Since on-demand manufacturing emerged about a decade ago, it has been gradually picking up steam. Driven by the explosive growth of ecommerce and shifting consumer preferences, on-demand, also known as cloud manufacturing, is now poised to revolutionize the supply chain industry. The on-demand manufacturing market is expected to reach approximately $112 billion by 2024, growing at an astounding 19.8% annually.
With on-demand manufacturing, goods are produced only when they are needed and in the quantities required. In contrast, traditional manufacturing requires large quantities of products to be made and then stored in facilities until they are ready for shipping.
As ecommerce redefines the customer experience, consumers increasingly expect and desire personalized products. The adaptability of on-demand capabilities can support shifting consumer needs by making it possible for brands to accommodate the rising demand for customized and small-batch goods. Due to its greater flexibility and ability to produce one-off orders, on-demand manufacturing essentially eliminates the need to hold costly inventory.
A number of other factors are driving the broadening adoption of on-demand production, including:
- Decreasing costs of 3D printing;
- Modernization of manufacturing industries, driven in part by government initiatives;
- Rising consumer demand for artisanal goods; and
- Increased reliance on cloud-based solutions by manufacturing companies.
For companies of all sizes in a wide range of industries, the case for on-demand manufacturing is strong. The process offers benefits to consumers, businesses, and the environment as well.
4 Ways On-Demand Manufacturing can Benefit Your Brand
Lower inventory costs: On-demand production virtually eliminates the need to store materials and the goods made from them. Instead of guessing what consumer demand will be every season and stockpiling inventory, brands can now meet the demand directly because orders are made when requested. On-demand minimizes the need to forecast new product volumes or meet minimum order requirements, and allows companies to shift the costs of warehousing and direct staffing resources to other tasks.
Improve cash flow: Traditional manufacturing generally requires minimum order quantities, meaning brands and retailers have to tie up their cash flow in inventory. However, because on-demand manufacturing eliminates the need for carrying inventory, it also frees up a business’ cash flow. This liquidity allows brands to boost revenue-driving activities such as marketing, which increases sales and ultimately grows their business. Some may argue that on-demand manufacturing results in a higher cost per unit price because orders are not produced at economies of scale. However, the risk with bulk inventory from traditional manufacturing is that brands may have to mark down or absorb items at the end of the season when trends change and styles have shifted, lowering their profit margin. Because on-demand produces an item when it is ordered, that item has a consistent margin throughout the year. This means companies will know exactly what their profit will be for each unit sold, and can better plan and manage their overall cash flow.
Streamline operations: With on-demand manufacturing, brands can outsource their supply chain solutions. That allows them to concentrate less on logistics and focus on what they do best — designing, marketing and selling. On-demand also provides an opportunity to easily test new ideas and designs in a cost-effective way, which benefits companies of all sizes. For small brands or startups, the ease and efficiency of on-demand enables them to quickly go-to-market. For businesses in the apparel and home goods market in particular, both of which have blossomed over the past year, on-demand manufacturing is a highly effective approach to scaling their operations.
Reduce landfill waste: With traditional manufacturing, brands must estimate consumer demand for each product. That usually leads to overproduction, especially in the fashion and apparel industry where styles and trends can rapidly shift. When items aren’t purchased, many wind up as landfill waste or are incinerated. Almost 87% of textile materials are wasted, representing a lost opportunity of more than $100 billion annually. Because on-demand manufacturing allows companies to produce only what consumers order, it eliminates unnecessary production and environmentally harmful waste. Simply put, companies using cloud manufacturing can implement a shorter and more efficient supply chain.
Retailers have been hard hit by the pandemic, with many needing to reevaluate their operations to compete in a changing landscape. On-demand can transform the manufacturing industry, as brands address the shifting demands of consumers while reducing costs and harmful environmental impacts. While on-demand initially provided growth opportunities for small to medium-sized businesses, more and more enterprise and retail brands are taking advantage of this innovative, cost-effective and sustainable manufacturing process.
Brian Rainey is the CEO of Gooten— a globally distributed production and logistics company transforming how online brands manufacture and fulfill merchandise to their customers. As a “big picture” thinker, Rainey elevates the organization through pivotal leadership and strategic direction while aiding in the expansion of financing, hiring, and global initiatives. Before Gooten, Rainey gained experience in the accounting and finance industries, previously serving as the CFO of Buzz Points, Inc. Rainey holds a Bachelor of Business Administration in Accounting and Finance from James Madison University in Virginia and an MBA from the Darden School of Business at the University of Virginia.