Demystifying the path towards Batch Size 1 Production
An article on Panels & Furniture Asia magazine in its July/August 2020 issue that explains ASEAN countries' current state of development in smaller batch productions in today's Industrial 4.0 era. It also seeks to educate and influence customers in taking the right steps when adopting smaller batch production.
By Szeto Hiu Yan from Panel and Furniture Asia
In our world today, customisation matters. From shoes to cars, consumers desire to own products that are theirs and theirs only. Be it embossing a name on a pair of new sports shoes or choosing the colour and finishing of a new car, mass customisation has made owning unique products possible for consumers. The same goes for furniture.
The era of customised manufacturing or batch size 1 production in the furniture industry has arrived, but are furniture manufacturers in South East Asia ready?
Industry 4.0 is taking industries by storm. New systems, software and processes are introduced and “islands of automation” are replaced with seamless, automated manufacturing lines that can reduce waste and increase material yield, improve quality and throughput, and ultimately achieve optimal efficiency.
Industry 4.0 has also opened the door to batch size 1 production, a new way of production that drives flexibility in manufacturing.
How has batch size 1 production changed the global furniture manufacturing landscape and how prevalent is batch size 1 production in Asia and South East Asia (SEA)? Are furniture manufacturers ready for batch size 1 production? What are the main considerations and potential pain points to take note of when furniture manufacturers are transforming their businesses?
PFA seeks the answers from several experts in the industry.
BATCH SIZE 1 PRODUCTION WILL BECOME A GLOBAL TREND
“The batch size 1 trend started in Europe more than 10 years ago and has slowly over the past few years become a predominant way of production in the United States (US) as well. It has been a long process but it is finally happening now,” said Marc Pfetzing, senior consultant at Schuler Consulting.
THREE REASONS WHY BATCH SIZE 1 IS BECOMING A GLOBAL TREND:
- Technology has finally caught up. New and better equipment, automation and software make batch size 1 production a truly competitive manufacturing option;
- Consumers’ tastes have changed. Driven by individualism and the desire to be unique, consumers are hungry for more custom choices to fit their personal taste and living situation. This creates the demand for more customised products in smaller batches;
- The growing affluency in developing countries also means that markets are opening up to higher-priced products manufactured using the batch size 1 method.
“In the last 10 years, Europe’s furniture manufacturing industry was the only market where batch size 1 production is financially viable. Batch size 1 production was only possible because there were niche manufacturers who could bear the incredibly high investment costs while being able to sell the products at a higher price. The batch size 1 production goes hand-in-hand with the selling price and the investment of the manufacturer,” explained Pfetzing.
DEFINING BATCH SIZE 1 IN ASIA
For now, batch size 1 production in Asia does not refer to an absolute batch size 1, according to Pfetzing.
“In this region, it is really nearly impossible to have a 100% batch size 1 production, unless the factory is only manufacturing two different products. So far, we have managed to get our customers to reduce their batch sizes but not to an absolute batch size 1. So even if a factory is now producing a batch size 10 or batch size 20, I will call it a batch size 1 factory.”
“Regardless of what we call it, I think batch size 1 changes the game through increased flexibility in production. This can only be achieved by changing how production is planned, and adopting a different method of production.”
SLOWLY BUT SURELY - BATCH SIZE 1 PRODUCTION IN ASIA
Experts generally observed that manufacturers from more developed countries with more manpower constraints are faster to adopt batch size 1 production.
“In Asia, there are already some furniture manufacturers producing in batch size 1, though they are producing a mix of mass produced and smaller batches of products, while some are still focused on traditional mass production,” said Pfetzing.
Wolfgang Neeser, managing director of HOMAG Asia, pointed out that the batch size 1 trend is growing steadily, especially in more “advanced” countries in Asia, such as Taiwan, Singapore and Thailand. The same goes for China and South Korea, said Pfetzing.
Developing SEA countries like Malaysia, Indonesia and Vietnam are still catching up. “They are willing to implement online Point-of-Sale systems and software solutions to cater to the local consumer, as well as for customers with smaller budgets,” said Neeser.
High labour costs may be a key reason why manufacturers from these countries are more willing to turn to batch size 1 production. “Labour costs have risen quite steeply so these companies have to invest in a lot of automation. They realised too that once they adopted automation, it was much easier to shift into batch size 1 production,” shared Pfetzing.
“It also helped that manufacturers in the more developed wood industries like those in China are starting to have more surplus money to afford these new technologies.”
The buying cycle of many customers is changing too.
“Frequent comments from OEM manufacturers are that they receive more and more inquiries on orders of 5, 10 and 20 pieces, compared to minimum orders of 100 to 500 in the past decade and they don’t know how to deal with these enquiries and how to process them efficiently,” said Neeser.
“Even for the wholesale buyers or those accustomed to buying in bulk, they all want more customised products nowadays and you can only do it in batch size 1,” said Pfetzing.
“Also, large buyers from the US, for example, are buying a lot of materials from SEA. These buyers are not willing to stock up so much products in the US anymore as large warehouses are a huge cost to them. They are forcing manufacturers to produce smaller batches more regularly and do more regular shipment…Previously, the manufacturer may be producing in batch of 200 or 500. Now, they are producing in batch of 30 or 40, while lowering the number of containers to the customers at the same time,” added Pfetzing.
ARE THE SEA FURNITURE MANUFACTURERS READY?
According to the several experts interviewed, the answer was a unanimous “no”. The interest in Industry 4.0 and batch size 1 production among manufacturers, however, is high.
“They are struggling, maybe because they are unaware or unsure or unwilling to change their current way of production,” said Pfetzing. “But the interest in batch size 1 has grown exponentially since 2019.”
“I believe smaller factories which manage many different parts with a low volume would be keen to explore batch size 1 production, but the cost of integrating this system could be a major factor to consider,” opined Kelvin Kwek, director of OPSH, a Singaporean brand selling pole system for wardrobes and optical glass kitchen cabinets.
PRECONDITIONS FOR SUCCESSFUL TRANSITION TO BATCH SIZE 1 PRODUCTION
It is a huge leap to switch from mass production to batch size 1 production, but by understanding the changes involved and taking small steps to prepare for the transition, the transformation can be less daunting and more palatable.
So what are the preconditions for a successful batch size 1 production?
• Data, data, data
The greatest difference between batch size 1 production and traditional mass production is that the former is very data- centric. From the very first second, producers have to start generating production data to be able to run a batch size 1 factory. With the conventional methods of running a factory, it is not possible.
• The right system, equipment and software
Batch size 1 production is a completely different model from traditional mass production. The smaller the batches go, the more flexible and intelligent the machines need to be, manufacturers will therefore need to change the equipment, the method of producing and the planning of production.
• Sufficient capital
A big investment is needed to purchase the new equipment, machines and software to set up the new system and generate the data required. The transition, however, is usually done in several stages. For example, addition of software can take place in the first year, followed by transformation of the cutting section in the second and the edgebanding section in the third.
• Readiness to embrace change
The new way of production will kickstart many new changes– jobs will be re-designed, workers will take up new roles. The changes will extend beyond the factory and manufacturers may need to consider how designers, salespeople and even the marketing department can be better coordinated to optimise the factory’s new capability and capacity.
• Willingness to train staff
In SEA, many companies may not see the importance of dedicating resources to train workers as the conventional way is for workers to learn and train on the job.
CURRENT PRODUCTION CHALLENGES IN SEA
• Lack of skilled manpower
The lack of skilled manpower has been a perennial issue. Many factories tend to overemploy just to continue production. Also, employing and retaining skilled labour is another big challenge. These issues will perpetuate or lead to new problems when manufacturers want to shift into batch size 1 production.
“Smart production always requires dedicated training hours and costs for factory staff to adopt new skills. Some employers may not be willing to do so,” said Kwek.
“It could be that manufacturers are used to not needing to spend on educating workers. I think this mindset has to change. In the future, technology will be more complicated and the qualification of workers has to be way higher. If they want to do batch size 1, they definitely need to think about educating their workers,” remarked Pfetzing.
Neeser also highlighted that when companies hire unskilled staff with a lack of roadmap on how to train and onboard them, they have little incentive to stay loyal to their employer, switch jobs frequently and new people need to be hired and trained all over again. He continued to point out that due to the lack of skilled workers, software implementation may be met with resistance because of perceived difficulty.
• Lack of data
“All producers are talking about Industry 4.0, automation, upgrading the factories, and they will need to have the data, but many are not sure or unable to create the type of data needed for them to run this type of factory, and to use the data in the right way,” said Pfetzing.
• No clear roadmap for companies who want to transform
When shifting to a new way of manufacturing, many changes have to be made and good planning is necessary for transformation to be take place systematically.
Neeser provided examples of some areas that company owners and managers usually need to look into:
- For manufacturers who want to change, one of the biggest challenge is changing the way orders are processed in the work preparation department and factory thereafter.
- Factories need to be more connected to dealers or their own sales outlets to capture the customer’s choices efficiently and to forward these orders to the factory for processing thereafter, also known as vertical process integration.
- With bigger batches, the work preparation department does CAD drawings only once and they can be used repeatedly and never have to change. Now, essentially every drawing has to change with each single order, creating a huge bottleneck in order engineering
• No clear mapping or assessment of intra-company processes
Having a clear map of processes within the company will help manufacturers visualise what changes are needed and where changes need to happen first, in order to deal with changing consumer environment, said Neeser.
• Optimising raw materials to reduce wastage
Optimising the raw materials in use means reduction of waste, which will eventually contribute to profits. Such optimisation should even be propagated up to sub-contractors level in case the manufacturers leverage sub-contractors to release some of their production load, said Ridwan Aziz, country manager of HOMAG Indonesia.
“In addition, poor production planning may result in over or under estimation of raw material being ordered for production, which may affect producers’ cash-flow due to excessive stock or shortage of raw materials at extreme points.”
• Difficulty in catching errors
Data re-entry and mistakes are easy to make but hard to catch. Also, when manufacturers try to use “generic, low costs” workarounds like Excel spreadsheets paired with basic 2D CAD standard, such solution may still be workable for small companies with high skill set but it will not be sufficient for industrial setups with hundreds or thousands of orders, said Neeser.
POSSIBLE SOLUTIONS AND IMPROVEMENTS
• Introduce software in each department
Some examples of software that can be use include:
- POS software to capture customers’ wants and needs that can be automatically transferred to an order processing tool without any manual re-entry of data
- CAD/CAM software for automatic production data creation (BOM parts list, automatic creation of cutting patterns for panel saw, CNC programmes, etc)
- MES software for factory floor control and transparency
• Keep informed of the latest technology
“Our advice would be to start understanding the different available systems and solutions early and stay in touch with novelties available in the market. Visit trade shows, use sales people to your advantage as information gatherers etc. Stay with technology to achieve first mover advantage,” said Neeser.
• Hire a consultant
For existing mass manufacturing companies, they can consider embarking on a hybrid initiative to re-design their factory layout and invest in assorted machines to enable a flexible production line that can accommodate smaller batch size. Their production management process will also be improved where production planning can now be connected to their production muscles (machines and operators) on the factory floor, said Aziz.
For start-up and Small and Medium Enterprises (SME), they will require a scalable system that can match with their growth path, Aziz added.
Along the way, manufacturers may also hit obstacles such as resistant staff. “Getting resistant staff to accept new changes is one of the most difficult things in our work,” said Pfetzing. “We do many workshops with the owners and their staff in order to convince them that this is the right way forward. If the team is against the change, then probably the manufacturer will not succeed in implementing the new system in any case…Usually with the support of the leaders, we are able to convince the teams.”
Ultimately, consultants can educate and provide guidance to producers so they can avoid pitfalls in their journey towards transformation.
FUTURE: ENTIRE SUPPLY CHAIN, NOT JUST MANUFACTURERS NEED TO UPGRADE
“Industry 4.0” simply cannot do without the “Industry”, stressed Pfetzing.
“Not only do factories need to be Industry 4.0 compliant, all the other suppliers – the wood suppliers, the board suppliers, the paint suppliers – and basically the whole industry has to change to support this type of manufacturing.
For example, if a factory has been built with the latest state-of-the-art technology and has the best of everything but they are not getting the materials in the right way and the suppliers are still working in a very primitive way where nothing is automated… this will become a pain point between the manufacturer and their suppliers.
The whole industry in SEA needs to upgrade as well, otherwise we will lose our competitiveness to other manufacturers and suppliers from other regions. It is everybody’s responsibility too,” concluded Pfetzing.