High Mix and Low Volume: What Are the Implications?

by Laurie A. Harbour, Harbour Results, Inc.

Since the late 1980s, many manufacturers perfected their processes through the implementation of lean systems. Companies were producing a great deal of high-volume products, but the mix had been substantially reduced. Throughput and improvement were soaring as companies implemented several different lean processes throughout operations, materials, scheduling and maintenance. The large manufacturers were building a high volume of products, such as certain automobiles, appliances or consumer products, with very little variation or complexity.

Today, that market is changing dramatically. Vehicles are becoming more complex with new technology and features never seen before, particularly on lower-cost vehicles for the younger generation. For example, the Dodge Dart is currently available for lease for less than $175 per month for a fully loaded product that includes heated seats, heated steering wheel, rear backup camera, touchscreen display, leather seats and hot/cold cup holders. These are features that none of the baby boomer generation ever would have expected on their vehicles at 20 years of age and for less than $175 per month!

In other industries, like appliance, there is more variation than ever before. The GE Monogram refrigerator has multiple versions of available exterior, providing options to each and every consumer looking for something more fitted to the consumer’s taste. Whether it’s the ability to customize apps and colors for Apple iPhones or the over one million variations of Starbucks coffee that are available to purchase, complexity and consumer preference are driving mass customization and complexity into the marketplace like never before.

In the automotive industry, the number of tools per vehicle has gone up 20 percent since 2000 and is expected to rise another 25 percent by 2020. Large Tier 1 suppliers are being asked to produce variations of product at very low volumes; and in some cases, are turning to their suppliers to run these low-volume options in order to minimize the complexity in the Tier 1 facilities. This is indicative of the rising complexity per product and the need to provide the consumer with all the choices they want from generation to generation. This same kind of increase is occurring in other industries as well.

What is the impact of this growing complexity? Molders are starting to see the impact on their production processes as companies are launching more tools at lower volumes than utilized in previous models. Their mix is growing, and the average volume per tool is reducing over time. This transformation in demand from the consumer also is having an impact on the manufacturing process. As the market moves to higher-mix and lower-volume products, the companies that have perfected their systems through lean manufacturing are starting to see these systems face challenges. Machines and molds need to be changed over more frequently, inventories are rising and companies are struggling to schedule effectively.

Companies are working harder than ever before, launching more products than the industry is used to in order to meet consumer demand. Costs seem to be rising. Profits are affected, and companies are working to determine the “new way” to manufacture products that will allow a return to the efficiency levels they once had in their operations. Manufacturing companies spent years perfecting lean manufacturing processes, and now some of those same tools are not working as they did in the past.

The best companies are attacking these challenges in a similar way to how they did years ago. They are gathering data on every single product and process – again. They are developing value stream maps for their processes – again – and trying to find the new pinch points in their systems due to these lower volumes. With this data and mapping, they are developing new swim lanes and scheduling their facilities differently than they have in the past. There is a renewed focus on changeover times and working to reduce total time – again – because many companies actually got complacent in this area, and times have crept up for their operations. A new way of managing inventory is emerging with these new systems in order to determine the appropriate amount to run for each production lot that drives efficiency. Most importantly, the best companies have become better at managing programs and launching products. They have refined their project management processes and communication because of the complexity and amount of launches required.

Chances of the growing complexity and mass customization trends reversing in the near future are unlikely. The new generation of consumer is more complex and more demanding. As a result, manufacturers will have to adapt their manufacturing processes in order return to higher levels of throughput and profitability over the long haul.

Laurie Harbour is president and CEO of Harbour Results, Inc. Combining operational and financial advisory expertise with industry analysis and thought leadership, Harbour Results delivers results that impact the bottom line. The company specializes in manufacturing, production operations and asset intensive industries, as well as a number of manufacturing processes, including stamping, tooling, precision machining and plastics. For more information, visit www.harbourresults.com.