In Wikipedia it refers to the “excess of supply over demand of products being offered to the market.” In other words, producing more (product) than what the customer wants or needs.
– What if a company is producing based on forecasts?
– What about service-based organizations? is there such a thing as “overproduction”?
To answer the first question, we need to evaluate the impact of overproduction. While overproduction keeps equipment and employees busy (to satisfy utilization metrics) on one hand, it generates other types of waste such as:
- Inventory – If it’s not going to the customer, it has to sit somewhere!
- Transport – There is more transport activities if the product has to be stored and retrieved
- Correction – If a defect is detected, more product must be investigated and corrected to ensure conformance.
So even if it’s based on forecasts, it is still generating other types of waste with no firm orders from the customer!
What about internal customers (like producing components for the next process, etc)? Same answer. Check against the list above.
- Generating more information than needed (we’re all familiar with this!): Sending emails to everyone unnecessarily, generating reports no one needs, unnecessary data collection, etc. – all of this results in tying up people’s time in wasteful activities, including meetings, to discuss them. Remember the question that we need to answer, Is there any value to the client or improvement to the process from doing this?
- Building potential value streams or capacities no one will use: If management puts in place facilities for potential services that stay idle for any reason, this may result in waste of resources (human resources, maintenance, etc)