Today's subject is how the general fluctuation in orders should be managed, one of the questions asked most often about Heijunka and lean production. At root, in every business there is always a phenomenon of decrease and increase that we can call periodicity or seasonality. In some sectors this periodicity occurs within the day, while in others it occurs within the week, the month, and the season. For example, in restaurants orders concentrate at mealtimes and fall at other hours. In the construction sector, by contrast, work slows in periods when the weather is cold and increases rapidly in periods when it is warm.
Companies that face such a situation generally make one of two separate choices. The first will be to invest in high-capacity machines and keep ready a capacity that will meet even the most intense order the company will encounter. What is actually done in such a case is to impose a significant cost burden by investing far more than the investment required by annual sales turnover. Machine costs rise rapidly. In order to keep these costs down and not lose its competitive strength, the company tends to produce even though it cannot sell — if it does not, the machine cost per unit of product reaches an unbearable size — and it produces products whose stocks face the risk of not being sold. It puts up with the cost of tolerating its capacity standing idle. It makes a loss in the low season and recovers it in the high season. If it cannot, it makes a loss. Or, in order to fill the capacity, it cuts prices and tries to raise the order quantity. It runs campaigns and gives various gifts as incentives.
The second way will be to produce in advance for the times when capacity cannot keep up, fill the stocks, and try to sell during the season. In this case the cost of stock rises and the need for working capital increases. Use of credit arises, and the cost spiral starts running again. If the company cannot sell the goods during the season, it again resorts to campaigns and incentives.
In fact, in both cases, this is nothing other than doing business by taking financial risks instead of fully managing the difference between seasons. A kind of gambling, in other words. What needs to be done in order to manage these differences correctly? Let us turn to that now.
- The machinery must be scaled correctly. Large, high-capacity machines (dinosaur machines) always consume a great many resources. It may not always be possible to feed them. This must be remembered. Machine scale should be chosen so that it can be changed easily according to the order, and without causing cost. They should be easy to bring into operation in the high season and easy to take out of operation in the low season. That is, two small machines are better than one large machine.
- Training the workforce required to meet the capacity that increases during the season will be a new cost. Providing productivity and quality becomes quite difficult if your operations are not simplified and not easy to learn. Standard work and 5S will always help. Machines should contain little technology and a great deal of ease of use.
- Chaku-chaku lines will be lines on which you can easily adjust capacity, according to the customer order, by the number of employees alone. Assembly lines in particular are ideal for these applications.
- Your machines being configurable will reduce the need for new machinery and equipment in the face of changing demand. Attaching importance to this kind of machinery will be very worthwhile.
- Low-cost simple automation enables you to reach much cheaper results than fully automatic machines.
- Employees who have more than one skill will enable you to respond much faster to customer demand. On-the-job training, 5S, and Kaizen applications are activities you need to value.