E6S-073 The 8 Wastes: Go the extra MILE MR TOYOTA- Part 2 - Overproduction and Inventory.

Intro:  Welcome to the E6S-Methods podcast with Jacob and Aaron, brought to you by E6S Industries, your source for expert training, coaching, leadership, and consulting in continuous performance improvement methods like Lean and Six Sigma. In this episode number 73 we continue our "8 wastes" discussion with an in-depth look at  Overproduction and Inventory.  "Go the Extra MILE MR TOYOTA - Part 2.  Here we go. http://bit.ly/E6S-073; http://bit.ly/E6S-iTunes

Recall: Go the extra MILE:  (Mitigate, Investigate, Litigate, Eliminate) ; MR TOYOTA  (Motion, Reserves, Transport, Overproduction, Yield Problems, Over processing, Talents, Awaiting Availability)

I            Over Production – Making more than you need

a.       What it “looks” like

i.      Inventory-

1.      WIP

2.      Finished Goods – either stored in the warehouse or pushed onto the customer       

3.      Also includes over purchasing of materials

b.      Examples        

i.      Manufacturing

1.      Producing 1000 Liters to fulfill a 100 Liter customer order, and stocking the rest expecting it to sell.

2.      Purchasing 10000 specialty fasteners to receive a bulk rate/lower price, but only 100 are used per week.

3.      Producing aircraft parts in 2 months in advance of their production schedule to achieve billable hours for the month

ii.      Service Industries or Back Office

1.      Monthly “TPS” reports that no one reads

2.      Hitting “Reply All” or needlessly copying others on emails

3.      Excessive meetings

4.      Meaningless, or bad metrics

5.      Too many ISO controlled procedures

6.      Hiring Process: Requiring full background, salary history and references before even interviewing a candidate for a job

c.       Common Root Causes (May need 5 Why’s)

i.      Manufacturing

1.      Producing to forecast, rather than to order

2.      Minimum order quantities (MOQ) –

a.       large batch sizes

b.      Long lead times

3.      Economic Order Quantity (EOQ) calculations

a.       Highly biased for overstock.  Presumes running out of stock is much worse than being overstocked.

4.      Poor business practices, metrics that allow or promote bad behaviors

ii.      Service Industries or Back Office

1.      Business-as-usual.  Processes and reports that were once necessary, but carried on after their usefulness.  Failure to kill the work.

a.       Band-aid due to a business process failure, audit finding or regulatory issue

2.      Ineffective management, staying busy and “work creep”

3.      Perfectionism

d.      Potential Remedies    

i.      Pull back on the RM orders.  Test the reliability and risk of your supply chain. Balance carrying costs vs. cash flow requirements.

ii.      Training in best practices for meetings and emails

iii.     Take a critical look at all reports

1.      Sometimes just stop doing them, and see who complains (plea for forgiveness rather than permission)

iv.      Move closer to Just-in-time (Pull), make to order rather than forecast

1.      Easier said than done.  Requires cooperation throughout the supply chain and numerous internal creative solutions.

II         Inventory – Work-in-process, Queue, Backlog

a.       What it “looks” like

i.      Manufacturing

1.      Work in Process (WIP)- piling up between work stations

2.      Raw material and finished goods stock

ii.      Service Industries or Back Office

1.      WIP in paperwork, backlog

2.      Caller queuing, lines of people waiting,

b.      Examples

i.      1000 plastic parts stocking up between molding and painting

ii.      Patients in the waiting room

iii.      Unprocessed emails and phone messages

iv.      Expense reports in the queue for audit and completion        

c.       Common Root Causes (May need 5 Why’s)

i.      Batching

1.      equipment constraints

2.      supply chain constraints

3.      long setup times

ii.      Push production and capacity constraints – making faster than a downstream process can handle, and still continuing to produce, regardless

1.      Belief that productivity is related to equipment uptime regardless of downstream demand.  Often a result of capital ROI expectations.

iii.      Variable flow and demand surges

d.      Potential Remedies    

i.      Value-stream map, process load chart (plus brainstormed actions)

ii.      Kanban, visual management, start/stop signals, queuing systems

iii.      Cellular design

iv.      Setup time reduction (SMED-Single minute exchange of die)

v.      Same as Over production

1.      Pull back on the RM orders. 

2.      Training in best practices for meetings and emails

3.      Take a critical look at all reports

4.      Move closer to Just-in-time (Pull), make to order rather than forecast

Outro: Thanks for listening to episode 73 of the E6S-Methods Podcast.  Stay tuned for episode number 74, Part 3 in this series on the 8 wastes, where we go into greater detail on Waiting and Skills. If you would like to be a guest on the podcast, contact us through our website.  Join our mailing list!  Subscribe to past and future episodes on iTunes or stream us live on-demand with Stitcher Radio.  Find outlines and graphics for all shows and more at www.E6S-Methods.com. “Journey Through Success”