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Manufacturers and Retailers Both Stand to Benefit from On-Demand Production

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On-demand manufacturing, also called “cloud manufacturing,” is a relatively new process that emerged over the past decade and is revolutionizing the supply chain industry. Driven by the explosive growth of e-commerce and shifting consumer preferences, global cloud manufacturing is expected to reach a market value of $111.9 billion by 2024, growing at an astounding compound annual growth rate (CAGR) of 19.8%. 

On-demand manufacturing — a process by which goods are produced only when they are needed and in the quantities required — has made headway among many small- to medium-sized e-commerce businesses. While major brands are slowly adopting the method, outlets such as Vogue and Amazon have created a buzz around on-demand manufacturing as the future of smart supply chains. 

On-Demand vs. Traditional Wholesale Manufacturing

Traditional manufacturing requires products to be made and then warehoused until they are ready to be shipped, whereas on-demand makes it possible to manufacture goods only when they are ordered by the end customer. Seeking to eliminate the cost and effort of storing and managing inventory, more companies are turning to on-demand manufacturing. 

As e-commerce 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. Thanks to its greater flexibility and ability to produce one-off orders, on-demand manufacturing essentially eliminates the need to hold costly inventory and allows for more opportunities to create unique, specialized products. 

For companies of all sizes in a wide range of industries, the case for on-demand manufacturing is strong — whether as an alternative or a supplement to traditional wholesale. The process offers four benefits to consumers, businesses and the environment. 

1. Reduce Costs to Manage and Store Inventory

On-demand production virtually eliminates the need to store goods and materials. Instead of guessing what consumer demands are and stockpiling costly inventory, brands can now meet the point of demand directly since orders are made when requested.

On-demand minimizes the need for forecasting new product volumes, meeting minimum order requirements, and managing and storing unwanted inventory — saving businesses time, money and headaches. 

2. End Overproduction and Reduce Landfill Waste

Especially in the fashion industry, brands tend to overproduce items, which eventually end up in landfills or are incinerated. Because these items are never purchased, almost 87% of these textile materials are wasted, representing a lost opportunity of more than $100 billion annually.

Many of these items are produced through traditional manufacturing methods, leading to overproduction and an abundance of landfill waste. Because on-demand manufacturing eliminates the need to store and manage inventory, brands can now implement a shortened and digitized supply chain, lessening unnecessary and environmentally harmful waste. This allows companies to only produce goods their customer will actually purchase.

3. 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 to carry inventory, it also frees up a business’ cash flow. This liquidity allows brands to boost revenue-driving activities such as marketing, which increase 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. 

Especially for businesses in the apparel and home goods markets, both of which have blossomed over the past year, on-demand manufacturing is a highly effective approach to scale their operations. 

4. Streamline Operations So Brands Can Focus on Design, Marketing and Sales

Because on-demand manufacturing provides outsourced supply chain solutions, it allows brands to concentrate on what they do best: designing, marketing and selling their products. On-demand also provides an opportunity to easily test new ideas and designs in a cost-effective way, helping growing brands quickly go to market. 

Especially for businesses in the apparel and home goods markets, both of which have blossomed over the past year, on-demand manufacturing is a highly effective approach to scale their operations. 

Transforming Manufacturing

This isn’t the last we’ll hear of on-demand production because it is poised to transform the manufacturing industry, especially to meet the growing and shifting demands of consumers. While on-demand has initially provided growth opportunities for small- to medium-sized businesses, we are seeing more enterprise and retail brands take advantage of this innovative, cost-effective and sustainable manufacturing process. 

Brian Rainey is the CEO of Gooten, a globally distributed production and logistics company that operates a smart supply chain for brands and retailers looking to reshape their e-commerce business with on-demand manufacturing.  

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