On-demand manufacturing, which is sometimes referred to as Manufacturing on Demand (MOD) or cloud manufacturing, has the potential to transform procurement and supplier relationships, drive efficiency, and reduce costs.
What is on-demand manufacturing?
In traditional manufacturing, a supplier produces a limited range of components, products, or parts – often in big quantities. Large-scale production not only means a vendor will have excess inventory to meet unexpected surges in demand but both supplier and buyer will benefit from economies of scale.
Of course, one of the major drawbacks of this approach is the cost of warehousing and the resources required for managing surplus stock. This can be particularly challenging for components or products that will quickly become obsolete or have more complex storage requirements, such as refrigeration.
In contrast, on-demand manufacturing sees suppliers producing components, products, and parts only as and when a buyer needs them – and in whatever quantities they require. The viability of on-demand manufacturing is largely thanks to the recent rise of cloud-based technologies and digital platforms, which means procurement professionals can obtain quotes, place orders, monitor production, and engage with their suppliers in real-time.
How can on-demand manufacturing benefit procurement professionals?
In a post-COVID world, many organisations will be wary of embracing on-demand manufacturing. After all, hasn’t the past year taught us that just-in-time (JIT) supply chains are a recipe for disaster?
As many procurement teams pivot to just-in-case (JIC) supply chain models, look to onboard additional contingency suppliers, prioritise risk mitigation, and reshore their operations, will there still be a place for on-demand manufacturing?
In the right context, and with careful consideration, on-demand manufacturing can continue to provide many benefits.
1. Cost savings
On-demand manufacturing negates the need for vendors and buyers to stockpile inventory. Not only does this reduce waste but it saves money on warehousing and staffing resources to conduct inventory management.
On-demand manufacturing also means procurement professionals needn’t waste resources identifying and onboarding new suppliers every time they need a new product or component.
2. Supplier collaboration
On-demand manufacturing platforms come with self-service software that allows buyers to upload their specific requirements and designs. Procurement can connect and collaborate with their suppliers in real-time to manage a project, address queries, and make adjustments as necessary.
3. Supply chain visibility
On-demand manufacturing platforms provide better visibility into production status, and access to historical order data. Access to a network of pre-vetted global suppliers also helps to mitigate risk and makes it easy for procurement teams to shift operations to alternate suppliers as and when it’s necessary.
The rise of eCommerce has shifted customer expectations to the extent that personalised products are both desired and expected. With the cost of technologies like 3D printing rapidly declining, purchasing custom-made, on-demand, and small-batch goods is becoming increasingly viable.
On-demand manufacturing means only producing the products and components that are actually in demand. As a result, there’s no risk of overproduction, which reduces waste and the possibility of environmentally harmful materials ending up in a landfill.
On-demand manufacturing platforms enable quicker turnaround times, shorter lead times, and more efficient supplier management, with many supplier-buyer interactions centralised and automated.