Comparing the processes of a mass-production environment with those found in a Customer Value Enterprise® is a revealing exercise.
In mass-production, the intent is to maximise all assets and capabilities: none should be idle and all should be working continuously. More so, that driving focus also determines management actions.
Truly, maximising production does make logical sense – but only if there is demand for the product. If not, the business needs to scale back production.
In the Customer Value Enterprise® world, however, a business produces only in response to known demand It doesn’t build up a ‘just in case’ inventory because such products may not be needed, resources are wasted and storage costs increase.
Regardless, North American mass-production enterprises are often driven by production forecasts: output is generated in the expectation that all products will be consumed.
Many such companies are now moving to ‘build to order’ – that is, ‘on demand’. The principles of operation between these two approaches are very different.
In the ‘on demand’ world it is acceptable to keep some assets idle, to accept idle costs in exchange for reductions in inventory, storage costs, and losses from discounting over-produced products.
In the Customer Value Enterprise® ‘on demand’ world, even idle-time costs can be recovered if the organisation uses the time to improve and optimise the value chain and in doing so, reduce the cost of production still further while increasing quality.