Unsold cars

If anyone thinks that the world’s car manufacturers have been adopting lean in the last few years they can think again. The Guardian has some photos of car storage sites. Number six is the best.

The aim of the Toyota Production System is to ‘produce cars at the rate of demand’. This means ‘get an order, build a car, deliver it, get your money’.

A lean system should pull from the order. Dealers should have one or two examples of each model which are used for test drives and showing off features. When the order is made that should be the trigger to build the car, which should be delivered within a week.

There should be no question of manufacturers having fields full of cars or ever deciding to reduce or increase production. If there are fewer orders then there will be fewer cars made. The system flexes automatically.

In the seven wastes that lean people talk about – they are not applicable to service(!) – there is the waste of over-production. Taiichi Ohno thought that this was the worst waste of them all because it was the cause of many of the other wastes. What he would think of these pictures… (Interesting that there are some Toyota pictures in there. It doesn’t say if they are already sold or not.)

Service is usually a bit different – you can’t have fields full of mortgage applications pre-assessed before the customers come along – but you can still get bottle necks. You can still design a system that does not serve at the rate of demand. The “inventory” will more typically occur just after the order. There will have mortgage applications submitted by customers that are waiting to be looked at instead.

So, ‘serve at the rate of demand’ is still the game. Thus you must still have a fast, flexible system, that absorbs variety. More important you must understand your demand, for it is against that information that you design your system.

Best,

Rob

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Comments

  1. Mark Graban -

    Wow, thanks for finding that article and the photos.

    I’d disagree about “overproduction” in a service organization. It *is* possible to overproduce at an upstream stage of a multi-stage process, like medical billing.

    If one process is working faster than the next and “work in process” inventory is piling up in front of a desk or cubicle, that’s also overproduction, the same as an auto parts supplier building components that aren’t being used.

    What “7 wastes” do you use in services?? How do you define the types of waste? (I’m curious, since we debate this in healthcare sometimes, if we need “new” definitions or adaptations of the old standbys that you referred to).

    Reply
  2. Rob Worth -

    Hi Mark,

    I am honoured that you commented here. I listen to your podcasts all the time.

    Maybe we have a slightly different approach to ‘overproduction’. Correct me if I am wrong but I take your meaning as any work that builds uncessesary inventory anywhere in a value stream. My meaning is any work that is producing things that a customer has not yet asked for.

    Now I am not familiar with medical billing but I can a imagine a (simplified and perhaps inaccurate!) process that looks like this:

    1) Patient has treatment
    2) Bill is prepared by hospital
    3) Bill is authorised by insurance company
    4) Insurance company pays hospital

    By your definition if billing is preparing bills faster than they can be authorised then they will build up and you would call that overproduction.

    By my definition it is not possible to have overproduction since if no patients are treated then no-one in billing could over produce. Ditto for authorising and payments in the insurance company. The build up of prepared bills is not overproduction it is where a process does not flow. I would agree it is bad, but at some point the each bill has to be prepared so it is not ‘over’ production just badly designed flow.

    But you can build a car that nobody, as yet, wants to buy. That is overproduction in both our books.

    I don’t use a list of wastes. If a task creates value for the customer then it is value, everything else is waste. I find that having a list means people are more likely to miss something as waste if it is not explicitly on the list, they spend a lot of time trying to fit what they find to the list so they are better off using their judgement. For example what about setting targets? Is that waste?

    Is it any of these?

    – Transportation – no
    – Inventory – no
    – Motion – no
    – Waiting – no
    – Overproduction – no
    – Over Processing – no
    – Defects – no

    But it is waste and it causes more waste.

    Best,

    Rob

    Reply
  3. Wings -

    Rob,

    I agree with your logic on overproduction in service processes.

    There are two inventory related wastes in the classical seven: overproduction and stocks (or work-in-process). Overproduction is making sooner or in greater quantity than customer demand. WIP is, by definition, anything still in process. Overproduction refers to work product that is finished processing and is ready to go to the hands of the customer. The cars in the pictures is a perfect example. Many people blur the distinction between overproducton and WIP because they blur the distinction between the ultimate customer and the next downstream process, which is often referred to on a local basis as your “customer”.

    Make-to-order and engineer-to-order processes generally don’t suffer from overproduction the way that make-to-stock processes do. A poorly-run fast food hamburger joint may have a load of generic hamburgers sitting under a heat lamp, but a fine dining restaurant typically does not have a bunch of random off-the-menu dinners sitting around the kitchen.

    Service delivery is typically initiated by a triggering request. I am pretty sure my auto insurance company does not have a filing cabinet full of claim checks in various denominations printed and signed and ready to issue to me when I smack by Saturn into a tree on Thursday noon. While there may be WIP clogging their offices, overproduction is probably not the biggest of their wastes.

    Thanks for a fine blog, and keep up the great work!

    Jeff Fuchs
    neovistanewsfeed.wordpress.com

    Reply