Focusing on One Area Produces the Biggest Result in Lean Manufacturing
The 7 most common areas that detract from a product or company's profit is commonly referred to as TIMWOOD: Transportation, Inventory, Movement, Waiting, Over-production, Over-processing, and Defects.
Today we will be discussing the worst of all the 7 wastes: over-production. In essence, over-production overshadows all of the other problems within your business.
Too much of a good thing is always a bad thing, and the production process is no exception to this tried and true rule. Making more product than you need may sound like a good idea, and it can be to a very short extent, but if you’re making more product than you’re selling, you are wasting time, money, and resources. Not only that, but over-producing causes you to tie up your capital in:
- stock
- raw materials
- works in progress (WIPs)
- finished goods
Your cash is what you rely upon to run your business, so you either leave yourself short, or you end up paying interest charges to your bank.
Another cost associated with over-production has to do with the storage and movement of the inventory that you have created, as it requires:
- space
- people
- equipment to move it around
- storage containers
One of the largest customers I have worked with ran flat out of room with no plans to move, as they couldn’t even lose one day of productivity. They have trucks lined up all day to move finished goods to an outside company/3 PL (3rd Party Logistics). The customer then sends out EDI orders for the 3 PL to fulfill the finished goods and ship to the customer. Not a bad idea in the short run, but expensive when considering waste. Raw material usage and inventory control is even more important in these scenarios.
Remember, all of this costs money. If you could eliminate over-production, the savings would go straight back to your bottom line, improving your profit.
Causes of the Waste of Over-production
Why do manufacturing companies over-produce? Common answers include:
- “This is how we have always done it!”
- Large batches are produced because of long set-ups on machines.
- Distrust of a supplier’s ability to supply what is needed, so more is ordered
Whatever the cause, Dynamics AX can help your company see the direct and indirect costs of manufacturing more closely, as it can monitor these tasks and possible other areas of waste:
- Route: what it is and how it is created
- Operation: what it is and how it is created
- Route networks: simple operations, independent operations, and simultaneous operations
- Route operations: what they are and how they can be created
- Jobs: what they are and how they can be generated
- Time consumed by an operation: how the start and end time is calculated for a production order; what the consumption calculation formula, operation link type, simultaneous operations, quality of work center, calendars, and Gantt chart are.
- Cost of operations : how a price for the production order is calculated; what indirect costs, costing sheet, cost category, and cost groups are
- How an operation is treated in Microsoft Dynamics AX; what a route group and capacity load are
To see detailed instructions on how to set these criteria, follow this link: http://www.dynamicsaxtraining.com/production_training/routes-and-operations#CostOfOperation
Yes, there are other ERP systems that can handle either Tim Wood, but they are not as affordable, scalable, or better suited for manufacturing, according to Panorama.
Clients First operates both nationally and internationally. Our AX consultants headquartered in Dallas/Fort Worth, Texas are committed to your successful Dynamics AX implementation (click on the link to email us). We are Microsoft Gold Certified Partners who know that there is no such thing as a “universal” ERP solution. Dynamics AX must be tailored to your company’s needs, organizational culture, staff capabilities, and project’s characteristics. Call us at 800.331.8382 so we can put your company first, too.