By December 19, 2006 3 Comments Read More →

The Gift of Overproduction

Honey, You Shouldn’t Have – WSJ.com

Update: I was probably wrong on this one (see here).

You see the ads for Lexus with the cars with red bows on top, the ultimate Christmas gift, right? It’s really the result of overproduction and the need to dump product at the end of the year. The WSJ article said:

Once upon a time, auto makers accepted that the Christmas season wasn’t a great time to sell new cars. But that is ancient history. Now, the 12th month of the year is one of the most promotional on the auto-industry calendar. One reason is that car companies, especially the luxury makers, realized that it was better to hold sales than end the year stuck with too many out-of-date models.

Surprising that the company that talks about the “waste of overproduction” (Toyota) has end of year clearances (Lexus). It goes to show they aren’t perfect.

The graph with the article (click for larger view) shows how Toyota is offering far lower incentives ($800 per vehicle) than Chrysler ($4000!!) is with their overproduction.

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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3 Comments on "The Gift of Overproduction"

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  1. Rich Cary says:

    Hmmm…you should consider giving away a Lexus in your next lean blog contest!

  2. Mike says:

    Wait a minute. Why does advertising a brand have to equal overproduction? What is it about the end of the calendar year that makes Lexus think they have to run a promotional to reduce inventories? The new models don’t come out in January, they come out in July or August. What is the source of the inset quote? Is it from the WSJ? Lexus has a history of advertising heavily during the Christmas season–it isn’t something new. Other car makers have done so over the years, too. This probably has more to do with brand identity than with sales. Really, who buys a new car for someone for a Christmas present? How often does that really occur? My guess is that it does not happen very often. I think the WSJ got it wrong in this case.

  3. Mark Graban says:

    I think it’s more about the financial numbers for end of year — boosting revenue and draining inventory — than it is end of model year. Yes, the quote there was from the WSJ.

    It also says a SMALL percentage of cars are true surprises or gifts.

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