the wastes in Lean because overproduction generates and hides into all of the other TIM WOODS wastes such as adding excess transport, hiding defects and increase inventories. Within the principles of Lean manufacturing (Just in Time), you are only required to make what the customer wants when they want it, pulling only what is actually ordered by the customer through the workflow. Overproduction goes against this principle, producing more than the customer has ordered.

 

Overproduction is often done for the ‘right’ reasons, i.e. in an effort to keep a factory busy, but what it does is tie up capital, waste time, movement and increase costs.

 

Remember: in a truly Lean business, no orders means no production.

 

When to stop production

 

We commonly see manufacturers that believe that shutting a line down because of a lack of orders is too costly to the organisation, this is the main root cause of overproduction. In a Lean manufacturing business, no orders mean no production.

 

Let’s explore a common example. The shift is nearly over, there is only an hour left in the day but the line has filled all required orders. The shift supervisor decides that rather than shut down the line they should produce more stock. The line produces an hour’s worth of stock in a specific colour, let’s say black for this example.

 

However, the next shift comes in and needs to build stock that is red. The red parts share a common component with the black parts and the previous shift (that overproduced) used up all the parts that the shift producing red now need to fulfil orders.

 

Do you see how something as simple as the scenario in this example can cause huge headaches for a manufacturing business?

 

If there are no orders, there should be no production. Shut down the line.

 

Just because the line is shut down, doesn’t mean that work has to stop. The team can work on clean downs or continuous improvement initiatives. If there continues to be a problem with availability every shift then you can look to adjust your manpower as you may be overstaffed.

 

 

Causes of overproduction

 

What causes overproduction?

 

In our experience, the answer is more often than not, “because we have always done it that way”. Our experience varies from companies running huge batches that create vast amounts of stock or work in progress. These businesses could easily reduce these batches and improve their flow. The irony is that by doing this they will actually improve their customer service and reduce their lead times.

 

Other examples included producing in huge batch quantities because of long set-up times on machines meaning that the business tries to maximise throughput and use ‘economical batch quantities’, rather than work it backwards from customer demand.

 

Issues down the supply chain can impact overproduction, too. Distrusting a suppliers’ ability to give the business what it needs on time. In this scenario, the company will order more than they need and sooner than they need it to ensure that they have enough to produce when they do need it.

 

Many manufacturers also distrust their own processes and plan for failures in the flow of production. Often, these companies will schedule days or even weeks between successive production runs in case of issues arising which may subsequently change the production plan.

 

Waste of Overproduction- clarity vm

 

 

The costs of overproduction

 

Overproduction causes a business to tie up its capital in stock, raw materials, work in progress and finished goods. Cash is the lifeblood of a business so you run the risk of leaving yourself short or starting to upset key stakeholders in your supply chain (suppliers or creditors).

 

Countless businesses have failed because they cannot afford to buy raw materials to service a customer because they have already put their cash into materials that are not required.

 

Another cost associated with overproduction is to do with the storage and movement of the inventory that you have created, it all requires space, it needs people and equipment to move it around and it needs containers for storage. All of this is a cost to you and if you could eliminate it the savings would be straight back on your bottom line improving your profit.

 

 

Eliminating overproduction

 

A Lean organisation makes every effort to expose and eliminate waste wherever it is found. Overproduction needs immediate attention to address it so you can get a clear sense of how overproduction is the cause of lots of other wastes.

 

The first step is to realise that you are doing it; understand that all too often we are planning our own delays and large batches just because we always have done so.

 

Once we understand the issues we need to implement the principles of Lean manufacturing, identify the value stream using tools such a Value Stream Mapping & Process Mapping. Then we need to make that value flow by rearranging our workplace accordingly.

 

We need to tackle set up times on our equipment to enable the production of smaller batches using the technique of Single Minute Exchange of Die (SMED).

 

Once we have done this we can use the ideas of Just In Time manufacturing to enable the production of the product only when it is ordered, using techniques such as Kanban to enable the Pull of production through our processes.

 

In doing all of the above, we not only eliminate the overproduction in our processes but we begin to eliminate and highlight the causes of many other problems within our processes that are hidden by all of this inventory.

 

 

 

ClarityVM Consulting, coaching your team to understand the Lean wastes

Here at ClarityVM Consulting, we coach clients both far and wide about how they can use a Lean programme and visual management to achieve their goals, exceed their targets and make financial savings which would otherwise be lost to waste. We work with our clients to create a bespoke strategy that ensures Lean is set up for success before providing specific, high-quality visual management products to sustain the initiative and make Lean work in the organisation long-term.

You can read more about the work we’ve undertaken with our clients by browsing through our Visual Management Case Studies

 

Further reading on the Clarity Blog:

 

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