How to Address the Challenges of Low Volume Manufacturing
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- Author: SVI Content Team
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Every company dreams of hitting the jackpot with a massive order. It’s widely known that the effort put into a small order isn’t vastly different from a larger one. So, naturally, the allure of those substantial contracts is irresistible. However, in the real world of business, these big clients aren’t as abundant as we’d hope. Orders of low-volume manufacturing ascend as the prevailing trend.
Small batch orders have the benefits of flexibility and more. Yet, it comes with its own set of challenges. What’s beneath these hurdles, and why do they pop up? There might be some aspects you haven’t thought of. To clear up your questions, this blog will provide you with fresh perspectives on its advantages, challenges, and solutions.
Let’s get down to it.
Part 1. Challenges of Low-volume Manufacturing
Small-batch manufacturing is a production that produces goods with few quantities. It can present challenges for customers who seek efficient sourcing solutions.
1. Low Bargaining Power
One of the challenges of low-volume orders is a reduced ability to negotiate favorable terms. With orders that don’t boast significant volume, you may find yourself with diminished leverage to drive prices down because suppliers are less likely to offer preferential rates or flexible terms for orders with smaller quantities.
2. Limited Supplier Options
Unlike larger-scale sourcing, where a plethora of suppliers might compete for orders, small-batch sourcing can lead to a scarcity of viable options.
Suppliers might prioritize bulk orders over smaller ones, limiting the pool of partners willing to fulfill lower-volume requests. This scarcity can hinder you from getting a reliable and suitable provider.
3. Lengthy Delivery Times
Low volume production might not be at the forefront of manufacturers’ production schedules. This can result in longer lead times, causing delays that affect business operations and hinder the speed of bringing products to market, which creates challenges in meeting customer demands.
More: There are more details about how to reduce lead times in sourcing.
4. Challenging Quality Control
Ensuring consistent quality is a complex task in low volume manufacturing. With quantities too limited to warrant the initiation of dedicated production molds, manufacturers often resort to sample molds that deviate in material composition from regular production molds. Besides, manual labor may replace assembly line processes, leading to variability in product outcomes and stability.
5. Inefficient Processes
Traditional manufacturing setups are often optimized for larger production runs. However, when dealing with small-batch orders, these processes may become inefficient and impractical.
6. Inadequate Infrastructure
Suppliers with established infrastructure for large and standardized orders sometimes are not suitable for small and customized orders. It will cause logistical or operational challenges if suppliers need to reconfigure the processes or workflows for low volume production.
Part 2. Causes of Low Volume Production Challenges
Small-batch manufacturing is a production that produces goods with few quantities. It can present challenges for customers who seek efficient sourcing solutions.
1. Substantial Supplier Investment
One of the primary reasons behind the hurdles in small-batch procurement lies in the substantial upfront investment required from suppliers. Developing a new product involves costs of design, development, molds, and labor.
However, suppliers are reluctant to take on low-volume orders because it is challenging to recoup the initial investment.
2. Limited Cost-Sharing Benefits
Cost-sharing, which benefits both suppliers and clients in larger orders, becomes less feasible in the context of small-batch procurement.
When costs (e.g., mold making) are fixed, in bulk orders, costs can be spread over numerous units, thus reducing unit costs. However, the cost-saving advantage of dividing these costs is minimal and not cost-effective because of low quantities.
3. Impact on Ongoing Larger Projects
Suppliers typically distribute resources and capacity based on projected order volumes and schedules. While suppliers manage multiple orders, introducing small, diverse orders can disrupt the original arrangement and affect the ongoing progress of large projects.
4. Impact on Profit Margins
Meeting the demands of small batch production often requires suppliers to allocate resources and attention away from larger and more lucrative projects. This shift in priorities will affect their overall strategy and profitability.
As a result, suppliers might quote higher prices for small orders to compensate for the perceived opportunity cost of diverting resources from more profitable ventures.
Part 3. How to Resolve Challenges of Low Volume Manufacturing
By knowing the challenges and causes of small batch production, what can you take to address these challenges and turn them into opportunities?
1. Establish Communication and Collaboration
Improve communication between suppliers and buyers. It helps get across all the product requirements, and expectations, so as to better manage the production process and address the challenges of small batch manufacturing.
2. Select Suitable Suppliers and Foster Partnerships
Choose suppliers who specialize in or have experience in dealing with small quantities orders effectively. Moreover, nurturing robust relationships with reliable suppliers can help to reap long-term benefits and smoother collaboration.
More: To find suppliers, look for the methods in “How to Find a Supplier in China.”
3. Reduce Extensive Customization and Optimize Costs
For low-volume orders, optimal resolution lies in fostering collaboration among design, procurement, and production teams. Teams can minimize non-standard components by adopting a modular design structure and then unify auxiliary materials and tooling into a standardized model. This can reduce excessive costs and facilitate the procurement process.
Part 4. What Are Triggers for Small-Batch Production
When it comes to orders with low quantities, several factors come into play that contribute to the need for diversifying orders.
1. Customized Requests
In today’s market, customers are increasingly seeking personalized and tailored products. As a result, you are facing a surge in specialized and unique orders, leading to the need for low volume production.
Advantages of Low Volume Production:
- Flexibility: Low volume manufacturing allows you to cater to individualized customer requests efficiently.
- Quick Response: You can respond swiftly to customer demands and adapt to changing preferences in the market.
2. Small Businesses
If you are small companies, particularly startups or those focusing on small or niche products, choose small-batch production instead of mass-producing large quantities. This is because smaller production can help you meet the target market and release financial strains.
Advantages of Low Volume Production:
- Reduced Inventory: Producing in smaller quantities reduces the need for large inventories and the waste of lagging products.
- Cost Savings: You can avoid large upfront costs associated with mass production and reduce the risk of holding excess inventory.
3. New Product Testing
Small-batch production is often used for prototyping and testing new products before scaling up to larger volumes. This allows you to refine the design, assess market acceptance, and identify any potential issues or improvements before going to mass production.
Advantages of Low Volume Production:
- Mistakes Mitigation: Manufacturing on a small scale allows for thorough testing and prototyping of new products before investing in mass production, which reduces the risk of costly mistakes in large-scale production.
- Iterative Development: By producing small batches, you can gather feedback from customers and make iterative improvements to the product design for higher-quality final product.
4. Client-Side Demands Shift
In fast-paced industries where trends and customer preferences change rapidly, small-batch production enables you to quickly adapt to market shifts and avoid the risk of being stuck with outdated or unsold inventory.
Advantages of Low Volume Production:
- Agility: Purchasing low volume enables you to quickly adapt to changing customer preferences and market trends. It has the benefits of reducing lead time and achieving quicker delivery to the market.
- Market Testing: It helps test the market response to new trends or product variations by producing small batches. By this, you can gauge customer acceptance and make informed decisions for future production.
5. Unforeseen Factors
Unforeseen incidents in the supply chain, such as damage during transportation, loss, or shortages, can disrupt the procurement process and trigger the need for small-batch orders.
For example, when products are damaged during transportation, immediate replacement of the affected items is necessary, which often results in the procurement of smaller quantities to meet a specific need.
Advantages of Low Volume Production:
- Supply Chain Resilience: Small-batch production provides a way to address unforeseen disruptions in the supply chain without significant delays to maintain operations continuity.
- Reduced Risk: Smaller quantities can minimize the financial loss and operational risks in response to unforeseen factors by adapting your procurement strategy as necessary.
Conclusion
Low volume manufacturing, also known as small batch production, is given paramount importance in dynamic markets. Various triggers drive the need for low-volume manufacturing. In the case of multiple demands, the low volume production satisfies you well and gives you various advantages
However, it is wise to consider the challenges encounter in small-batch orders. These challenges include low bargaining power, lengthy delivery times, production inefficiency and many more. To overcome these obstacles, you should understand the causes behind them as illustrated in the previous text.
To gain successful outcomes in small orders, it is important to focus on building strong relationships with suppliers, optimizing production processes, and leveraging technology.
Additionally, collaborating with industry experts like SVI Global can provide valuable guidance and support in addressing your concerns in low volume production. With our rich experience in the supply chain, we are more than willing to guide you through obstacles and help steer your business toward success.
