In today’s environment, getting products to your customers promptly is a top priority. However, there is a balance to strike here as you also have the pressure of trying to keep production costs down and delivery as affordable as possible. The truth is that businesses perform best when they give their customers as much value as possible while also incurring the least amount of costs. Implementing effective business sustainability strategies becomes crucial in this context.
With increased awareness around sustainability and climate change, manufacturers need to be mindful and conscious of supply chain management. There are costs associated with having too much or too little of something and these are not just monetary costs. The entire production process affects our planet and overproduction, and overconsumption only adds to the already high levels of toxic gases and pollution that contribute to global warming.
Overproduction also threatens biodiversity, our precious ecosystems, and human and animal health. Moreover, overproduction can also have consequences for your business and its profitability. Continue reading to learn more about the business case for slower, more mindful production.
What does overproduction mean for manufacturers?
If you are not fully familiar with what the term overproduction involves, it refers to when you have too much of something than necessary. The reason behind this is generally to meet the demand of your market. While this can result in lower prices and therefore offer more value for your customers, it can also lead to unsold goods. This results in the costs of manufacturing, like the cost of labour, increasing significantly.
The resulting cost of labour and poorly managed inventory could cause future losses of profitability. In addition, overconsumption is problematic for the environment. Where a poorly-managed supply chain involving overconsumption can harm your business, a well-managed, responsible supply chain can help you increase profitability and minimise your impact.
Consequences of overproduction for the planet
Overproduction is a major issue that we all need to focus on if we are to fight the climate crisis. Human activity is contributing to a lot of harm to our planet. Some of this harm we are oblivious to like pollution and deforestation. Overproduction contributes significantly to climate change as it causes more waste to tackle and similarly, more waste-associated pollution.
Recent research figures reveal that 80 percent of the world’s natural resources are used by just 20 percent of the world’s population. The effects of climate change transcend international borders, and we have witnessed this phenomenon in real time as hurricanes and wildfires become more frequent. Many industries are currently producing more goods than people can afford to purchase.
One of the main examples is fashion whereby the number of seasons has drastically increased from 2 to 52. To put it into more context, we discard 92 million tonnes of clothes-related waste each year. Moreover, we produce half a million tonnes of microplastics through making garments. If that was not enough, the fashion industry generates more carbon emissions than shipping and aviation combined.
With all of this in mind, it is clear that overproduction has drastic impacts on the environment. Businesses that overproduce ultimately risk contributing to pollution. Not only does pollution exacerbate climate change, but it also threatens habitats and natural processes. In addition, ecosystems’ ability to adapt to climate change. This ultimately affects the livelihoods of millions of people across the globe as well as our food production capabilities and social well-being.
Another example of an industry that is overproducing is the food industry. The Environmental Protection Agency (EPA) has estimated that agriculture emits around 9 percent of the United States’ greenhouse gases – namely methane from livestock and nitrous oxide from fertilisers. The number is, of course, much higher globally, and is only expected to rise as we continue to produce animal goods at an alarming rate. Wasted food damages the environment because it has already been grown, transported, and prepared for consumption.
According to the EPA, approximately 130 kg of food waste per household or 48 kg per person is wasted every year. Food waste costs the average household in Ireland roughly 60 euros per month or 700 euros per year. This is an annual national cost of 1.29 billion euros. The food and beverage manufacturing and processing sector within Ireland also generates around 219,500 tonnes of food waste per year. While the reasons for food being wasted vary, a lot of it comes down to overproduction and the creation of more food than consumers can eat.
How overproduction negatively affects your business
Beyond the environmental implications of overproduction, this practice can also negatively affect your business. The consequences of overproduction can negatively affect your products, staff, and your profitability. Surplus products have to be stored before they reach the point when they can be finally sold. With this, employees and machines must be assigned to take components, works in progress, and completed goods to your storage space.
Therefore, staff and equipment are tied up unnecessarily. This is even more so the case when successive upgrades of your production line are carried out without rethinking the entire coherence of your supply chain. Overproduction is always regarded as a quick way to get products out to customers. However, it also slows the turnaround time of your stocks. The space you utilise is generally larger than you require. If you fail to optimise this space or specific stages of your production, there is a risk of loss concerning your profitability.
It is important to keep in mind that storage consists of many costs like maintenance, handling personnel, premises, and insurance. Therefore, the more you clutter up your inventory with old goods, the less space you have to store your new products. Ultimately, poor inventory management will only lead to profitability declines. If production is excessive, unfortunately, there is also a risk that stocks can be overloaded.
Despite whether you carry out checks at each stage of the production process, there could still be product defects that you do not spot until the goods leave storage. This is because there are simply too many products in storage, and new products are being created simultaneously. Therefore, failure to identify dysfunctional processes and defective batches can only result in productivity losses.
When it comes to an overproduction model, the only real way to sell your goods is to lower the price. However, this is not a good strategy for the long term. Overall, overproduction represents waste that can impact your performance. Depending on the industry you operate in, some manufacturers may be at higher risk than others. While sometimes loss is uncontrollable, you should be able to identify the red flags within your production process to reduce loss.
What is the way forward for businesses to stop overproducing?
Overproduction is a practice that is bad for both the environment and businesses. What it comes down to is we are creating too many products, and there are huge risks to your profitability if you continue to make excess goods. The question then is, how do you go forward? Businesses must engage in more mindful, slower production.
It may be hard to envision what slow production looks like with overproduction taking the lead currently. Numerous fashion brands have already begun to switch to slow production processes. This involves creating products with trendless designs and utilising more premium, long-lasting materials. In addition, curbing the use of harsh chemicals in their products.
How do you translate this over to your specific business? The best way is to try and create products that have a circular design. In other words, products that fall in line with circular economy practices. The circular economy is all about keeping goods in circulation to prevent them from contributing to climate change. Therefore, circular design involves rethinking the process of creating a product from start to finish. As mentioned previously, your business will perform its best when your customers receive the most value.
Circular design is one way to deliver that value to your customers while transitioning away from overproduction and being more mindful of the planet. Some examples of circular design include Timberland using tires to create shoes and Enerkem using rubbish to power cars by turning carbon into a gas that can make biofuels. Adopting circular design and driving the transition to a circular economy will see you save costs, improve profitability, and win over customers looking for the most value.
Overproduction is a common practice in today’s fast-paced environment. However, it has significant impacts on the environment and your business. With customers directing their support toward businesses taking action, switching to more conscious production strategies is ideal. This will help you not only win over customers but also save costs, prevent risks, and improve profitability.
The way forward is the circular economy, as this is what will give customers the most value while allowing you to also have a positive impact. Circular design is making waves and gives businesses the opportunity to move away from overproduction, and hopefully, encourage less overconsumption too.