Handling inventory carrying costs is a challenge in itself in today's era. It refers to the cost of storing unsold goods or unfinished parts. This is one of the major reasons that the concept of on-demand manufacturing has risen to the platform of manufacturing engineering. With the onset of the Fourth Industrial Revolution, the Internet of Things (IoT) and Cloud Computing are becoming stronger day by day and are changing the way manufacturing is carried out. On-demand manufacturing is a complete architecture to reduce delays in quotations, increase efficiency and transparency in supply chain management. In this article, we will discuss what advantages it brings to the table, a comparison between traditional and low volume manufacturing and its applicability in custom parts manufacturing.
Conventional and on-demand manufacturing (also known as low volume manufacturing) are two different strategies used to fulfill the demand of the customers. These two strategies in some ways are polar opposites of each other. In conventional manufacturing, parts are produced in bulk and then are stored in the inventory before they are sold to the customers. As the parts are produced in large quantities, it is very easy to achieve economies of scale. This is because the fixed costs are divided over a large number of parts, which reduces the unit cost of a single part. The drawback of using conventional manufacturing is that it requires inventory space in which the produced parts are stored. This requires extra cost. Furthermore, some parts have limited life and therefore will become useless if they are stored in the inventory for long periods. A poor forecast of market demand is normally the cause for excess inventory that remains unsold causing the manufactured parts to lose their value. Hence, there is no room for an inaccurate forecast about market demand in conventional manufacturing.
In low-volume manufacturing, the parts are only produced when the customer places an order and the quantity of the parts produced is no more than the actual demand of the customer. By using a digital platform, the customers can easily get the prices of the parts that they want to order and stay in touch with the production of the desired part in real-time. Hence, the customer can order the exact quantity of parts that are required which causes the implementation of the JIT (Just in Time) strategy across the entirety of the supply chain. The exact differences between conventional and on-demand manufacturing are listed in the table below:
Parameter | Conventional Manufacturing | On-Demand Manufacturing |
| Procurement approach | The customer must look for different suppliers. | Existing manufacturing partners are used for the completion of customer's demand. |
| Acquisition of Quotation | Quotation of prices can take a long time as they are communicated via emails. | The quotes can be found in real-time by using an online platform. |
| Design for Manufacturing | DFM (Design for Manufacturability) feedback is given through emails, telephone or in-person. | DFM reports are automated. A smart platform for all the uploaded CAD models helps the customer in real-time. |
| Lead time | It is dependent on the selected vendor as well as the capacity of the workshop. It can take from several days to several weeks depending on the vendor. | Most parts are delivered swiftly to the customers. |
| Means of communication between customer and vendor | Communication is done directly with vendors via phone or emails. | Buyers communicate their demands to the manufacturing support team via a platform or through chats, emails, and phone. There is no direct communication with vendors and buyers. |
| Interlinking | The individual capabilities of a vendor can be utilized only. For post machining or post-processing, the buyer has to outsource independently. | The platform interlinks the capabilities of a manufacturer and their partners for a one-stop solution for the customer. |
If we study both conventional and on-demand manufacturing, the benefits of the latter are quite obvious. It is centralized on the relationship of the buyer and supplier and it automates it to the best of its ability. This helps in overcoming the incapability and the setbacks and delays that are common in the production process. These advantages lead to a well-organized process which has several benefits as shown in the diagram below:
We hope this article helped you in getting a descriptive and pictorial depiction of what on-demand manufacturing is all about. It is imperative for most industries to make a shift towards low volume manufacturing sooner or later. However, it is really important for you, as a customer, to know which platforms and suppliers are most seasoned in this line of work so that you can actually benefit from all the advantages that we described in the article.
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