James Womack, author of the best-selling business classic text ‘Lean Thinking’, tells the story of how he challenged his children to an envelope-stuffing competition. While his children set up an assembly line with one of them folding the letters and the other labelling and stuffing, James took on the ‘small batch’ approach and completed the entire task himself – folding, stuffing and stamping one envelope at a time.
Small is beautiful
Of course, James won the challenge. Over recent years, many businesses have benefited from manufacturing in small batches, most notably Toyota with its approach to building cars. Small batch manufacturing allows Toyota to quickly switch their assembly lines between models. It also allows the company to identify and fix quality problems much sooner and more cost-effectively than manufacturers who run long assembly lines and wait to uncover problems at the end of the run. While individual operator productivity is important, evidence suggests that the overall performance of the manufacturing system itself is fundamental. In short, Toyota realised that small batches made its factories more efficient.
Some businesses prefer large batch sizes to benefit from economies of scale. Long assembly runs enable them to buy raw materials in bulk and reduce their variable costs. On the downside, this approach means increased inventory costs for input materials and having to store quantities of finished products – overhead costs that manufacturers avoid with small batch runs.
Another benefit of manufacturing in small batches is the ability to quickly get a finished product into your customers’ hands, enabling them to validate it and provide feedback about any specification changes that might be required. Small batches reduce manufacturing risk and are more flexible in meeting customer demand.
If small batch manufacturing offers such fundamental benefits, what are the barriers to this approach?
Variable batches, variable profit?
Generally, manufacturers who produce identical goods week in, week out, in large batch runs, have the benefit of months or years of experience to inform their production scheduling, pricing, and refine their processes to improve productivity. For businesses who want to take a more agile manufacturing approach using small batches, or produce a lot of product variants, it is more challenging to gather this data – especially if you rely on paper-based systems for production recording. The additional setup time for each batch, which adds to variable costs, makes it more difficult to price small batch runs profitably.
For high-spec cable and connector producer GTK, the ability to manufacture small batch runs is fundamental to its value proposition. Its production runs range from a single item up to around 1,000 pieces. Similarly, the work content varies between a few minutes up to several man-weeks. With only paper-based records to rely on, GTK found it difficult to accurately quote for new ‘small batch’ business, and gather data to improve its production efficiencies.
Switching to Mestec’s manufacturing software system enabled GTK to accurately measure labour and material content for even its smallest batch runs. It now has a library of cable assembly times as well as accurate standard times and costs. Using this information, it can bid profitably for new business and has increased the flow of work through the factory floor, improving due date performance. In addition, GTK has improved overall labour effectiveness to 86% and operator utilisation to 87%, as well as ridding itself of an estimated £10-15,000 of unrecovered labour costs.
Data is key
Whether it’s better to manufacture in large or small batches really depends on the nature of your business. There are pros and cons to each approach, and for some manufacturers like GTK, batch sizes can be extremely variable – from a small production run of a few devices where the challenge is for operators to quickly become proficient in tackling the ‘first off’ assembly and to accurately price the job, to high-volume production runs, where minutes shaved off each assembly time can make a significant contribution to the profit of the job as a whole.
Whatever your batch size, having a way to collect real-time shop-floor data – without the use of paper, is key to transforming manufacturing productivity.
Read the full Mestec – GTK case study here.