Why do you need to understand customer demand?
When you practice continuous improvement, the goal is to provide your customers with the highest quality, at the lowest cost, in the shortest time by eliminating waste. You aim to provide them with the value they are looking for at the time they need it. Understand and satisfy customer demand is not an easy task. To understand customer demand, you need to understand the volume, the mix, and the variability.
How does the sales volume of your products change over time? Is it seasonal? Can you identify peaks and troughs? For example, the sales of all kinds of outdoor sports gear have their peak during the summer, while arts and crafts increase during the winter. Fall and winter are baking seasons, while the summer is grill season.
How the mix of products that you sell looks like? There is a good chance that 80% of your sales are made up of 20% of your products. Finally, you need to understand the variability of the demand. Are those volumes steady, or do they change often?
In a perfect world, you would be able to produce what they need; at the time they need it. But the world is not perfect, and most probably, you respond to volume, mix, and variation by overproducing and creating inventory. Both things are waste in the continuous improvement world.
How to respond to demand changes
To respond to all these changes without over-producing, you need to be flexible. Design the work area to allow for changes. Consider the use of worktables and equipment on wheels that you can move when you need to change the configuration or layout. Team flexibility is critical to react to changes in demand or mix. Make sure that cross-training and people’s development never stop.
Another critical piece is to schedule your product to respond to those changes without the ups and downs of demand. You do that by using production leveling. Using the volume, mix, and variability information, you can classify your products this way.
- Runners – Top sellers, orders with high volume and high frequency with little to no variability.
- Repeaters which are moderate volume and order frequency. Their variability is moderate too.
- Cats and dogs or strangers which are low volume and frequency with high variability.
After you classify your products within one of these categories, you are ready to design your leveled schedule. Your goal is to set up a series of workstations that build products as per demand. You can have dedicated lines for your runners while grouping similar repeaters with similar ingredients or materials in the same work area or lines. Cats and dogs are so infrequent that you should consider making them to order.
Use your data to understand your customers, the customers or their buying habits give you the answer you need to improve your processes. Knowing all the details about demand will help to satisfy your customer demand without incurring high inventory costs and all kinds of waste caused by overproduction, which is the worst of the 7 wastes.