Also referred to as line balancing refers to fluctuations in the product flow which causes waste, to prevent this waste , fluctuations at the final assembly line must be kept to zero. Production is levelled by making one model, then another model, and so on.
Production leveling, also known as production smoothing is a technique for reducing the muda waste and vital to the development of production efficiency in Lean Manufacturing. The general idea is to produce intermediate goods at a constant rate, to allow further processing to be carried out at a constant and predictable rate. Ideally production can easily be leveled where demand is constant but in the real world where actual customer demand appears to fluctuate two approaches have been adopted in lean: Demand leveling and production leveling through flexible production.
On a production line, as in any process fluctuations in performance increase waste. This is because equipment, workers, inventory and all other elements required for production must always be prepared for peak production. This is a cost of flexibility. If a later process varies its withdrawal of parts in terms of timing and quality, the range of these fluctuations will increase as they move up the line towards the earlier processes. This is known as demand amplification.
Production leveling can refer to leveling by volume, or leveling by product type or mix, although the two are closely related.
Leveling by volume
If for a family of products that use the same production process there is a demand that varies between 800 and 1,200 units then it might seem a good idea to produce the amount ordered. Toyota's view is that production systems that vary in the required output suffer from mura and muri with capacity being 'forced' in some periods. So their approach is to manufacture at the long-term average demand and carry an inventory proportional to the variability of demand, stability of the production process and the frequency of shipments. So for our case of 800-1,200 units, if the production process were 100% reliable and the shipments once a week, then the production would be 1,000 with minimum standard inventory of 200 at the start of the week and 1,200 at the point of shipment. The advantage of carrying this inventory is that it can smooth production throughout the plant and therefore reduce process inventories and simplify operations which reduces costs.
Leveling by product
Most value streams produce a mix of products and therefore face a choice of production mix and sequence. It is here that the discussions on economic order quantities take place and have been dominated by changeover times and the inventory this requires. Toyota's approach resulted in a different discussion where it reduced the time and cost of changeovers so that smaller and smaller batches were not prohibitive and lost production time and quality costs were not significant. This meant that the demand for components could be leveled for the upstream sub-processes and therefore lead time and total inventories reduced along the entire value stream. To simplify leveling of products with different demand levels a related visual scheduling board known as a heijunka box is often used in achieving these heijunka style efficiencies. Other production leveling techniques based on this thinking have also been developed. Once leveling by product is achieved then there is one more leveling phase, that of "Just in Sequence" where leveling occurs at the lowest level of product production.