Adapting to High-Mix/Low-Volume across the Six M’s of Manufacturing

“A lot of quoting opportunities, but not as many awards,” or “The volumes aren’t any where near what they said they’d be,” are common responses to my question to manufacturers I meet: “How’s business?” These are clues that manufacturers are facing a new reality where domestic mass manufacturing opportunities are dwindling under changing consumer preferences and global economics, which means traditionally high-volume manufacturers must adapt to new business models to survive.

Globalization and free markets have facilitated production optimization of mass manufacturing to low- cost labor, low-cost regulation, and/or low capital cost regions. Some of that benefit has been offset by the increasing costs of global transportation, such that transportation costs become a more significant portion of cost per unit as volumes of product shipped decline.

This economic reality of transportation cost per unit dovetails well with the other trend of changing consumer preferences. The consumer is no longer happy buying the inexpensive version that everyone else has. Instead, the consumer increasingly wants experiences personalized to their specific situation and products customized to their personal preferences and self-image.

These trends together paint a picture for domestic manufacturing to shift from high-volume production to high-mix/low-volume production. This is increasingly evident in the automotive industry, for example, where even the high-volume pick-up trucks have extensive options for consumer choice that require manufacturing components in lower volumes. Another automotive example is the proliferation of battery electric and hybrid vehicle models with relatively low volumes of each. Likewise in other durable goods, such as home appliances, exercise equipment, furniture to name a few, where the low-priced model is mass manufactured off-shore while the high-end, commercial, or customized products are manufactured domestically in low volumes.

So how does a mass manufacturer adapt to a high-mix/low-volume business model to meet this change in demand profile?

The answer is not through inventory. I have visited a few manufacturers who responded to the change in demand by continuing their high-volume operating practices and shipping to low-volume demand out of inventory. The result was an incredibly low return on capital employed (ROCE) with significant cash tied up in finished goods such that capital expenditures were limited, credit availability was tight, and shareholders were frustrated with the low return on their investment.

The answer is in designing the high-mix/low-volume business appropriately in each of the Six M’s of Manufacturing: Method, Man, Machine, Materials, Measurement, and Management.

To better illustrate the Six M’s, let me first contrast the Six M’s for high-volume mass manufacturing versus low-volume, custom or prototype manufacturing.

Method

Method refers to the specific approach selected to manufacture the product. While the specifics of the method vary greatly by product or by manufacturing process technology, the difference in method can be contrasted generically for high volume versus low volume. The approach to manufacturing by high- volume manufacturers can be categorized to dedicate machinery to the primary transformation processes and automate as much as can be afforded. For example, a high-volume metalformer would prefer to construct a die dedicated to the specific product with as much if not all of the forming processes in that one die such that raw material enters and a completed part exits the machine. In contrast, a low-volume manufacturer will use the best or most appropriate tools (or machines) at their disposal. Depending upon the available tools, different manufacturers will use slightly different processes to arrive at the same finished state, such as one may have a 5-axis laser cutter, while another may use a prototype die and a blanking press.

Man

The next M involves the choices regarding the use of labor. High-volume manufacturers choose to use labor as servants to the machines. The dedicated and automated machines must be kept running to maximize returns on that investment. For low-volume, custom or prototype manufacturers, the approach to labor is the complete opposite: Keep the highest skilled laborers (or aptly “craftsmen”) as busy as possible. Skilled people are the constraint to output and profitable growth.

Machine

As indicated above, the high-volume manufacturer focuses on the machine to achieve maximum utilization, efficiency, and productivity. For low-volume manufacturers, the view of the machine is simply a tool to be used by the skilled labor. Machines of various process technologies –and even robots, may sit idle like hammers in a drawer until such time a skilled operator needs the function it provides. The need for speed and efficiency of the skilled laborer drives the selection of what machines to have available.

Materials

A real economic advantage of high-volume manufacturing is the ability to negotiate better prices for raw materials purchased in large quantities. Buying in bulk, such as a plastic injection molder getting resin delivered in railroad car quantities, is critical to cost competitiveness of high-volume manufacturers.

Low-volume manufacturers try to only buy what they need for the job, passing those higher-priced raw materials on to their customer. However, frequently exact quantities are not available such that low- volume manufacturers will end up with excess and may keep the left-overs for future projects.

Measurement

A very significant but often overlooked difference between high- and low-volume manufacturing is the approach to measurement. The focus of measurement, or quality control, is ensuring that the manufacturing processes are stable. That way not every part produced has to be measured. In prototype manufacturing, the part produced is measured thoroughly while the process stability is ignored as it might not be repeated.

Management

What is the last M of the Six M’s of manufacturing can be debated –if it’s mentioned at all with most authors stopping at Five M’s. However, I have worked inside of manufacturers in all four corners of high- versus low-volume and large versus small organizations, and have come to believe that the sixth “M” is in regards to how the shop floor or manufacturing operations are managed. It is also the M that is most misaligned with the previous five M’s that results in failure of the operation. In high-volume operations, the shopfloor management approach is to create standardization and then work to sustain the standards. This includes standard work by the operators with specified work instructions, standard stocking quantities, standard shipping quantities, standard maintenance schedules, etc. Custom and prototype manufacturing have fewer opportunities for standardization, as product characteristics can vary widely, driving different processes and practices.

Shopfloor management in these environments relies too often on tribal knowledge and focuses on solving today’s problems out of necessity. Better shopfloor management practices at low volume involve creating an environment where results are visible, individuals are accountable, and teams can coordinate to achieve today’s necessary results throughout all of the variability that the operations encounter.

The differences in the Six M’s of Manufacturing for high-volume versus low-volume are summarized in Table 1.

Table 1. The Six M’s of Manufacturing for High-Volume v. Low-Volume

Adapting to high-mix/low-volume manufacturing involves learning from these differing environments of high and low volumes, but not adopting one or the other in the business design. Instead, the Six M’s of Manufacturing for high-mix/low-volume have their own nuanced approaches.

Method for HMLV

For high-mix/low-volume, the manufacturing method is to separate the “high” part from the “mix” part of the process. Some steps of the process can often utilize a high-volume approach, such as producing standard components with high-volume methods. Or bulk processing multiple products together on the same machine to save time. Other steps that facilitate the mix or custom part of the process may be more variable, or involve skilled labor. Each aspect of the manufacturing process is designed and executed with a high- or low-volume methodology.

Man for HMLV

In high-mix/low-volume manufacturing, it’s the man that makes all the difference. The focus of labor is often that which creates the unique, custom, or low-volume element of the product, while the undifferentiated or standard portion of the product is automated or produced in dedicated machinery.

Machine for HMLV

Dedicated machinery can have its place in high-mix/low-volume, but investing in flexible or programmable equipment provides greater equipment utilization opportunities. Since the machine may be producing standard components in high-volume, or providing utility to the laborer for the customization, flexible or programmable options can have significant payback.

Materials for HMLV

Materials for high-mix/low-volume can be difficult to manage. Some elements of the product may warrant buying in bulk for a lower price, while other components may require custom specifications or unique materials. The goal is to find economies of scale in materials where ever they may exist. For example, a manufacturer using sheets of metal will encounter minimum charges to buy just one sheet. However, more competitive prices can be realized if the manufacturer can spread the material across orders and at least buy one stacked pallet. The high-mix/low-volume manufacturer may also intentionally limit their “sandbox where they play” by only quoting opportunities that use materials they use with regularity, thereby reducing obsolescence risk from purchasing economic quantities.

Measurement for HMLV

In the approach to quality is where I often see the most challenges for high-mix/low-volume manufacturers. Some approach the problem purely from the high-volume side of verifying process stability, but then are frustrated to control the variable processes that generate the custom or mix portion of the product array. Others approach the problem purely from the low-volume side of verifying the product, which then creates long queues, delays, and excess costs in 100% inspection. The recommended approach is a blend of the two. For the repeatable portions of the process, establish process parameters and take measurements to ensure those processes are under control. Then institute a final check of the finished good, but only focusing on the critical characteristics for that which made it unique or custom in order to minimize the appraisal costs of quality.

Management for HMLV

Shopfloor management is another area where few have formulated a solid approach for high-mix/low- volume operations. The managers from high-volume operations seek to standardize everything, which results in a flurry of IF-THIS-THEN-THAT instructions and stifling the problem-solving abilities of the semi- skilled or highly-skilled labor. The managers from low-volume operations leave much up to tribal knowledge and the skills of the laborers, but then find themselves repeating problems and/or failing to meet production demands. The optimal approach for shopfloor management for high-mix/low-volume is to focus on developing SYSTEMS rather than pure STANDARDS. The systems create an expectation as to HOW things generally get done rather than focus specifically on WHAT gets done. The systems establish expectations for the individuals or teams and make progress and performance visible so they may be held accountable to meeting those expectations. But the system also enables the semi-skilled and skilled labor to adapt and problem solve to produce a quality product on-time.

Conclusion

A summary of each of these recommended Six M elements for high-mix/low-volume manufacturing is presented in Table 2. Global economics and customer demands are gently pushing many manufacturers in the United States towards producing a high mix of products at low volumes for each discrete product. Manufacturers from both ends of the spectrum from high-volume to low-volume or custom are encountering challenges to cost-effectively meet this profile for product demand. Carefully considering each of the Six M’s of Manufacturing to design and operate the business is necessary to be successful.

While neither the high-volume nor low-volume business is the best design, the high-mix/low-volume manufacturer can learn from elements of each to adopt a more optimal business design.

Table 2. The Six M’s of Manufacturing for High-Mix/Low-Volume