We are already half way through 2017, and more than halfway through the decade, yet the Great Recession of 2008 continues to pose challenges for manufacturers. Some challenges can present new opportunities and could force a remake in manufacturing operations worldwide. For both developed and developing economies, manufacturing remains a strong economic sector, accounting for about 16 percent of global GDP and 14 percent of employment. Manufacturing’s contribution the world over is still sizeable- from innovation, contribution to research and development and economic productivity-manufacturing matters.
Many feel this is now the fourth industrial revolution – a blending of the physical to the digital, and that manufacturing must move supply chains to digital frameworks. Cloud technology is becoming more connected, and agile, with less risk, and continues to require operations to become even more connectable. It is now commonplace for manufacturers to integrate their supply chains, and their plant, management, and data operations. Manufacturers must think strategically, be nimble, able to predict the market, not react to it, and to move from information silos, to information networks. The successful manufacturing company will need to turn production lines into production ‘ecosystems.’ These migrations will help manufacturers stay the course, but to stay ON course they need to watch out for two emerging headwinds of customization that could throw them off as the future of manufacturing takes shape.
Consumers today have choices at their fingertips, and can be quite literally a click away from choosing the competitor’s product. The pressure is on manufacturers to stay competitive. One market shift- customizable demand – involves choice and is at the heart of speed-to-market developments. The ability for manufacturers to customize, update, innovate and distribute their products to meet consumer directives in customization will help them stay one step ahead. Innovations like the Internet of Things (IoT) are actually aiding customization by transferring data for product customization over manufacturing networks. Artificial Intelligence (AI) is also pushing innovation, especially with respect to how it can impact E Commerce portals. Those who can respond and create quickly can meet these new challenges, and develop products that meet more customized demands. If speed- to- market force continues to gather steam, then manufacturers who can respond to the challenge, solve it and deliver the goods fast, will get the business.
One way to explain this force is to describe how the opposite- decreased speed to market- can prompt a manufacturing failure. Decreased speed to market gives the competition the sale. A manufacturing operation will lose out when its competitor can make the prototype faster, solve the production problem and/or deliver a new product or service first. It isn’t always about creating the best design but getting the right prototype or product in faster than the competition. The right lead time, and/or the right cost may decide the client’s next supplier or vendor.
As the saying goes, don’t let the perfect be the enemy of the good; navigate around the risks and challenges, respond nimbly and stay on course. Manufacturers need to shorten their supply chain and bring the product quickly to market. It is also crucial to anticipate the needs of the sales team, and customize brand-approved materials for delivery worldwide. Creating value-added materials ahead of time for sales to respond quickly will deliver speed-to-market, customizable products. Manufacturers that give more control to the sales team also give them faster response time to address these customizable demands. Having pre-approved, branded materials will facilitate product updates in this new market so speed just might win the job.
Make-to-stock / Make-to-order Manufacturing
MTS or make –to- stock means creating accurate models of demand forecasts so that manufactured products can be made to stock to minimize excess inventory. The challenge going forward is the trend in customer demand towards product customization. MTO, which stands for make to-order is the new consumer remake of the old ‘bespoke’ concept where a tailor would make your shirt or suit to order. This concept is emerging in tech talk as bespoke manufacturing, and is in conflict with most current methods of manufacturing. It is not made-to-measure, but truly custom-made, or made-from-scratch to a client’s specifications. Mass production and mass customization are two concepts that are at cross purposes. Modern manufacturing networks are already automated, so this new headwind of bespoke design and customizable parts puts manufacturers in a tough spot. Needing to address the challenge of mass production alongside mass customization will demand a unique solution. “Soon every on-site shopper can have a bespoke experience with dynamic pricing strategies rivaling today’s airline industry.” Samit, Jay. "Brick and Mortar Retail Is About to Get a Technology Makeover", Fortune, 23 June 2017
Make-to-stock and make-to-order will present challenges to more manufacturers as consumers demand the ability to order exactly what they want. Often the manufacturer can produce nothing until it has a confirmed order. If the customer can obtain the needed personalization, they still must wait for it to be made and delivered. It takes little imagination to see how this “upside” for the customer is a potential “downside” for the manufacturer. When the (one) client order does come in, it goes to a center (maybe in China), where an electric scooter brings it to the factory. The carbon costs add up by the time it comes back to the U.S. This will probably not pay off in the long run for some manufacturers.
MIT CityCar, the famed urban electric car, is one product that pays off in this make-to-order climate. As a car, it has a base design but is easily scalable, and customizable. Due to its initial design, it can be customized from scratch so it is easier to produce in a made to order mode. Not all manufacturers will have the kind of products that will make for such solutions. Challenged to stay efficient, all manufacturers must pay close attention to customization since this could disrupt the efficiency of operations and have serious consequences.
In part II, we will look at how data-driven manufacturing, the third force, will drive manufacturing to find the right data to stay competitive now.