Cutting capacity at LG

What do you do if you’re a TV manufacturer in a global recession? You will appreciate that spending on consumer durables gets hit very hard in any economic downturn. A nice way to describe this is to refer to ‘black goods’ (like TVs, DVD players etc) as being highly income elastic.

How can manufacturers respond? Lean manufacturing is all about reducing waste. We’ve already heard about a wave of temporary factory closures, cuts in overtime and other moves to slash capacity. The logic of these moves is to avoid the problem of building up wasteful piles of unsold stock.

Unused factory capacity is a form of waste too, of course. This excellent video clip from the BBC shows the tactics employed by LG. They have slowed their flow production right down and are focussed on BTO (build-to-order). These are smaller, more flexible production runs that meet the current market’s needs precisely.