Succeeding in small scale production
At MFG Concepts we are in an interesting position where we get to see the manufacturing business from all sides, and in all sizes. We help our customers by streamlining their production processes, yet we also produce prototypes. For most people the idea of low volume (which prototypes inherently are) is synonymous with a difficult business. People seem to dread the term “job shop” for some reason. We disagree. There needs to be an understanding of why low volume production is different than large scale, then we can see how to succeed. Today we are going to look into some of the small-scale manufacturing challenges, but also opportunities. (And no, charging customers more is not always the correct answer!)
Set up cost
Many people say that small-scale manufacturing requires the same setup costs as large-scale manufacturing. With low volume, how can a business be competitive without charging an arm and a leg? Injection molding is famous for this, where a single mold could cost over $100k USD. Then the part that comes out of it is often less than $1 USD and only costs $0.05 USD in raw materials to make. The standard assumption then is that if you sell less than 105k units, you’re losing money; which is true.
My challenge here is: don’t set up a small process like a large process. If you are going to sell less than 105k units, ignore injection molding. Instead leverage other technologies like resin casting. Molds typically run around $1,000 USD to produce, and are often usable for 100s of parts.
The same is true for metal components. Sand casting and forging are great processes for massive quantities. A foundry can pump out 1,000s of raw units in no time flat, largely ready for simple machining steps. The same tooling issues apply as in plastic, but the science of the process is also much more expensive. You can’t just pour molten aluminum. There has to be consideration for shrinkage, reservoirs, runners, etc.
The usual small-scale response I see is to move to machining billet. This typically leads to huge CNC machining centers spending hours turning a 100lb block of aluminum into a 15lb part. That’s 85lbs of waste. Instead, I put forward the idea to use laser cut plate steel in a weldment. For critical dimensions a post machining step can be added. This is often significantly cheaper per product, faster and just as functional.
Vendor Courting
I hear a lot from small companies that vendors are hard to find for their volume. It makes sense that vendors would rather court one large client with huge orders rather than multiple small guys. Sometimes small businesses try to work around this by placing one overly large order, just to get someone to take the job.
This is not only financially risky, but it takes one of the most important strategies for a small volume business out of play. Good vendors can open so many doors for success. Some shops want multiple small volume customers to diversify their portfolio. Others just enjoy the challenge of new products. Either way finding the right vendors is worth the hunt. They can offer you product on margin, better payment terms, and will usually help you tailor your product for cheapest production in their shop.
Unfortunately, the best vendors are rarely on Google Maps or have perfect SEO websites. You have to be more creative, finding them where they go. Used equipment auctions, local chamber of commerce, Facebook Marketplace can be full of the vendors you’re looking for.
Sales Channels
Another major issue can be the sales channels for small scale production companies. Many outlets penalize small volume sellers in their algorithm. For instance, if your product doesn’t get clicks, it won’t be on the first page of any search. All this despite it being the absolute best at solving a particular niche. This is where it becomes critical to leave the big, easy outlets behind and focus on where the customers are. This might mean that the only ecommerce sales for a small company might be via a forum sponsorship. Sometimes even abandoning ecommerce works in favor of in person trade show sales.
Conclusion
If the volume is small, you can’t run production like the big guys. By tailoring the production processes to the size of the endeavor, we can still be profitable, possibly even more so than the giants. Here at MFG Concepts we have seen all manner of businesses large and small. We have seen some ingenious solutions to both increase production volumes, but also increase profit while reducing volumes. By being creative we can find profitability for your business. Let us share this expertise with you, and get in contact with us today!
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