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Understanding On-Demand Manufacturing
So, what is on-demand manufacturing exactly? In a traditional mass production model, the company might circulate a spreadsheet twice annually that outlines the order plan from the manufacturer, specifying quantities for each product color: Red - 1000 items, Blue - 1200 items, Black - 3000 items, Navy - 2500. This process can be highly inefficient as the quantities to order are often based on guesses. And sometimes, the company will unfortunately overproduce and get stuck with unsold inventory.
On-demand manufacturing, on the other hand, flips this traditional model on its head. Instead of producing goods in bulk and hoping they sell, on-demand manufacturing focuses on producing items only when they are ordered by customers. This eliminates the need for excessive inventory and reduces the risk of unsold products piling up in warehouses.
What is an example of on-demand manufacturing?
A perfect example of on-demand manufacturing can be seen in the custom footwear industry. Companies in this space allow for custom designs to be created by customers, which are then assembled and shipped directly to them. This method empowers consumers to get exactly what they want, when they want it.
How Does On-Demand Manufacturing Work?
Manufacturing on-demand creates products that customers order based on their exact demands. Instead of stocking different products that ship out when customers order, like traditional manufacturers, on-demand manufacturing creates and ships products only when they’re ordered. Using a highly digitalized process, companies can identify and eliminate bottlenecks and potential problems, as well as create innovative products that their customers want without producing or storing any extra goods in the manufacturing facility. On-demand manufacturing is a crucial concept in today's fast-paced business world, as it allows for adaptability and efficiency in various industries, without the need for minimum order quantities.
Let’s take a look at how custom manufacturing works by using a custom shoes business as an example. Here’s how it works:
1. Order placement. The customer submits specifications for the product they want. The purchase can take place in person at a store, over the phone with a sales representative, or online using a product customization software like Kickflip. This type of solution has the benefit of giving customers a live preview of the product prior to purchase, enabling them to visualize their personalized designs. It also eliminates ordering errors and ensures that the customer gets exactly what they want.
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2. Quoting and selection. The company analyzes the customer’s design and provides a quote to the customer based on factors like materials, complexity, and quantity. In the case of the custom shoe company, utilizing a product configurator software enables them to provide instant quotes and price adjustments. As customers choose various options, they will observe real-time price changes and can finalize the purchase directly on the e-commerce platform.
3. Production. Once a customer confirms their order, the manufacturer produces the product using various technologies including, but not limited to 3D printing, CNC machining, injection molding, die casting, or urethane casting. When it comes to the shirt business, it could leverage DTG (direct-to-garment) technology to create custom shirts after they are ordered. DTG printing involves a specialized printer that applies the design directly onto the shirt fabric, resulting in a high-quality and long-lasting print.
4. Quality control and delivery. The product undergoes quality checks to ensure it meets the customer’s specifications. Finally, it’s packaged and shipped directly to the customer.
On-Demand Manufacturing vs. Traditional Manufacturing
There are some critical differences between on-demand and traditional manufacturing. Some of the main differences are:
Strategic Planning and Forecasting
In traditional manufacturing, companies try to anticipate demand and create products based on what they project customers will want. There is a longer planning and manufacturing process for conventional products, allowing for economies of scale to be realized. With on-demand manufacturing, companies pull the customers into the manufacturing process, allowing them to dictate the exact product specifications they want. With this model of manufacturing, there are more customization options. The traditional model includes manufacturing and storing products in large quantities, whereas on-demand businesses opt for small-scale production with minimal pre-production, making it a more efficient and cost-effective alternative to traditional manufacturing processes utilizing 3D printing, CNC machining, and similar technologies. This shift in the manufacturing industry has also led to changes in planning and production strategies, with a focus on meeting the specific demands of individual customers rather than mass producing for a general market.
Production Processes
The production processes also vary between traditional and custom manufacturing. For conventional businesses, production requires a considerable amount of resources, with time, effort, and storage space allocated for product production. However, a key advantage of conventional manufacturing is its ability to produce goods in large quantities at a low cost, thanks to specialized machinery and assembly lines that reduce production costs.
For on-demand production, production begins once each product is ordered, allowing for enhanced customization and eliminating the need for bulk production. This not only reduces up-front costs and space for production, but also ensures there are no extra products that haven’t been bought, making it a cost-effective production method.
Responsive Delivery
With traditional manufacturing, products are typically produced in bulk and stored in warehouses until they are ready to be shipped. In contrast, on-demand manufacturing allows for a streamlined delivery process. As each product is manufactured as it is ordered, there is no need for extensive warehousing or inventory management. Instead, products can be shipped directly from the production facility to the customer.
Advantages of On-Demand Manufacturing
There are many benefits of using manufacturing on-demand for a customized products business. Here are some of the advantages:
Reduced Inventory Costs
An on-demand system can save your business lots of money by reducing inventory costs. If you have a custom shirts business, for instance, then a print-on-demand model enables you to create each shirt when it’s ordered, eliminating the need to store large amounts of various shirt colors and designs. In traditional manufacturing, you would need to estimate how many shirts would sell in different designs, buy the shirts, and store them until they sell. This traditional model is much more costly than printing on demand.
Increased Flexibility
On-demand manufacturing allows your business to adapt quickly to changes in the marketplace, customer demands, and new trends in your industry. Since production is based on need, your business can adjust product offerings easily without significant financial risk or waste.
Lower Risk
Manufacturing on-demand reduces the risks and costs of overproducing and storing stock that doesn’t sell. This gives businesses less financial risk since they only produce goods in response to customer orders.
Customization and Personalization
On-demand manufacturing allows for greater flexibility in meeting consumer demand. It unlocks the capability to provide the utmost level of customization. Since items can be made to order, customers have the final say in their product custom parts, coloring and other features. This offers a significant competitive advantage in markets where customer preferences are highly individualized and where customization and personalization are in high demand.
A more sustainable approach
Approximately 48% of companies report facing increased pressure to enhance sustainability within their supply chains. By reducing overproduction and waste, on-demand manufacturing not only conserves resources but also significantly lowers the carbon footprint associated with production processes. Traditional manufacturing methods often involve mass production of items in anticipation of demand, leading to excess inventory that may never be sold. This excess not only represents a waste of materials and energy but also contributes to the carbon footprint through the production, storage, and eventual disposal of unsold goods.
On-demand manufacturing, on the other hand, creates products only when there is a direct need, which is one of the best way to minimize unnecessary production. This approach is inherently more efficient, as it aligns production with actual demand, reducing the energy and materials consumed. Consequently, it also decreases the emissions associated with these processes, contributing to a lower overall carbon footprint for the products manufactured in this way.
Cost-Effective for Small Batches
On-demand production is an ideal solution for small businesses or those catering to niche markets. It allows for the efficient fulfillment of orders as they are received, ensuring that production levels are directly aligned with demand. This approach not only optimizes the manufacturing process but also significantly reduces waste, making it a cost-effective strategy for those producing smaller batches of specialized products.
Improved profit margins
Customized products command premium prices and can help your business increase revenue by catering to consumers willing to pay more for personalized products. According to researchers at Deloitte, 1 in 5 consumers interested in customized products are willing to spend a 20% premium for those products.
Technologies Empowering On-Demand Manufacturing
Manufacturing on demand is increasingly accessible because of the advancement in technology. Some of the technologies that enable on-demand manufacturing include:
3D Printing creates physical objects from digital CAD models, layer by layer. 3D printing is often used for custom prosthetics, architectural models, phone cases, toys, and jewelry.
Laser Engraving and Cutting uses a laser beam to engrave designs or cut shapes onto different raw materials. Personalized gifts, signs, and product labeling may be created using laser engraving.
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CNC Machining uses computer-controlled tools to cut and shape parts from different materials such as metal sheets. Examples include medical devices and automotive parts, and molds.
Direct to Garment (DTG) Printing prints designs directly onto fabric using inkjet technology. T-shirts, hoodies, bags, sportswear, and personalized apparel can be made with DTG printing.
Sublimation transfers a design onto specific materials (like polyester or ceramics) using heat and pressure. This process may be used to make mugs, phone cases, apparel, flags, and sports jerseys.
By leveraging these digital fabrication technologies companies can streamline production processes, minimize the delay between order and delivery and offer competitive prices. Shortening lead times not only improves the customer experience by delivering products faster but also increases the competitiveness of a business by making it more responsive to market needs and trends.
On-Demand Manufacturing Real-World Examples
Manufacturing on demand is happening all over the world. Here are some examples:
Herschel Supply Co. uses DTG printing for the limited edition designs on their backpacks and bags.
Nike offers online shoe customization options that allow customers to choose colors and materials and add personal touches like text or monograms. Orders are made-to-order, and production time typically ranges from 2 to 4 weeks.
BMW offers customization options for many of its cars. The luxury car company uses 3D printing for small series production in its vehicles that are made to order, producing components of the cars through laser beam melting and polymer parts through multi-jet fusion and selective laser sintering.
Limitations to Consider in On-Demand Manufacturing
Manufacturing on demand offers many advantages, but there are some limitations to consider before diving in. First, the cost per unit may be higher. While bypassing large-scale production saves on inventory, the per-unit price for smaller batches can be higher, making traditional manufacturing the best option for sustained production when consumer demand increases. Additionally, setup fees for specific technologies or material limitations can add unexpected costs. For very high volumes, it may still be more cost-effective to rely on traditional manufacturing methods.
Second, production times can vary, with some taking longer than others. While on-demand manufacturing boasts faster turnaround times than traditional methods, it’s still not magic. Complex designs or intricate processes might require more time, so the delivery time has to be adjusted accordingly.
In addition, on-demand manufacturing relies heavily on supply chain management to ensure materials are available when needed and orders are fulfilled in a timely manner. Thankfully, the emergence of cloud-based platforms for supply chain management has simplified the process of managing the supply chain and optimizing on-demand manufacturing.
Finally, don’t underestimate the power of choice paralysis of your customers. When given too many options, customers can often feel overwhelmed and struggle to make a decision. This is something to consider in on-demand manufacturing, where customization is a key selling point. While it's important to offer choices and personalization options, it's equally important to strike a balance and not inundate customers with too many possibilities.
Conclusion
On-demand manufacturing represents a transformative shift in the production of consumer goods, offering a strategic advantage for businesses seeking flexibility, customization, and quick turnaround times. This approach allows businesses to tailor their output to actual demand during each production stage, ensuring a more efficient allocation of resources and a reduction in waste, thereby enhancing the overall customer experience. As technology continues to evolve, the adoption of on-demand manufacturing in the creation of new products is anticipated to grow, further revolutionizing the landscape of industrial production and setting new benchmarks for operational excellence.
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