Batch sizes and Ice Cream

Two of my biggest issues with manufacturing are batch sizes and measurement. The next few blogs are going to be focused on these though I will try to only write about one at a time!

Let’s start with batch sizes. One of the first lessons about economics is the economies of scale. Bigger batch sizes mean fewer turnovers and therefore should mean less cost associated with the product. This is constantly upheld when purchasing raw materials. If larger batches are purchased, then you get a discount.

This logic of bigger batch size only works though IF you have someone to sell the product to. Otherwise you end up with big inventories in your warehouse, pressure on Sales staff to find ANY market, a reduction in price as you try to sell of the inventory and a cash flow issue. This becomes even more pronounced when you are in an industry which either has seasonality to it or has actual expiry dates of products.

Bigger batch sizes are often the result of “in case” thinking. We need to make sure we can produce enough in case we get that order with Customer X. Or, we need to make sure that we have inventory on hand in case the machine fails and we can’t produce. Or, what if our competitor has an issue and suddenly can’t produce, we need to have a product so we can get the sale immediately. How often do these things happen?

How do we get to this thinking? Being told you are getting discount can often override a practical look at the full impact of a decision. Have you ever gone to the grocery store and bought a 2L container of ice cream because it was on sale? Even though you weren’t too sure if you even liked the flavour and it was in the middle of winter? You end up throwing out the ice cream 3 months later because no one ever ate it. In the meantime, you have paid electricity to keep the ice cream cool, there is a huge amount of waste because you never get the true value of the product since you throw it out halfway through and, because you have ice cream in the freezer, you don’t buy what you really want since you know you have to finish off the first container still.

The flipside to throwing half the ice cream out is to either indulge, eating it all, or throw a party and have people come over and share it with them. In the first case, you feel disgusting and bloated, not able to function to the level you should as well as having extra fat know in the system (ie inventory!) which takes longer to get rid of. As for the second, you have the extra expenses associated with the party – sending out invitations, getting enough bowls and spoons for everyone and having to wash everyone’s’ dishes after. Plus, you really can’t just give them ice cream. You’ll have to get cones, strawberries, maybe even make dinner too. All because you have too much ice cream. It’s kind of like having a sale. You need to advertise it is going to happen and sometimes you have to bundle your one product with others. Then there is the energy costs associated with the party! I mean, production.

So was it really worth it to buy that 2L container of so-so ice cream? Sure you got it on sale and you don’t have the gas costs associated with driving to the store to get more, but did you really need the quality/characteristics of that ice cream?