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4 Reasons Your Large Portfolio of Small Batches Drives Your CM to its Knees

Posted by Bruce Hendrick on Mon, Feb 22, 2016 @ 10:02 AM

You’re an OEM with a large annual demand and spending budget, check.

You get lots of attention from big Contract Manufacturers (CMs), check.

You have oodles of unique assemblies to manage, check.

Most of your products are best ordered in small batches, check.

You can’t get no satisfaction, check.

Does this sound familiar?

You spend a lot of money annually, so naturally, CMs are like so many cats at your door. They know of your growth and success and want to participate in it, of course. You give one of them a chance and they impress you with aggressive pricing and reasonably good service. Over the next year or so you move significant pieces of business to them. All is well.

But then something begins to bother you. Very subtly, ship dates for most of your orders under a certain size begin to get moved out on you. Unit prices begin to rise too, sometimes dramatically. You used to get all kinds of attention but these days it seems that your CM might be happier if you didn’t call. What happened?

In frustration, you are tempted to let another cat into the picture. Maybe this new CM partner will be hungrier than the folks you’ve been working with lately. Maybe, but for how long?

It’s not you, it’s not them.

It’s your products. Or, more specifically, it’s the batch sizes in which your large variety of products are built.

It becomes very expensive for a CM who runs large batches in their schedule – and on their equipment – to go into and out of a small batch. Doing this repeatedly can be downright crippling. Here are the 4 reasons why you may not be getting the best service on your substantial assortment of small-batch products:

  1. When the CM slows down to run your small batches, chances are good that one of their large batch customers is adversely affected by the loss of vital production capacity.
  2. Your quoted unit price was calculated based on “normal” overhead cost assumptions… which are often severely underestimated in the real world of small batches. The bigger the product line, the larger the profitability and resource drain this becomes.
  3. Often your small batches require specialized production, testing or engineering expertise so that every unit in the short run can be usable. This further exacerbates the support load needed.
  4. Your corporate philosophy of extending product lines as needed (by adding new assemblies) is directly opposed to the CMs' desire to grow batch size and reduce operational complexity.

As a result of these issues over time, the managers at your CM begin to view your products as time-consuming distractions that interfere with profit and customer service goals. You can’t blame them either. But in this environment, it makes it hard to satisfy your customers!

Thankfully you have a better option: use a CM who works exclusively with small batch sizes like yours. If none of the cats at your door are specifically designed in this way, we’d be happy to take your call.


Bruce Hendrick serves as President & CEO at RBB Systems, The Small Batch Experts.

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Topics: Small Batch Electronics

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