On-Demand Manufacturing and Operational Transparency

[Audio] Good day Everyone, today I'll discuss Chapter 25 of Production and Operation Management entitled, On- Demand Manufacturing and Operational Transparency..

[Audio] The learning objectives on these topics are What is On-Demand Manufacturing -We are going to Define On-Demand Manufacturing We'll know the advantages and Limitations of On-Demand Manufacturing What is Operational Transparency -How operational transparency can be implemented and - What are its limitations. So, lets proceed.

[Audio] What is on demand manufacturing On demand manufacturing is also called as manufacturing on demand or custom manufacturing or cloud manufacturing. So, this is a methd of producing goods only when needed and only in the amounts required. Which means that this revolutionary system is in contrast to traditional manufacturing, in which products are manufactured in large quantities and stored in facilities until they are sold, distributed, and also delivered. So, It's no surprise that the manufacturing industry felt the same pressure as other industries in a post-Amazon world. Why?, its because customers expect companies to provide them with what they need when they want it, and with very little tolerance for delays. The growth of ecommerce and the rapid rate of change in various industries need a production model capable of adapting to fluctuating business needs. Therefore, businesses hope that on-demand manufacturing services could be the answer to handling ongoing disruptions in the supply chain process, and many industries are already using on-demand manufacturing. On Demand system is a new system of production or manufacturing. The earlier system which is known as the traditional manufacturing used to rely on products with standard specifications which had to be mass/large produced and stored..

[Audio] Moving on to the advantages of on demand manufacturing These are as follows: Level Playing Field Testing the Markets No need for Markdowns Environmental Friendly No Credit Risk Faster Qouting Better Product Inventory Management Quicker Lead Times and Improved Cash Flows So, now let us go over them one by one.

[Audio] First advantage is Level playing field. The on-demand manufacturing system provides a level playing field to big companies as well as the smaller ones. This is because there is no need to mass produce products as the per unit prices do not go down significantly. So, The end result is that a few small companies cannot really dominate the market. More competition means more innovation and the end result is that customers can be provided with products which are innovative as well as lower-priced..

[Audio] Next, testing the markets. On-demand manufacturing works well for companies such as apparel and retail where customer tastes and preferences are rapidly shifting. So, with the advent of on-demand manufacturing, the lead time can be reduced to less than a month. This allows companies to send small lots to the market. As per the traditional model, companies require anywhere between six to nine months in order to take a product to market. Hence, they have no choice but to estimate demand based on certain assumptions. If the estimate proves to be wrong, manufacturers end up with excess stock which lies unsold in their godowns or on their stockroom facility. and based on the sales of these lots, companies can decide whether or not they want to produce more and if so in how much quantity. Since mass manufacturing is not necessary, products can be repeatedly produced as and when required in order to meet the needs of the consumers..

[Audio] Next advantage is, no need for markdowns. The modern apparel industry has become used to markdowns and end of season sales. Such markdowns only happen because mass-produced goods lie unsold until the end of the season. These markdowns damage the brand image of the seller. Many customers do not buy products anticipating prices to be lowered during the markdown. Since, On-demand manufacturing replaces mass production and on-demand manufacturing becomes more prevalent, the era of the end of season sales might be about to disappear or it will lead to the end of markdowns..

[Audio] Moving on, On demand manufacturing is environmental friendly. So, it needs to be understood that mass producing goods is also damaging to the environment, why? because when goods are mass produced more and more resources are consumed. Sometimes these goods are not even consumed, this means that the resources were not even utilized but simply wasted! Whereas, On-demand manufacturing ensures that natural resources are only utilized when there is a genuine demand from the customers, so on demand manufacturing is a lot more environment-friendly than other modes of production..

[Audio] Next, No credit risk why? Since sales are being pushed on to subsequent levels of the supply chain, credit sales have to be made. As a result, many companies find their money locked away in accounts receivables. More accounts receivables also mean that there is a higher chance of bad debts. On-demand manufacturing changes all of this. There is no need for credit sales why? because customers pay upfront. Therefore, the need for working capital is completely eliminated..

[Audio] Next is Faster Qouting These instant quotes eliminate the back-and-forth that occurs during traditional manufacturing and makes for a superior customer experience. So, On-demand manufacturing uses instant quote engines to provide up-front estimates of production costs..

[Audio] Next will be, Better Product inventory management So, one of the benefits of an on-demand manufacturer is that they can act like a warehouse and manage the finished products in a buyer's inventory. That gives companies the ability to produce a small inventory of products, which cuts down on shipping costs to get the items into a warehouse. And the ability to have orders shipped directly from an on-demand manufacturer can also speed up the time it takes to get a product to a customer..

[Audio] Quicker Lead Times The supply chain lead times for traditional manufacturers can be up to ten months. Since On-demand manufacturing is agile and scalable, manufacturers can develop and produce products in a shorter turnaround time..

[Audio] Last advantage of On demand manufacturing on the list is, it Improved cash flows. On-demand manufacturing also facilitates more consistent margins because it's easier for a business to accurately forecast profits and there's a lower risk of a company ending up with a lot of unwanted inventory, forcing them to either mark down the costs or absorb the loss. Eliminating the need to spend money on housing inventory frees up cash reserves for other important initiatives — like boosting marketing and sales to drive revenue growth. That ends the advantages of On demand Manufacturing, now we will proceed to the limitations of on demand manufacturing..

[Audio] So, These are the limitations of On demand manufacturing Maintaining High Production Volume is the first one in the list, Next is Managing Frequent Design Changes Controlling the Supply Chain Lack of Uniform Quality Standards Problems With Service Availability Issues With Communication and Risk of Intellectual Property Theft.

[Audio] One of the limitations of on demand manufacturing is maintaning high production volumes, its because On-demand manufacturers cannot meet production requirements. Earlier we said that One of the benefits of on-demand manufacturing is that companies don't need to carry a large quantity of stock because they can ramp up production as needed when demand changes. However, If a company must produce large amounts of products at a consistently high volume In such cases, this business is better off investing in a traditional manufacturing model. which produce a large quantity of products to be stored in a faciity..

[Audio] Next limitation is Managing frequent design Changes If a company's design process is prone to mistakes, inconsistencies or changes, the ensuing back and forth with suppliers about changes often leads to budget overruns. Companies with specific product requirements should have all their documentation in order up-front for an on-demand manufacturer. so, If such a company decides to go with an on-demand manufacturer, they should choose one capable of helping them with design issues and experience in dealing with changes..

[Audio] Controlling the supply chain gives up control over the manufacturing process which means they don't know the production techniques or the skills and technology used in production. And that makes it difficult for the business to discover and deal with production issues, unless it implements robust quality control processes throughout the production cycle to ensure that the manufacturer will end up with a quality product..

[Audio] Lack of uniform quality standards - quality standards can vary from one company to the next. Businesses must thoroughly research an on-demand manufacturer before signing a contract. Companies should check out a manufacturer's reputation within their industry So, It's advisable to select a company that has clearly defined standards around quality throughout the supply chain. They should take steps to ensure there is a uniform approach in place when working with manufacturing partners, because picking the wrong provider leads to process delays and flawed products..

[Audio] So, Next is Problems with service availability businesses are dependent on suppliers to deliver orders promptly, so it's critical that providers can scale up production unexpectedly Otherwise, companies find themselves unable to fill customer orders on time because the supplier can't meet their needs..

[Audio] Issues with communications a lack of experience on the part of the manufacturer or misunderstandings of the scope of the project leads to issues. such as Manufacturers not giving a realistic timeline to cover product needs that will lead to issues such as delays on shipping the products Insufficient planning to handle the transition of resources from a customer to the manufacturer Insufficient clarity around whether a manufacturer has the requisite capacity Manufacturers not communicating critical details about a project among internal team members, which leads to delays or production problems These are some of the issues with communication or miscommunication.

[Audio] Last disadvantage of using a on deman manufacturing mode of production is Risk of intellectual Property Theft. Working with an on-demand manufacturer means giving them proprietary information about a product. Businesses should understand the measures an on-demand manufacturer takes to keep their data secure. There should be clear security protocols in place to track which people are involved in a project and what they do with any associated information. If the company doesn't enforce standards to protect that data, a business could end up having its intellectual property stolen or leaked because of inadequate security controls..

[Audio] When we were in grade school, we always had to prove to teachers and parents that we were doing our best in school and Homework books or assignments were proof that we were spending our time productively, and often soothed angry parents and teachers.The same principle seems to apply to corporate life! Harvard Business Review published a recent article on the benefits of operational transparency. Since this article was written, operational transparency has become the latest buzzword in the corporate world. So on this topic, we will take a closer look at what operational transparency is and we'll try to understand how it could be implemented and what limitations there are..

[Audio] Okay, so, what is operational transparency This is a behavioral science concept that refers to a company that purposefully exposes its processes to customers to help them understand the work being done on their behalf. Think watching employees at Burger king build your favorite burger, or make your coffee at Starbucks. Another example is seeing a progress bar during a software update that lets you know you're on item 5 out of 20 updates, just so you know how long it will be before you can work again. Research has shown that customers value this glimpse into a company's process and that being transparent builds engagement, trust, and loyalty. Why? Customers appreciate the work companies do for them. Operational transparency can be defined as a situation wherein the customer knows exactly what stage of service delivery they are on. So, Operational transparency has a huge impact on the satisfaction levels of the customers as well as employees. This is the reason why companies like Shopee, Lazada or Amazon try to provide transparency to their customers. An order from e commerce industryies does not magically fallout from the sky. Instead, it goes through several stages..

[Audio] So, How to implement Operational Transparency This has to be customized based on the industry. The software development industry is another place where this model is being exhaustively used. Under the traditional development model, the customers would give their requirements to the development team and then wouldn't hear from them until the product was ready for testing. If the development team did face any challenges or delays, it was up to them to fix the problem and deliver on schedule. As far as the customers were concerned, the entire development process was a black box. This is no longer the case. All across the world, software companies are ensuring that their customers remain more involved in the development process. This is because once they are a part of the journey, they are more empathetic towards the challenges which were faced by the development team and therefore reported higher rates of satisfaction..

[Audio] Moving on to the last part of my discussion, the limitations of operational transparency Where, Employees are being exposed and - Customer tend to get dissatisfied The theory of operational transparency is fundamentally changing the way many business entities operate. However, there are limits to the application of this theory. For instance, it is a known fact that just like people don't like to wait, no one likes if someone is watching over their shoulder all the time either! Hence, companies need to make sure that they share information without exerting their employees or making them uncomfortable. Hence, if there is an incompetent employee who is dealing with the customers, they will quickly understand that they are receiving poor service. On the other hand, the service provider may take a long time to find the root cause and fix the problem. The bottom line is that operational transparency needs to be included in day to day operations. The inclusion of operational transparency does not need an overhaul of the entire business. It can be accomplished quite easily without disturbing the business operations..

[Audio] That ends my report on On demand manufacturing and Operational Transparency, so thank you everyone and have a good day!.