Difference between revisions of "Overproduction"

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'''Overproduction''' (oversupply) it's an excess of supply over [[demand]] in the [[market]]. It occurs any time a process makes more of a product or part than what the next [[customer]] in line [[needs]].  
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{{Infobox
Overproduction is one of the most prevent types of waste, but it can be difficult to recognize. This makes it the pefect place to start identifying and eliminating waste.
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|Concept={{PAGENAME}}
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|list1=<ul>
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<li>[[Lean manufacturing]]</li>
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</ul>
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|list2=<ul>
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<li>[[Economics]]</li>
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<li>[[Demand]]</li>
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<li>[[Supplies quality]]</li>
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</ul>
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|list3=<ul>
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<li>[[7 wastes of lean]]</li>
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<li>[[Muda mura muri]]</li>
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</ul>
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}}
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'''Overproduction''' ('''oversupply''') in [[economics]] it's an excess of supply over [[demand]]. It is more strictly defined in [[lean manufacturing]], where overproduction includes also includes defected products.
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In older approach, enterprises treated as overproduction only those products that were not sold to the [[customer]]s. However this didn't show the real range of overproduction. When the company introduces [[customer|internal customer]] concept it treats each next workplace as a customer of earlier one. In that approach more overproduction is revealed. The next step is [[lean manufacturing]] which takes into account also those products, which were manufactured with defects and then repaired. Therefore:
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<center>'''Overproduction = manufactured products + repaired defected products + not repaired defected products - demand'''</center>
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The concept of waste in the enterprise is described in articles: [[7 wastes of lean]] and [[Muda mura muri]].
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Reducing the amount of overproduction has direct influence on expenses. Fewer raw materials are used, along with less  machine time. If the extra goods are stored, reduction in overproduction production will be associated with reduced inventory and its corresponding financial impact.
  
 
==Forms of overproduction==   
 
==Forms of overproduction==   
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* Producing products faster than customers are buying them (early type of overproduction).
 
* Producing products faster than customers are buying them (early type of overproduction).
  
==Reasons of overproduction==
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==Causes of overproduction==
There are many different reasons for overproduction, some of which are linked to inventory issues. Not knowing exactly what the [[customer]] wants can be one of them.
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The main reasons of overproduction are:
It leads to making more of each variety of product.
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* wrong inventory management
Also a desire to utilize the remaining time on a shift (beyond the known [[demand]]) or to finish a  raw of material can also result in overproduction.  
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* not knowing exactly what the customer wants - production just in case
Sometimes overproduction is connected with poor [[quality]]. If yield is known to be 80 percent, extra goods are  made so that 100 percent of [[customer]] orders can be
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* desire to utilize full employees performance until end of shift or until finishing raw materials.
completed (assuming good product can e identified through inspection.) Reducing the amount of overproduction has direct influence on expenses. Fewer raw materials
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* poor quality of products requires manufacturing more in order to fulfil the demand
are used, along with less machine time. If the extra goods typically are stored, reduction in overproduction production will be associated with reduced inventory
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* changes in the economy (underconsumption)
and its corresponding financial impact.
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* changes in consumer behaviour (capital accumulation)
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===Underconsumption===
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The underconsumption is related to drop of consumption caused by recession and stagnation. Those economic issues decrease demand and can cause overproduction in the enterprises that use push method of production. Impact of underconsumption on enterprises using pull method of production (e.g. lean manufacturing) will be limited.
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===Capital accumulation===
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The underconsumption and then overproduction can be induced also by dynamic that motivates people to limit consumption and put more capital on investments.
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==Artificial scarcity==
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Manufacturers can limit production in order to keep prices high. Therefore they produce less than demand and price can rise. It is only possible in case of monopoly or cartel.  
  
==Negative overproduction==
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In modern economy the artificial scarcity has also another application. If the producers have ideas that are not shared, they create artificial scarcity. In case of products exchange of them doesn't create additional ones. In case of ideas exchange enables generating multiplication of ideas and than boost the innovativeness.
Negative example of overproduction:
 
If a problem in the production process produced a defect, overproducing the product would just produce more defective product which would require more rework it is important
 
for Operations to produce only what is supposed to be produced when it is supposed to be produced.  
 
  
 
==References==
 
==References==
* C.Harris, R. Harris, '''Developing a lean workforce''', Productivity Press, 2007.
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* C.Harris, R. Harris, ''[https://books.google.pl/books?id=-LRR2_-Z144C Developing a lean workforce]'', Productivity Press, 2007.
* T. McGraw, '''Macroeconomics - Theory and policy''', Hill Publishing Company limited, 2005.
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* Johnson M.A., Pasour Jr E.C. (1980) ''[http://ajae.oxfordjournals.org/content/63/1/1.short An Opportunity Cost View of Fixed Asset Theory and the Overproduction Trap]'', American Jnl of Agricultural Economics, Volume 63, Issue 1, Pp. 1-7
* R.M. Meisel, S.J. Babb, S.F. Marsh, J.P. Schlickting, '''The executive guide to understanding and implementing lean [[Six Sigma|six sigma]] the financial impact''', ASQ, 2007.
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* Austenfeld Jr R.B. (2003) ''[http://ci.nii.ac.jp/lognavi?name=nels&lang=en&type=pdf&id=ART0007287200 A primer on lean enterprise]'', Hiroshima Shudo University
* L. Webber, M. Wallace, '''[[Quality]] control for dummies''', Wiley Publishing Inc., 2007.
 
  
 
{{a|Joanna Panuś}}
 
{{a|Joanna Panuś}}
 
[[Category:Lean management]]
 
[[Category:Lean management]]
 
[[Category:Production management]]
 
[[Category:Production management]]

Revision as of 08:21, 27 February 2016

Overproduction
Primary topic
Related topics
Methods and techniques

Overproduction (oversupply) in economics it's an excess of supply over demand. It is more strictly defined in lean manufacturing, where overproduction includes also includes defected products.

In older approach, enterprises treated as overproduction only those products that were not sold to the customers. However this didn't show the real range of overproduction. When the company introduces internal customer concept it treats each next workplace as a customer of earlier one. In that approach more overproduction is revealed. The next step is lean manufacturing which takes into account also those products, which were manufactured with defects and then repaired. Therefore:

Overproduction = manufactured products + repaired defected products + not repaired defected products - demand

The concept of waste in the enterprise is described in articles: 7 wastes of lean and Muda mura muri.

Reducing the amount of overproduction has direct influence on expenses. Fewer raw materials are used, along with less machine time. If the extra goods are stored, reduction in overproduction production will be associated with reduced inventory and its corresponding financial impact.

Forms of overproduction

Overproduction can have two forms:

  • Producing more than is required by customers (quantitative type of overproduction).
  • Producing products faster than customers are buying them (early type of overproduction).

Causes of overproduction

The main reasons of overproduction are:

  • wrong inventory management
  • not knowing exactly what the customer wants - production just in case
  • desire to utilize full employees performance until end of shift or until finishing raw materials.
  • poor quality of products requires manufacturing more in order to fulfil the demand
  • changes in the economy (underconsumption)
  • changes in consumer behaviour (capital accumulation)

Underconsumption

The underconsumption is related to drop of consumption caused by recession and stagnation. Those economic issues decrease demand and can cause overproduction in the enterprises that use push method of production. Impact of underconsumption on enterprises using pull method of production (e.g. lean manufacturing) will be limited.

Capital accumulation

The underconsumption and then overproduction can be induced also by dynamic that motivates people to limit consumption and put more capital on investments.

Artificial scarcity

Manufacturers can limit production in order to keep prices high. Therefore they produce less than demand and price can rise. It is only possible in case of monopoly or cartel.

In modern economy the artificial scarcity has also another application. If the producers have ideas that are not shared, they create artificial scarcity. In case of products exchange of them doesn't create additional ones. In case of ideas exchange enables generating multiplication of ideas and than boost the innovativeness.

References

Author: Joanna Panuś