Importance of Small Batches ToolScott Williams
There are merits to reducing the size of the batches you manufacture and/or hold in stock at any point in time. This might sound counter-intuitive because of the oft-quoted ‘economies of scale’ and the time cost of pulling down tool set-ups and changing them to manufacture another project. But, in the words of the song; “it ain’t necessarily so!” Learn the importance of small batches.
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To manufacturers, this may seem very inefficient. It means that small quantities are required to be manufactured when the conventional wisdom is that you need large production batches to get “economies of scale”. On the face of it, this is probably quite true for manufacturing as it’s widely known but, there’s also a great deal of business knowledge on how to convert your production line to small batches. Therefore, making your production line much more responsive to customer demand. This will, in turn, improve your income from having more fast selling lines in stock to sell. The costs of under and over production are discussed in the article “Cost of Over and Under Stocking”.
Go to the Skills Module introduction: Theory of Constraints (TOC)
Go to the article: Cost of Over and Under Stocking
For a retailer, buying from a wholesaler in small batches and having the overhead cost of shipping those batches to you may seem very expensive. However, there is the lost income cost of running out of a fast running product and the risk of losing a customer for life to offset the additional cost. With modern day courier systems, the cost may not be as bad you expect.