Overproduction – the act of making more of something than is immediately required. In this series titled “The 8 Lean Wastes and Their Potentially Disastrous Effects”, we examine a case study for when companies, government organizations, or entire industries have allowed a specific type of waste to escalate to a disastrous effect. In this post, we review the waste of Overproduction to understand what causes it, how to see it, and how to eliminate it. Wikipedia defines overproduction as “excess of supply over demand of products being offered to the market. This leads to lower prices and/or unsold goods along with the possibility of unemployment.”
The 8 Wastes and Their Potentially Disastrous Effects:
In 1988, chemical manufacturing company PEPCON, located in Hersonson, NV experienced a massive explosion of 4,500 metric tons of Ammonium Perchlorate (AP). The facility was producing AP, which is used as an oxidizer in rocket fuel, for the Challenger Space Program. In 1986 the Challenger Program was suspended after the space craft exploded in mid-air only 72 seconds after launch. PEPCON decided to continue production of AP even though there was no longer a demand for it as a way to sustain production capability without inflating costs. The company assumed that they might be able to sell the excess AP to other government programs or to the Challenger Program if it were to ever come back online. They stored the excess product in containers in a parking lot near the production facility. Finally, one of the containers containing the AP ignited and the entire highly-combustive lot went up in smoke. The explosion cause catastrophic damage, destroying the PEPCON factory and other nearby factories and residential property.
The explosion resulted in 2 deaths and and 372 injuries. It also created about $100M in related damages.
In response to this incident, the Nevada legislature passed the Chemical Catastrophe Prevention Act in 1991, and later the Chemical Accident Prevention Program.
4,500 metric tons of this product and others were being stored on site at the time of the explosion in aluminum, HDPE, and steel drums. The blast range of the explosion was a 10 mile radius. The actual cause of the fire was never officially determined.
For more details on this case study, check out the Wikipedia article at the following link:
Overproduction is one of the most dangerous types of lean waste because it enables all other forms of waste to occur. When factories overproduce, they create buffers that allow the manufacturing process to become disjointed from the subsequent elements of the supply chain. This enables process waste to fester in the manufacturing stage because problems in the production process have little to no effect in the company’s ability to satisfy customer demand. This buffer removes the “pain” of poor production execution and the factory loses the discipline required for true operational excellence.
There are management tools that can help to minimize the detrimental effects of overproduction and provide the foundation for increasing operational discipline. OEE is one great example for how to measure productivity so that overproduction can be eliminated and the factory can transition to more of an on-demand operation with minimal finished inventory. Impruver is a fantastic tool for implementing OEE that also drives a grassroots culture of getting better everyday.
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