Why Low Volume Costs More

Low volume products cost more per unit than high volume products in the same shop. Most manufacturing people accept this notion intuitively. The magnitude of the disparity, however, is often much greater than intuition indicates. Below are some examples of the contributing factors.

One could argue that most of these examples are just sloppy practice and should have been corrected. True enough, but, every shop has limited resources. In a mixed volume shop, resources are naturally and sensibly directed at the high volume business. Moreover, it often makes little sense to put forth a special effort for parts that only run once or twice a year. For another perspective, see " The Cost of Quality." These are also examples of the Experience Curve effect. The more volume, the more likely these problems will get resolved.

This is a strong argument for outsourcing to a shop whose forte is low volume or splitting the plant into focused factories. In this way systems, equipment and people can be optimized for the appropriate volume range.

Production High Volume Low Volume Prints readily available. Tooling known by operators & available. Setups familiar and fast.Operators work quickly and with high quality. Standard containers are available. Tooling is optimized for speed, quick setup and quality. Prints must be found & issued. Operators must look up tooling ID & locate in tool room. Setups unfamiliar, unpredictable & take more time Operators have forgotten the last run and must relearn. Operators improvise containers. Tooling is ad hoc. Quality High Volume Low Volume Gages readily available. Inspectors know which defects are uncommon and do not require inspection. SPC provides a history of process control and prevents many defects. Specific gages do not exist & measurement takes longer. Inspectors check everything. History unavailable.

Scheduling High Volume Low Volume Kanban systems that require little scheduling effort. Little or no expediting. BOM is up to date and accurate.Components in stock. Work orders issued each job. Significant expediting BOM checked on every job. Items lost in warehouse. Engineering High Volume Low Volume Engineering design is mature & up to date. Process has been reviewed and updated for latest equipment and tooling. Improvements have not been incorporated in the latest design. Process is ten years old and never been reviewed.

Materials
High Volume	Low Volume
Components setup on blanket orders with simple release mechanism.	Purchase order required with quotes and negotiation.