If retailers want to survive and thrive over the long run, it’s vital they take…Read more
Through using Digital Manufacturing in combination with Mass Customization and Intelligent Customization software companies can unlock what we call the Power of 3D Customization. One very clear advantage of 3D Customization is the ability for companies to switch to local production.
By producing locally: environmental, branding and process advantages are unlocked. Additionally companies can work more directly with customers, reduce shipping costs and go to a Zero Lead Time or Zero Inventory business model.
Co2 and other Environmental Benefits
Many consumers have a general anxiety about global warming, Co2 and the environment. Depending on your product category there could at this moment simply not be an environmentally friendly alternative available. Compliance on very complicated multi step supply chains that span the globe is very difficult. By switching to local manufacturing you can ensure that your supply chain is the most ecologically friendly one. By simplifying your supply chain it can be optimized to build products close to the consumer. Recycled materials can be used at the point where those materials are disposed of. Co2 and material use can be reduced and by producing close to the customer your product will be reduced in its environmental impact throughout the supply chain. This can bring branding advantages to your company and improve people’s perception of your product or service.
Reshoring and The National Premium
By reshoring a portion of your production to your home country further branding and governmental relations can be had. Currently we are experiencing a time of increased isolationism, nationalism and populism. At such a time it could be politically expedient to produce locally in order to cater to increased nationalistic stances by governments or the general populace. By producing in a country such as Italy or Germany a national premium is also obtained. Made in Germany or Made in France will let your product obtain a premium and is something to communicate to your customers. In light of increased labor costs in China and other companies reshoring makes additional sense at the moment. Increased capabilities in 3D Printing, Digital Manufacturing and industrial robots also mean that your costs per part might actually be lower in Europe than elsewhere in some cases. Overall increased automation will have lowered costs significantly over the past few years. If a highly automated next generation factory will have to be built and installed somewhere the capex will be significant. Labor costs will be a lower portion of factory produced parts of the future. This means that putting this factory in a higher labor country is less of a burden to manufacturers. The improved regulatory environment or stability of the country and its greater access to highly skilled labor are additional elements that will make this decision make more sense. By putting that high investment factory in the company’s home country travel, security and cultural risks are minimized. Many manufacturers are looking at “lights out” factories and Industrie 4.0 where the people are only there to do quality control and the entire production is automated. If you were to build such a factory somewhere would it be 4000 miles from your headquarters? Reshoring increasingly makes economic and political sense and in many product categories will be increasingly important. Adidas SpeedFactories in Germany are just one major way through which products traditionally made overseas are now being made at home.
Across many products there is also increased consumer anxiety about safety. Scandals with plastics in toys and paint in consumer goods have made consumers more aware of possible health risks involved from obtaining products from afar. In categories of products where there is a lot of direct close contact with the product (glasses, utensils, drinking vessels, health care items, cosmetics etc.) and in children’s products especially safety is a critical quality that people are looking for. Regulatory environments such as the European Union impose strict safety standards on products and materials. By reshoring and producing locally consumers can feel safer in their product acquisitions because they are made in Europe. In these close contact products especially the increased safety could be a deciding factor in the supermarket aisle. In other product categories such anxieties do not play a part in consumer decision making because there have not been scandals with that product category or the consumer’s perception of that category is different. A baby bottle would benefit greatly from being made in the EU, meanwhile an item of clothing (from a perceived safety perspective) would make less sense. Additionally by reshoring and using the increased safety umbrella of strong regulatory environments companies can insulate themselves from scandals and surprises. If you sit atop a supply chain that is composed of 100’s of vendors in a dozen companies you can never be sure what is actually in your product. If Adidas makes its shoes in Germany and the materials come from Covestro and BASF their much less complicated all German supply chain would be expected to have less ‘brand killing’ surprises in product safety.
Faster iterations & Fast Product Design
By producing locally companies can also optimally take advantage of fast product design, design communities and limited editions. These quicker low volume ways of producing collectively are in and of themselves shaping the future of manufacturing through iteration and improvement of product and we’ve discussed them at length in their respective sections.
Direct Communication with the Customer
One advantage of local manufacturing is the direct contact it affords you with your customer. People can come into a store and see what the mass customization options are. They can discuss an item with your employee and they can advise them on how to best design the perfect thing for them. Rather than be a pitchman trying to sell them something an employee can take on an advisory role and together with the customer undertake a journey. People can have an experiential shopping event around your brand that activates their creativity and tactile senses. In many markets the super premium is being unlocked, with their being super premium tonic, gin and tequila becoming more and more prevalent. There are many product categories where there is no super premium. By producing locally and setting up your retail experience as a true experience your product could be elevated in terms of the overall experience and its price point. Customer expectations can be managed better. The brew pubs and local coffee roasters growing in number show us that traditional beer and coffee brands now find themselves under threat from tiny locally manufactured products that sell at a premium. It is actually quite strange that brands that have been around a hundred years or more and have been well established while spending millions on advertising can now be competed with. By producing locally a local beer brewer instantly has a premium. Their product has a relatable local story to it. People are connected to the brand because they’ve met you, the brewer and know where your brewery is. This new brand feels more close and personal than the beer brands of old. This is one example where local manufacturing can almost instantly create a powerful brand and experience. Craft breweries also sell their products at much higher price points than traditional beer companies. Local manufacturing is something that could in many different product categories afford companies similar opportunities. What is the next product ripe for premium local manufacturing? Socks? Furniture? In a world where people can sell you a $7 craft beer bottle from a brand you’ve never heard of, anything is possible.
Lower Shipping Cost & Time
By being physically proximate to the customer shipping costs and times are reduced as well. It costs only a few hundred dollars to ship a container around the world but individual shipments to the end customer are still relatively expensive. By shipping from within the country to the end customer shipping costs for the ‘last mile’ are greatly reduced. The supply chain is also simplified here once again going straight from the manufacturing company to UPS which delivers it to the customer. No freight forwarders and distribution companies to distribution centers to the package company. This reduces costs and complexity as well. Time is the greatest cost in this regard here however. Many customers now are used to instant gratification and want their products quickly. By speeding up delivery times custom products produced locally can arrive faster than those produced overseas. Companies can get customers to pay up front, then produce, then ship and the item could be in the customer’s hands the same day or the next day. This is a huge advantage in terms of cash flow to the company as opposed to having thousands of goods in stock at distributors or in transit. In some cases distributors take and pay orders and they take on stocks. This may seem like an advantage but by producing and selling directly more margin can be had, the customer can have their item quicker and the cash is paid up front. Once the investment in local production has been made this is a very advantageous model for the company in terms of margin, cash flow and time to market. This is especially true once we consider that local labor costs will be significantly reduced by Digital Manufacturing and automation. The initial capex may be significant but variable costs and time to market are reduced. By manufacturing locally the time from purchase to the customer having the item in hand is reduced leading to increased profit velocity on the overall product mix.
Zero Lead Time & Zero Inventory
Ideally products can be produced with zero lead time (or practically zero lead time). Using analytics and predictive learning software local trends can be analyzed and products can to a certain extent be produced locally in anticipation of the demand that day. Companies can produce on demand to the latest trends or in anticipation of them. Manufacturing can be done with little or no inventory. In business models where orders are placed and then on demand production is done there would be no product inventory. There would be machines and raw materials but no stock in terms of finished products. Fashion risk would be diminished and companies would have less issues with unsold inventory. Price cuts and sales would not be needed which in and of themselves can harm brands and delay purchases at regular pricing. Instead what the customer wants can be made locally as per their needs.
Would you like to explore local manufacturing and the Power of 3D Customization? We would love to speak with you about the possibilities, pitfalls and opportunities. Contact the Twikit team today.