Transfer batch sizes and the financial performance of manufacturing – theory of constraints perspective

The purpose of this paper is to examine the effect of manufacturing transfer batch sizes to financial performance, using an unbalanced production process as an exemplified situation. According to the most recent changes in the manufacturing business environment, as well as earlier research in the field (especially the Theory of Constraints (TOC) related research), manufacturing organisations should favour decisions related to lead time improvement and ignore the proposals of cost saving models (Economic Order Quantity, Economic Production Quantity). The results of this paper support this view and it seems that manufacturing organisations using transfer batching are able to serve versatile customer orders in a profitable manner, regardless of actual order size. On the contrary traditional management methods will lead to the situation, where some potential customer groups should be ignored. Despite these interesting results, this paper also proposes further avenues of research on the topic of transfer batching. Lead time improvement creates an interesting trade off situation between two different components (lead time improvement based purely on transfer batch size and non-constraint cycle time savings).