Low volume manufacturing involves the production of lesser units of products to ascertain the product’s success in the market before large production takes place or to fulfil other goals. It involves the mass production of quality parts in a small volume. It can also be used as an all-time strategy by companies because there are multiple benefits of low volume manufacturing. Some of those benefits are discussed below:
Low volume manufacturing saves cost:
It is a common belief that mass production reduces costs. But it only happens when the demand in the market is high. For markets which are uncertain or are saturated with players, the leverage of scale doesn’t apply. In many industries, the reduction in cost due to large production is a myth.
To mass produce, you need more automation, more energy, and space to withstand the pressure of scale. This increases the production cost, inventory cost, cost of distribution, and more. It is always a high-risk game to mass-produce unless there’s a guarantee of high demand.
Testing and checking the quality of welds and even recalling the products from the market in case of a defect is easy in low volume manufacturing. The depreciation of the tools and the production machinery is also low. Low volume manufacturing reduces the cost of tools and equipment even without requiring any minimum threshold order quantity to do so.
Design innovations and high investment R&D possible:
The product and service market is changing rapidly every day. The product designs which were wonders of yesteryears are now obsolete. Every other day, better design and better propositions are cannibalising the existing products. Now, companies which had a traditional amount set apart for R&D and a large chunk of investment afforded in large scale production, disbursement, and sales are in a dilemma.
To allocate a worthy amount for R&D to subsist or exist in the market, low volume production is a viable option. That way, fund allocation for remaining continuously viable in the market is easy. For products with shorter life cycles, low volume manufacturing helps you to respond quickly and repeat production of parts in a better manner.
According to a case study for assignment help – for a fixed design and in a high demand market, “the effect of changing the scale of operations depends on the fraction of the total price that is made up of materials costs and purchased items. Unit materials cost change little with scale, whereas the costs per pack for labour, capital, and plant area may decline substantially with increasing production rates.”
However, when the market demand is fluctuating, and design innovations and yesteryears products going obsolete have become the norm, low volume production is the best way out.
Faster to market:
Think of the time, your team had ideated the product, conceptualised it, afforded research on it, and then assessed the cost implications before finally putting it into production. Even then, it had to maintain a large resource of inventory and draw out viable suppliers to reach the customer.
In large scale production, since the profit or loss is high, the decision making requires more time, more time is spent on deciding product efficacy in the market, and more time to reach your customers. So, you had to wait around a year or so, and by the time the product reaches the market, customer preferences may start to change.
Now you can get over all these with low volume production. You reach the market faster and beat your competitors who are still mid-way, trying to leverage economies of scale. Moreover, the sooner your product is used, the sooner you get customer feedback, and sooner you can upgrade your product and send better versions matching your customer expectations.
This way, you jump from prototype to the main product aligned to customer expectations faster and better.
The market is always a game of uncertainty, however smart you are, and whatever forecasting is there. You never know that the 100,000 units you have produced will not be recalled from the market or the customers would find a better product mid-way. Take the case of the Coronavirus epidemic.
Think of the organisation that had 100,000 units lined up for sale all in inventory, accruing costs of storage, and even depreciation every day. So the loss is huge. In the case of low volume production, massive losses can be averted.
For Amazon or global firms that have been successful, they can take risks as they can shift their procurement or manufacturing from high-cost regions to low cost ones but not for every firm. Amazon stocks more than 100 million items, and in the wake of Coronavirus pandemic, they shifted their procurement priority region to a cheap labour, cheap cost Chinese base.
There are many other factors to consider before you decide to become a low volume manufacturer. A small step in the wrong direction can turn out to be a loss affair. The industries, which really found low volume manufacturing more viable, are CNC Machining parts, injection moulding, die casting, etc.