Manufacturing traditionally was an activity of producing goods, storing them in warehouses, and supplying them to distributors. The distributors then are responsible for supply to retailers through whole-sellers. It means that manufacturing essentially has to be a mass-production activity taken as a large scale industrial phenomena.
Though the concept is getting acceptance in global markets, it is not a wholly new idea. The export-oriented industries already produce against specific customer demand. The Textile industry in Pakistan is the best example of on-demand manufacturing. About 90% of the production in this sector is against confirmed orders from global importers. Their demands run into a single container to year-long bookings as per their market demand, size, capacity, and other factors affecting their supply chain requirements.
On-demand manufacturing, also termed cloud manufacturing, is an emerging concept for industrial production. The idea is fast gaining popularity and revolutionizing the supply chain industry. The phenomenal burst of e-commerce is kicking off a sharp shift in consumer choices. Cloud manufacturing is a fit answer to the fast-changing customer preferences. A Market Watch report hints on expansion in global cloud manufacturing to reach about $100 billion by 2024 with an estimated annual growth of 19 percent annually.
How it works
Under the process of On-demand manufacturing, the goods are produced only in response to desired quantities. It is the opposite of traditional manufacturing, where a large volume of goods produced, stored, and then shipped. On-demand, production is a smarter way to make what the customer demands. A large inventory is not to be maintained, but only a fixed amount of raw materials are needed. Many factors are responsible for the growth of on-demand manufacturing. The rise of e-commerce remains the single largest factor behind the popularity.
The COVID-19 pandemic drastically pushed the growth of e-commerce, paving the way for quick production. Consumer awareness stimulates more customized products to meet individual choices. The suppliers can comfortably meet the small individual needs by quickly producing the small quantities for ready turnover of their funds to generate small but speedy profits. The on-demand production best meets the shifting consumer needs. It makes it possible for brands to adapt to address the rising demand for customer-specific small-batch goods.
On-demand manufacturing has many other favorable factors behind its acceptance. The factors include reduced costs due to 3D printing and small batch production, extended government support for revamping industries, rising consumer demand for customized goods, and fast-selling through e-commerce channels. The case of on-demand manufacturing is equally beneficial for small and large scale industries. The process offers benefits that suit consumers, businesses, and the environment. Below we discuss the advantages of attracting brands to opt for on-demand manufacturing:-
Saving on Storing & Inventory
Cloud manufacturing help in the elimination of the storage of produced goods. Similarly, the brands need not maintain hefty quantities of inventory stocks. Hence the production starts against the confirmed orders, the immediate supply to buyers and consumers is always guaranteed. The companies get rid of long term planning, raw materials stocks, storage costs, and forecasting on larger production volumes for meeting the surge in demand.
Saving on Overproduction
Traditional manufacturing bound the brands to forecast the required quantities of each product for a given period. The demand sometimes does not come up to estimates, resulting in overproduction. It is true, in the case of the fashion industry, where a sudden change in trend can play havoc. The unsold stocks go into discounted sales and even into wastage in some cases. The losses in industries like textile are at about 85% of the total production. The losses, therefore, run into billions of dollars. On-demand production is a way to save time and money due to the certainty of sales as production only takes place against the orders alone.
The on-demand production provides ease of outsourcing production at lower costs without fear of maintaining unsold stocks. The brands can better concentrate on designing, marketing, and selling. They even have a choice to outsource different products to different vendors based on their specialty. It is an easy way to maintain quality with minimum controls and interference. On-demand production is already a time-tested feature in businesses like textiles, apparel, and home goods.
The on-demand production being against orders needs low investment, and that too with a very high level of confirmed sales, immediate turnover, and the sure profits. The Retailers are facing difficulties because of the Covid pandemic. The on-demand production is a way forward to the re-evaluation of their operations. Keeping small stocks helps in speedy sales, changing product features at every new batch to give a big push to never before selling volumes. It surely means a handsome profit at comparatively lowest investments.