If you were to study business in an academic setting, one of the subjects you would likely study is production management. Few of us who don’t work in the field of manufacturing think very much about what goes into creating the products we use each and every day. It’s a complex, and production management reflects that, spanning fields such as statistics, accounting, budgeting, logistics, performance management, distribution, and more. Consider the task of getting raw materials to a place of production. Then ensuring their quality. Then creating a process through which those materials can easily flow. Then securing adequate manpower to shepherd that process. And then finally determining the quality of finished goods. All of these steps require attention, especially if manufacturers want to marry profitable efficiency with excellent end goods, and managers will need to make a host of concomitant decisions. Just one of those decisions is how many of a particular good to make at once — and when it comes to OTFs, that choice will invariably impact the knife you purchase.

In this article, we will define what batching is, talk about how it fits into the production process, and explain why it matters when you want to purchase a knife.

What Is Batching?

It’s not particularly difficult to understand the nature of batching. If you’ve ever sampled one tray of fresh-from-the-oven cookies even as you load the baking sheet with a second group of dough dollops, you intuitively understand the principle. To quote Merriam-Webster, a batch is “a quantity (as of persons or things) considered as a group” and to batch means “to bring together or process as a batch.” However, if you want to understand why batching particular quantities of a product has a major impact on goods in general (and OTFs in particular!), then you should grasp how the manufacturing process works starting from the very beginning..

Understanding the Value Chain

Imagine yourself enjoying a leisurely breakfast, the table before you spread with croissants and cantaloupe, sausage and soft-boiled eggs, coffee and crepes. Now pick one of those items at random and ask yourself, “Where did that come from?” Just for the sake of example, let’s pick that cup of coffee. Now if you answered, “It came from the store,” or “It came from a field,” you’d be right — but you’d also be incomplete. To grasp why, consider a concept known as the value chain.

In 1985, Harvard academic Michael Porter published a book that both introduced and popularized the term “value chain.” A value chain includes all of the inputs that go into making a particular product; think of them an individual links. Pundits like to divide them into primary activities and support activities. (We’ll get more into those in the next section.) By analyzing those inputs, companies can determine where costs come from and more precisely define their manufacturing process.

Our hypothetical cup of coffee comes from an imaginary company, and that business may lay out its value chain as follows:

• PRODUCTION: This section would include various farms run by the company or contracted with on behalf of the company.
• TRADE: A company may purchase green coffee beans from a third-party, such as a commodity trader.
• PROCESSING: This involves the preparation of coffee beans prior to roasting.
• MANUFACTURING: For coffee, roasting comprises much of the manufacturing process, although one must also consider activities such as quality assurance, storage, and packaging.
•  MARKETING: Reaching out to retail organizations is an essential part of the value chain for most companies.

One point worth remembering is that the value chain can stretch just about as far as you like. Some businesses like to brag that they are “vertically integrated,” meaning that they essentially own all parts of their production process. While this may prove broadly true as far as operations are concerned, it’s an impossibility in actuality. Let’s quickly go back to coffee as an example. Our hypothetical coffee business might own a bevy of farms, its own factory, and a bespoke marketing division. That’s pretty much everything you need to make coffee, right? Well, not really. Consider the fact that successfully producing and selling coffee will likely require soil amendments and pesticides, tractor trailers and grocery shelves — and a whole lot more. If you wanted to really stretch the value chain to its extremities, you’d eventually see that, in a very real sense, it takes the whole world and even the entire cosmos to produce a single cup of coffee. Of course, no company can own *everything*, and the way in which a business defines itself is in deciding which part of the value chain to claim as its own.

The Difference Between Primary and Support Activities

Once a company has claimed its section of the value chain, it begins production, and that’s when batching decisions start to be made. Beforehand, though, businesses must examine every action that its particular place on the value chain will require, and as we mentioned before, those activities fall into two main categories: primary activities and support activities.

Primary activities are those that are essential to the main activities of the business. Experts break them down into five subcategories:

• Inbound Logistics (how to get raw materials to a place of production)
• Operations (the value-adding steps that transform raw materials into final products)
• Outbound Logistics (how to get finished product to a selling place)
• Marketing and Sales (the process of informing purchases of the final product and selling it to them)
• After-Sale Service (providing customer support, service, and/or refunds)

Support activities are those tasks by which companies facilitate their primary activities. They typically include four subcategories all their own:

•  Procurement (how the company secures its raw materials)
• Technological Development (how the business creatures or acquires technology that aids production)
• HR Management (the care for and direction of employees)
•  Infrastructure Management (the maintenance and/or acquisition of physical assets)

Why is it important to identify primary and support activities? Because they help a business understand exactly what it’s doing — and how that relates to its expenses.

Cost Drivers and Allocation

Standard accounting procedures make it pretty easy for businesses to understand the total tally of their expenses. Still, that block number sometimes masks some important information, such as which sections of the company are incurring those costs. Once a business has a grasp of how much of the value chain it spans and the nature of its primary and support activities, it can begin to allocate those costs to certain segments of an organization. From there, important insights come into focus.

Imagine a really large company that, say, manufactures knives. It owns mines, crafts its own steel, and uses its own logistics subsidiary to get that steel to the factory. In addition to manufacturing, it uses a direct marketing approach, employing a raft of salespeople who sell straight to consumers. A cost driver analysis might show that the bulk of the business’ expenses come from the running of the mine assets, but a surprisingly big sum also belongs to the sales force.

Now think about the polar opposite situation. There’s a knife producer that occupies a relatively small section of the value chain. It doesn’t operate any mines, smelt any steel, forge any blades, stamp any parts, own any trucks, or employ any sales staff. It buys prefinished parts, assembles them in-house, and then sells the knives to various retail outlets instead of marketing them itself. Such a business will have a much different cost allocation than the behemoth in the prior paragraph.

On its own, cost allocation is an important, efficiency-improving tool, but it becomes absolutely essential when paired with our next point: what pleases customers.

Which Activities Add to Customer Satisfaction?

Just as every blade isn’t the same, so every customer doesn’t desire identical things. Some will value a cheaply made blade that dulls quickly, but doesn’t cost much. Some will want a bespoke, hand-forged knife of CTS-204P steel created exactly according to their specifications. Still others will look for a well- designed OTF crafted from high-quality materials that will simultaneously last for the long run and not break the bank.

See, a related idea to that of the value chain is the assertion that every product is comprised of varying physical, image, and service characteristics. Different customers will desire different combinations of these things in a final product, and determining what those combinations are will help a business achieve success. When married to cost allocation, an understanding of customer satisfaction helps decision makers see whether or not expensive activities lead to products that please customers.

Do your customers enjoy your knives, but express dissatisfaction with your sales team? If you were our huge knife maker, you might want to dispose of the entire sales team. Similarly, if purchasers wanted inexpensive, after-market support, our smaller producer might consider instituting it. There are numerous production permutations that businesses can make in their quest to find the ideal mix for their customers — and one of them is batching.

We know we’ve taken the scenic route in getting back to our original topic of production management and small batch versus large batch knives, but we hope that it drives home the reasons why different

batching sizes matter when knife aficionados make a purchase. Small and large batches offer very different advantages and disadvantages, which are reflected both in a consumer’s price and the final product.

What Problems Naturally Arise in Batching?

No matter whether a manufacturer chooses large or small batches, some specific problems will naturally occur. This pattern holds true no matter if the end product be baby dolls or bourbon, knitting needles or knives.

The Advantages and Disadvantages of Large Batching

When manufacturers choose to create a good in large batches, they usually have a single reason why: efficiency. Large batching offers the advantages of securing large amounts of raw materials at large discounts, reducing setup and cleaning costs, and realizing economies of scale. In short, large batching saves producers money.

The disadvantages, though, are significant. Quality control suffers during large batching simply because it’s difficult to adequately oversee so much in-process product. It also often requires warehousing and additional hires. Finally, large batching robs manufacturers of flexibility, locking them into a smaller number of designs with a set assortment of materials.

The Advantages and Disadvantages of Small Batching

Small batching presents a largely opposite view of things. It will almost necessarily cost more due to the inherent variable expenses required in executing multiple tiny production runs. Setup costs. Cleanup costs. Personnel costs. It all adds up and multiplies many times over. In absolute terms, small batching simply will incur greater expense on a per-unit basis.

However, other considerations can outweigh that increased cost. For instance, small batches translate into greater flexibility in design. Have tastes changed or has a new innovation arrived on the scene?

Small batching allows businesses to pivot quickly as need arises. Increased quality control also means that items will be more excellent than those made in big batches. Fast turnaround times are yet another advantage, as are cashflow advantages for producers. Basically, businesses that create products in small batches may offer slightly pricier goods, but those goods will be of higher quality, more current and contemporary, and have fewer technical issues.

What Should You Expect from Small-Batch Knives?

Small-batch knives exhibit all of the qualities one might expect from small-batch products in general. Tough. Timely. Consistent. Unique. Always high quality. If you want the cheapest offerings and don’t care much about the materials your knife is made out of, large batching will work just fine for you. But if you want the sorts of things we just mentioned above, you should make sure to look for someone who deals in small-batch knives.

TacKnives is just that sort of business. We design our knives in-house and source all of our parts from excellent suppliers. When you buy from TacKnives, you’re getting a small-batch knife of top quality.