Some companies are bringing a new product to market and they realize that the well-known contract manufacturers are not going to be a good fit. They want to work with a factory that is happy to start with relatively small volumes and that will NOT excessively de-prioritize their small customers. They often search for small batch contract manufacturing. But what does it mean, and who might benefit from using one?
What is small batch contract manufacturing?
Simply, this is where a contract manufacturer produces a relatively small number of products for you.
Many manufacturers have a fairly large MOQ (Minimum Order Quantity) which could be well into the thousands or even tens of thousands of pieces. A small batch contract manufacturer will be willing to take on relatively small orders.
Just to provide an idea of what a “small batch” is, for a consumer electronic product of average complexity they might accept to make just 300 or 500 pieces at a time.
Who would use a small batch contract manufacturer?
Startup companies and SMEs that launch an innovative product tend to favor small batch contract manufacturing as the market feedback for their “version 1.0” is largely unknown. They usually hit larger sales volumes in their version 2.0.
B2B products, and those targeting niche markets, also typically move smaller volumes of products.
How does it compare with regular contract manufacturing?
A company such as Foxconn, Wistron, Flextronics, Jabil, and others like them, tend to focus on large-scale production runs with greater emphasis on economies of scale. They won’t offer an MOQ as low as you’d like. And, even if for some strategic reason they do, you will suffer from being the lowest priority of your project manager when one of their blue-chip customers calls for extra attention…
What can we classify as a ‘small batch?’
For the ‘large scale’ manufacturers we mentioned above, a normal production run is above 10,000 units…
In many OEM/ODM factories, you will hear a certain rule of thumb. For example, a minimum of 5,000 pcs for mobile phones.
On the other hand, in a company like ours, there is no artificial MOQ. If a customer needs 500 pcs, that’s usually not an issue. With two caveats.
First, component suppliers have MOQs. If the product includes, say, a custom display coming from a supplier that needs an order of 2,000 pcs at a time, the customer is usually asked to send us a payment for the extra 1,500 pcs that need to be purchased and kept in inventory.
Second, when a batch quantity becomes very low, the customer needs to pay for the manufacturing setup that needs to be done before every batch. For plastic injection molding it is the cost of flushing the material, changing the tooling over, etc. For assembly, it is the cost of doing incoming QC, setting up the workstations, and bringing all the materials close to the line.
Are some manufacturers happier with smaller batches?
This question may make you laugh. Especially if you have had a lot of experience in China – all factories want to grow up quickly, right?
Well, in a way, starting with lower volumes is reassuring. We are much more comfortable starting with a few ‘pilot runs’, making 50 pcs or 80 pcs at a time, and fine-tuning the manufacturing process at the same time. Then, going into ‘mass production’ orders of 500 pcs, then 1,000 pcs, and so on.
Remember, for an innovative product that is made for the first time, the manufacturing process needs at least 3 or 4 good runs before it is relatively stable and mature. Until then, there is a lot of uncertainty. In some cases, issues appear and the manufacturer needs to do a lot of rework and re-production, which means a lot of extra costs.
What production processes may be used in small batch contract manufacturing?
In a general sense, the manufacturing processes will be the same for small batches and large batches. Automation will be much lower for small volumes of production, of course.
If you are looking for productions of electronic and/or mechanical products before tooling is ready and before the New Product Introduction process has been completed, that calls for the use of prototyping equipment.
We wrote about bridge production like this in the past.
This is a flexible way of getting products made earlier. And then later you can scale up as required and pivot to processes more suited to larger order quantities.
3D Printing
3D printing is not very fast (but getting better), flexible, and not always expensive. Although often used for prototyping, it can be used for producing small batches of products if it’s suitable. Good for custom plastic parts, typically.
CNC Machining
Again, a popular choice for prototyping, but realistically can be used for producing small numbers of custom parts. Possible for plastic or metal, depending on the geometry.
Plastic Injection Molding (sometimes)
The mold tooling cost and complexity play a part here, but supposing it isn’t too complex, injection molding could be used for a smaller batch. New molding technologies (with 3D printing) are making injection molding more realistic for small productions.
What should you know before selecting your CM?
Taking the same precautions as when sourcing a regular contract manufacturer makes sense. Because you require a small batch, look out for the following…
The small batch contract manufacturer has experience with your product type
Businesses that produce small batches often have quite niche or customized products, so an experienced manufacturer is a must. They are likely to have the equipment and staff who can hit the ground running.
They are flexible on MOQ
Small batch customers may need to alter production amounts and don’t benefit from being locked into producing a specific number of pieces. Can the CM cater for this flexibility? Does it seem they are quite disappointed when they hear about your initial order quantity?
