There are a lot of batching assumptions being made based on single/few color options that may not be valid with this run -- if I were making S5s, based on machine setup times and whether sufficient storage space is available, the most efficient production schedule might be be something like:
1) Begin making and heat-treating blades.
2) As sufficient quantities of blades are available to complete a blade color (for all three handles), have someone coat all the blades for that sub-batch.
3) Pick a handle color (probably the most popular) and setup the handle machine
3a) Have someone else begin handling the coated blades.
3b) Depending on the handle machine setup overhead, the time to prepare each blade color batch, and whether you have space to stage coated/un-handled blades, it may or may not be worth swapping handle colors before all the blades for each handle color batch are completed (i.e. it may be most efficient to complete all the black handled knives, then all the brown handled knives, then all the green handled knives.)

I suspect this would be the most efficient production plan, but I don't know enough about Scrap Yard's production facilities to make that declaration definitively. Also, that process requires sufficient space to stockpile completed knives until the colors for each person's order are all finished (or incur greater shipping expenses than were charged for multi-knife/multi-color orders). However, I am fairly confident that production batching will based on color combos rather than the sequence of orders.