The manufacturing industry is one of the latest sectors to feel the impact of the on-demand manufacturing model. Customers want production companies to be able to provide them with things they need without delay. Meanwhile, on-demand manufacturing is an important way that helps in Startups de-risking to avert problems.
What is On-Demand Manufacturing?
On-demand manufacturing is a production model used in manufacturing industries that involves the production of parts or products only when customers need it. Customers want manufacturing companies to be able to provide them personalized products in a short time. Therefore, the need for on-demand manufacturing is growing, and more and more Startups rely on it to build their business.
On-demand manufacturing involves the use of CNC machining, rapid injection moulding, sheet metal fabrication,3d printing and such manufacturing techniques together with a cloud technology to provide customers with instant quotes and get them connected throughout the production process. On-demand manufacturing is an important component of most Startups as it is scalable, cost-effective, and guarantees a better customer experience. It can also effectively contribute in Startup de-risking strategy.
Differences Between Traditional Manufacturing and On-Demand Manufacturing
Understanding how on-demand manufacturing works comes with knowing how it differs from the traditional manufacturing model is highly crucial in todays consumer-centric manufacturing scenario. There are many differences and below are some of the notable ones:
Large Quantity in Production
The traditional manufacturing model requires parts to be produced in large quantities. This is important to ensure overall cost-effectiveness as large quantity production reduces unit cost by spreading the cost over large units. The on-demand manufacturing model however, can be used in small production while still being cost-effective.
Needs For Inventory
Due to the large production of parts associated with the traditional model, there is a need for proper inventory and storage before sales and delivery. This leads to an increase in time and effort spent in inventory management and the cost associated with the process. It can also be problematic as some products have short storage life which can lead to lower product quality. However, on-demand manufacturing works with the order based on demand. Therefore, you only get to make a product when people request it.
How On-Demand Manufacturing Helps De-Risk Start-ups
On-demand manufacturing can be of immense help in any Startup due to the many benefits it offers. Below are seven benefits of Startups using on-demand manufacturing models.
It Lowers Inventory and Storage Costs
On demand, manufacturing removes the need for Startups to store raw materials and final products. In the traditional model explained above, there is a need to forecast demand to determine production volume. Consequently, forecasting leads to getting the required material before production and storing them. However, on-demand manufacturing removes the need for storage and inventory which lowers inventory and storage costs.
Lowered inventory and storage cost is a very huge advantage to Startups as it reduces the effort and capital expended on storing raw materials. Therefore, intensity and capital can be directed to other parts of the business such as marketing and sales to drive revenue growth.
Enabling Greater Customization
Since on-demand manufacturing allows businesses to make production in small runs, it enables them to make better customisation. There are two types of manufacturing methods used by major companies running on-demand manufacturing: subtractive and additive. Both methods are ideal for delivering such customisation. However, the additive method is better suited for customisation due to its cost-effectiveness. Also, the raw materials used in 3D printing are more compatible than pre-cut workpieces used in subtractive processes such as CNC machining. The pre-cut workpieces sometimes are not in the right size and shape to create the necessary parts.
Customization guaranteed by on-demand manufacturing is an important asset that can benefit Startups as it increases sales conversion. For example, it has been noted that it can lead to a 30% increase in sales for Startup businesses.
Another advantage of using On-demand manufacturing is that it uses instant quote engines. The instant quote engine can provide the production cost estimation. Therefore, there is an elimination of the back-and-forth cost assessment and estimation in the traditional model. Also, it improves customer experience. China’s leading on-demand manufacturing company, RapidDirect, has a software driven instant quote engine that could generate automated quotes in seconds after uploading a design file based on cloud manufacturing.
It Leads to Faster Production
The major problem with traditional methods of manufacturing is the slow production. Businesses using this method of manufacturing have to wait for a specific quota to be filled to balance cost and production. Inability to fill such quota will lead to delay which slows production. However, on-demand manufacturing ensures that tooling and production of processes such as CNC machining and injection moulding have been defined immediately. Consequently, production can begin without a problem.
Faster production is important in new businesses as it makes it possible for them to cater to a large number of customers as required.
One of the major benefits of using on-demand manufacturing is that it makes prototyping easy. This is unlike the traditional model which is not cost-effective due to the need to produce in mass to balance cost.
Startups can avert product and market risks by prototype machining. In terms of product risks, Startups can salvage errors that could have led to a reduction in product quality and correct them by using a prototype before moving into production. In terms of market risks, Startups using the reduced prototyping cost can create prototypes to assess market acceptance. Therefore, they can avoid wasting money on investing in such products.
Quicker Lead Times
The traditional model has a very long lead time which can be up to a year. However, due to the scalability of on-demand manufacturing, Startups using it have a faster production time which leads to a quicker lead time. This assured quick lead time can help Startups reduce sales risks.
Improved Cash Flow
Lower inventory cost means there is money in reserve for other things. Also, it reduces the risk of Startups being clogged with unwanted inventory. Therefore, there is no need to mark down the costs or absorb the loss.
The on-demand manufacturing model has made it possible to create small volumes of parts with different customization. When adopted by Startup businesses, it offers a lot of benefits. Consequently, Startups manufacturing businesses utilize the model as a way of de-risking.
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