Analysing more waste in your business: Creating more than is needed, out of sync from demand

During the previous article in this series, we spoke about a Lean Waste referred to as over-processing. That is not to be confused with the theme from this next piece.  This time round, we shall address another type of waste. We shall now deal specifically with ‘over-producing’ waste. In other words, the waste associated with generating more than is needed by the activity downstream. Over production also happens when we create more of something sooner than it is needed. This subsequently leads on to a number of other waste situations that we can relate to in the rest of this series of discussions addressing Lean Waste.

A simplistic parallel that we can draw to help explain this type of waste would probably be linked to an everyday activity.  Let us discuss a couple of corollary use cases.

Use case: waste through over-production

The local café outlet down at the town centre buys a selection of lovely freshly baked cakes daily. With the intention of selling all the cakes, these are delightfully displayed alongside a variety of other goodies in the refrigerated display unit, standing just by the main counter. A pleasure to look at; a satiating action to bite into!

Throughout the day, different customers are hopefully tempted by the delicious appearance of these goodies, sitting in the refrigerated display unit. The prime intention of the café is no more than to instigate customers to gradually give in to the temptation, and buy into the stock of freshly baked cakes and goodies on display.

Any left over at the end of the day will need to be disposed of to make way for the fresh bakes due to arrive first thing the next morning, just before opening time.

With the intention of not falling short of supply, the café estimates the daily order quantity, based on consumer trends and guesstimates. The stock, no doubt, demands appropriate storage and control conditions within the display unit to retain the freshness. The ultimate goal is in hoping to sell all – or at least most – of that stock. The café management, however, need to bear the risk of throwing out any unsold cakes at the end of the day. Lots of effort, resources and material has gone into making those unsold goodies, only to be scrapped and appropriately disposed of at the end of the day (creating additional processing and physical/material waste as a consequence).

Naturally, the prices charged for the proportion of sold cakes need to cover the risk of this loss at the end of the day, with some additional profit to go into the business … of course!

A classic example of everyday over-production waste, that we have possibly learnt to live with, and goes through with little attention. 

Unless, that is, the café manager decides not to run that risk of unsold goodies, and orders less in terms of quantities. Bearing the brunt and the risk of running short of goodies to sell half way through the afternoon, giving rise to other opportunity losses in revenue generation and client satisfaction matters.

A contrasting use case: just in time 

Compare the model with the contrasting fast-food outlet scenario. 

You walk into a fast-food outlet, place your order at the counter, and whilst you are tendering the payment transaction for your order, your sandwich is being assembled at the back-of-house kitchen, made up of standard components (bun, patty, ketchup, salad, fries, etc), to produce your fast-food meal, which you would have ordered barely a couple of minutes before.

All the production processing for your sandwich seems to be so standardised, made out of standardised bits and pieces that eventually build up to your ordered snack. 

Net stock of pre-assembled food items on the counter at any time during the day, and that need to be managed and controlled, equals zero.

Net stock of finished product to be disposed of at closing time, again, equals zero.

This is the beauty of ‘one-piece-flow’ or also referred to as Just in Time (JIT). The fast-food outlet business model is precisely that of creating the product, one product at a time, based on the demand made by the famished customer.

A contrast to the café scenario.

Over-production waste

Therefore, in summary, over-production occurs any time when parts, products or services are produced or provided such that there is more than the customer is willing to purchase.

Over-production has a great negative impact on the success of our operations. This type of waste consumes vast amounts of time and resources, rendering a business tough to be sustained.

This waste can thereby be seen to subsequently generate spiralling higher levels of waste through other forms.   

Recapitulating from the café scenario, over-producing goodies means:

• the need to manage the stock (accountability, handling, HACCP control procedures…)
• the investment in appropriate storage and control facilities (refrigerated display, energy consumption, manpower…)
• the occupation of space (refrigerated display units, storage systems…)
• discarding unsold stock at the end of the business day (how can the café claim to sell fresh goodies the next day, otherwise?)
• resources, effort, money, all down the drain!
  
  

Possibly you can think of more waste streams that can be pencilled into this quick and obvious list, created for illustrative purposes only.

Once again, drawing the parallel with the fast-food outlet business model, here the operations are designed in a manner to attempt tackle the reduction in waste generated through over-production. This is generally done by establishing a reasonable workflow that enables the sandwich to be produced in accordance with the ‘pull’ generated by the varying customer demand.

Push vs pull

In the latter case, the waste of over-producing stock within a fast-food outlet is largely reduced, because the fast-food outlet creates product based on the ‘pull’ generated by the demand. The product is produced (one piece flow) through the kitchen only when the order is taken at the front counter. And the processing activities taking place in producing your sandwich are all predefined and standardised, with little room allowed for variation.

On the other hand, the café scenario discussed in our use case operates a ‘push’ model. 

Think of it as if the café is seemingly enticing you with those goodies that you might not have even intended to consume in the first instance, when you thought of grabbing that last shot of espresso through your busy afternoon.

Back in your office, or at your workbench, think of all those situations you come across involving over producing waste. That ‘pending’ tray that contains more documents thrown at you than you can process through any particular day. Any build-up, or buffer, in between the process stages, caused by a push that is more than can be handled, or more than is required, at any given time.

The process is said to not be balanced.

It is all a balancing act!

At this point in time, we speak of a more technical term, called the ‘takt time’, which is the rate at which the process needs to ‘tick in harmony’ throughout the different activity stages, such that the process flows without building buffers at any point in time, yet delivering to customer demand. We will not get into the detail of this aspect, as it goes beyond the scope of us creating the interest, and the awareness, through these thought-sharing opportunities provided from this space. Suffice to say, that takt time is an important element in designing our processing activities, and maintaining that balancing act in check (maintaining uninterrupted flow).

Re-design of business operations for reducing waste

Such flow processing can only be achieved after careful studies of the business activities. Eventually putting into place clearly identified and well-defined procedures for every standard set of value-generating activities within the business.  This may well mean that the organisation may possibly need to redesign its modus operandi to ensure better flow through any identified bottlenecks. Be it through a change in methodology, introduction of technology, or some other means.

So, over production is bad. It is really bad. Perhaps it is the worst of all wastes.

On the other hand, doing things just in time (JIT) or through a balanced one-piece flow approach creates a number of other challenges! We shall not delve into those here, but to give a light flavour of matters arising with JIT, one could mention limitations like tools and equipment utilisation aspects, the changeovers that need to take place fast, to cater for the demand and its pull, the risk of running short of your inventory; to mention a few. 

One will have to explore possible solutions to those problems. But that is for another day.

The net take-home message from this article ought to be that over production is wasteful and we just have to do our utmost to eliminate it through careful process design!

Ing. Joseph Micallef is a freelance Consulting Advisor, bringing with him over 30 years’ worth of experience across various sectors. Working in areas related with quality, lean, business process transformation and project execution and programme management he can be contacted directly on +356 9982 2244 or email: joseph.micallef@icloud.com