The Ultimate Waste Reduction Technique to increase your profits and revenues is to only produce what is already sold!
It is not always possible. Current management techniques always recommend forecasting demand, planning production backwards from the day the finished goods are needed, producing them and hoping that the forecast was correct!
This is always a hit and miss approach but the better way to produce only those quantities that are already spoken for!
In some industries this is already somewhat possible, as in buying a desktop or laptop from Dell or HP. They assemble the machine according to yoru specifications and then ship it!Even here you will have to forecast the potential demand for different components ahead of time and make sure they are available at the right time at the right place! Components can be reused in other assemblies and to that extent, the financial outlay of the company is reduced a bit.
However, the "Pull" method of Demand Forecasting and Production is already in place with Toyota with their Toyota Production System (TPS). The entire production planning system is different from other industries and other countries. The cars that are being manufactured are already sold to different dealers in the exact colors and models they have ordered.
This also explains the way in which they are handling their current crisis. For the first time in their history, Toyota is going to make a quarterly loss. People around the world have stopped buying cars being worried about their jobs and financial future. Banks have stopped lending money for cars around the globe. Both these factors have affected Toyota sales just as they have affected all other auto makers.
The striking difference is in how different automakers are handling this downturn.
The story Toyota orders 11-day output halt as sales slump explains how Toyota adjusts its production schedule continuously based on what their demand is. The temporary shutdowns more than adequately adjust for changes in demand and they are able to do this because they are using a 'Pull" model of production planning.
It also helps that they have built their assembly lines in a flexible way so that within a few days or even within a day sometimes they can reconfigure a SUV assembly line to products smaller cars.
The Pull method is probably the logically best way of adjusting production to demand. It wastes the least!
Something to think about whether it is demand for products or services! Business Processes can also benefit from staffing enough number of people for different parts of the business process based on demand. You don;t need to layoff people as long as you train them in multiple skills and can be reassigned to different parts of the company based on demand there.
Supply always comes on the heels of demand - Robert Collier
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