Overproduction occurs when products are produced before they are needed. This frequently happens when managers are trying to assure that down-line stations have adequate supplies to fulfill their requirements. Sometimes this happens in “make work” situations. Rather then sending a crew home before the end of a shift, a manager will order the crew to fabricate several or several hundred widgets for supply inventory. The manager is able to avoid the unpleasantness of sending someone home early.
Everyone has heard of JIT or Just In Time. In the context of building products, it simply means that supplies are ordered or parts and subassemblies are fabricated when they are actually needed.
There is simply no good reason to pre-produce large quantities of inventory as long as all that is required is available when needed. Sure, everyone has a story about some relic or other stash of useless stuff saving the day in some way or another. I know a guy who claims that were it not for his supply of ketchup packets, he would have starved during a winter snowstorm.
Back to Hamburger Heaven
Speaking of ketchup, let’s go back to the hamburger stand I referenced in my “The Waste of Motion.” How many times have you walked into a hamburger joint and seen row upon row of French fries waiting to be purchased? This is a classic case of overproduction.
Here’s what happens leading up to the French fry glut. Notice, it has nothing to do with customer satisfaction.
Joe, who has been building hamburgers for most of his young life, knows that the lunch hour is going to hectic and busy. Joe figures if he can just get ahead on French fries, he won’t feel quite so rushed and he won’t have to worry about running out of fries.
So at 10 a.m. every morning Joe starts cooking fries. By the time noon rolls around, Joe has produced enough fries to cover the lunchtime crowd.
What’s Wrong with Anticipating a Crowd?
Three things are fundamentally wrong with handling the fries in this manner. First, there is the underlying reason for Joe getting an early start on the fries. His reasoning has nothing to do with the customer. It’s all about Joe, it’s too hectic, it gets too busy, he has to run his little feet off keeping up with the orders over the noon hour. Therefore, to address this issue, his discomfort, Joe elects to make all the fries in advance.
This is an expensive solution. First, the fries have to be kept warm. Nobody likes cold fries. The solution to this is a bank of heat lamps, which will be turned on while the pre-cooked fries wait to be ordered. The fries will sit there basking under the artificial sunlight for one, two or maybe three hours; just waiting for the lucky customer to place an order. So rather than freshly made fries, the customer is going to get fries that are one to three hours old.
If you’ve ever used a sunlamp you know that they do indeed produce heat along with the light. They produce a lot of heat and light because they use a lot of electricity. This means there is a lot of money being spent on something that adds no value to the product.
The second reason is that fries that have been left sitting around like this are going to tend to became less and less appetizing because they become more greasy with each passing minute. By the time 1 p.m rolls around, the remaining fries will be soggy, slightly warm and generally unappetizing.
After a couple of orders of less than tasty fries, the customers will begin avoiding them and ultimately, the French fry business will experience a significant downturn.
Then we have the third reason, the threat of the unknown. What happens if the usual lunch time rush fails to materialize? Then the hamburger stand is stuck with a huge inventory of perishable French fries. This could happen for any number of reasons. Maybe there is an accident blocking traffic on the road near the restaurant, maybe the weather is lousy and people just want to stay in their offices. Whatever the reason, the demand for fries is going to take a nosedive. The hamburger stand is left with a ton of French fires that are now unsellable.
So look at the overproduction expense that this pre-cooking process has caused.
1) Added costs for equipment and electrical consumption for sun/heat lamps
2) Unusable inventory in the form of old, cold, soggy, greasy French fries.
3) Reduced sales from customers not wanting inferior fries.
4) Less space available for productive activities because of the special requirements for the French fry storage area
This adds up to less sales, more expensive sales and a higher cost per French fry and a lower quality French fry. None of this will serve to increase the sales volume of French fries or to enhance the relationship between the hamburger stand and the customer.
So what does enlightened management do about this? First, they talk with Joe and find out what the basic causes are for the French fry glut. Some managers would fire Joe for being self-oriented and only thinking about making his job easier. But, that is really a stupid thing to do at this point.
Joe holds the key to success. He knows what the problem really is. Spikes in demand lead to delays and frantic efforts to cook fries as they are ordered.
Joe and management can work out a successful resolution that ensures product quality, protects the hamburger company from loss due to overproduction of unsellable fries, and creates a work environment that doesn’t stress Joe out during the noontime rush.
By modifying Joe’s solution of precooking all the fries to precooking a smaller batch every 30 minutes starting at 11:30 a.m., the hamburger stand can do it all! The loss potential is substantially reduced, customer get fries that are no more than 30 minutes old and Joe doesn’t need a valium at the end of the lunch shift.
While French fries may be a simple example, overproduction is a practice that can harm any manufacturing company. Just substitute fries for dampers, deodorant or trucks.
Check out this blog frequently for information on the other classic “wastes” that can hamper your drive for success.