Why “High-Mix, Low-Volume” Does Not Equal “Small Batch Job Shop”

Posted by Bruce Hendrick on Wed, Jun 12, 2013 @ 10:06 AM
Venture Outsource logo

First, let’s agree on what the term high-mix, low-volume (HMLV) means in the EMS industry. According to popular EMS industry resource Venture Outsource, HMLV is an “environment where products assembled vary in application, lot size, and production processes. Contract manufacturers have the ability to change over product requirements and convert assembly lines in a matter of hours, sometimes minutes. They can easily add capacity to accommodate increased volume and rapid throughput cycles. However, high-mix, low-volume, manufacturing creates numerous challenges because there are more areas to invite error."

Many of these elements also apply for RBB, until it comes to the next and final sentence: “Lower volumes demand more frequent changeovers and may only last for a few shifts, or days.” RBB systems sloganRBB builds upwards of a thousand unique assemblies on an annual basis, introduces multiple new assemblies most weeks, and we do all this with an average batch size of fewer than 50 units. Now that’s small. It is rare indeed that RBB runs a batch large enough to consume an entire shift of time, much less a few shifts!

Now admittedly this should be compared with low-mix, high-volume (LMHV) in our industry which has “high-volume production [that] may last for weeks or months using the same setup.” This is clearly a different animal than HMLV. And now at last I come to my point – that the small batch experts should become its own new subcategory of contract manufacturer!

For discussion purposes, take a look at the following comparison chart:

Picture of categories of electronic contract manufacturers table

Another item that distinguishes many SBJS’s from their HMLV cousins is that HMLV business leaders often consider themselves “on the way to becoming a LMHV” operation. In other words, they see growth “away from” low volume work as good/attractive/legitimate growth – the “bigger is better” thought process.

Small Batch Job Shops

Small batch job shops target a different goal. The only way that they can succeed at the niche they’ve chosen is to be carefully optimized to build small batches repeatedly and routinely. This is not compatible with running large jobs through the same production operation. As a result, the best opportunity for the SBJS to sustain long term growth is to attract more and more customers that need their specialized services. The more successful they are, the more it reinforces their operational excellence with small batches. So there is very little chance of a SBJS growing up or into a LMHV shop like the HMLV shop aspires to be.

This new dynamic is actually good for all parties involved. The OEM customer has more choices of CM’s with more specialties to suit his unique needs. The SBJS sticks to what they do best and gets even better over time. The HMLV firm can build its base of customers and grow with those customers headed into the higher volume arena. And the LMHV business can focus on its sweet spot, knowing that smaller customers will be well-cared-for by the other industry providers until they have high enough volume to be an attractive fit for themselves. Everybody wins.

I realize that the term small batch job shop, or SBJS, may take a while to catch on. I offer it up here to get the discussions going. I’d love to hear your opinions, definitions and disagreements with my thinking.

Bruce Hendrick has been a leader of major change in corporations and small business alike for the past 25 years; he's the owner of RBB Systems and Organizational Development Services, LLC; noted speaker, author, active church member and community volunteer.

Get the Checklist Are you an OEM evaluating a new circuit board manufacturing partner? You can also check out our one-page checklist which will give you all of the questions you should ask as part of your evaluation.

Topics: Small Batch Electronics, Contract Manufacturing, Original Equipment Manufacturing