It's “waste of overproduction” day on the Lean Blog. Here is an article about Chrysler, where analysts are baffled because they are cranking out vehicles on OVERTIME shifts while sales are falling and inventories are rising.
Hourly workers who make the company's core models — pickups, SUVs and minivans — say they regularly have been working overtime even when nearby storage lots are full. This weekend, for example, Chrysler planned to pay UAW members overtime to make Grand Cherokees in Detroit, Dodge Durangos in Delaware and Rams in St. Louis.
“I don't understand what they've been doing,” said Joe Langley, an auto industry analyst at CSM Worldwide in Northville. “They've been doing this for months. The inventory is up. The incentives are up. And they're running overtime. It's an absolute mystery to me.”
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Now the only reason that I could see for building cars that people don't want is for level loading or “heijunka” purposes. You might overbuild today with the idea that seasonal sales are increasing and they'll sell later. That's quite a bet to make, you better be sure of your forecast.
Determining production schedules is complicated, involves long lead times and is affected both by dealer orders and business fleet customer demand, said Chrysler spokesman Mike Aberlich.
“You have to look ahead,” he said. “What you decide to do on a plant level is based on a long-term look. … When a dealer puts an order in it can be six weeks before it leaves the system.”
Is that long lead time part of the problem?
Part of the problem, [analysts] say, is that the last time they couldn't get reasonable answers — earlier this year — it was about why storage lots near Chrysler assembly plants seemed to be overflowing with inventory.
Chrysler eventually told dealers in September that it had built more than 100,000 vehicles that dealers hadn't ordered.
So what is going on here? Level loading or overproduction? The person who emailed me this article asked, “What is Tom LaSorda smoking?” I think that's a bit harsh, LaSorda is as good of a lean guy as we have on top of the formerly-Big 3, and that's including Ford's new CEO.