Steve Shebuski, VP of Digital Strategy
Guiding businesses through their digital transformation journey
With the continuing growth of IoT, the cloud, and a shift to X-economies, manufacturers are finding it necessary to change their business models, products, and services. X-economies push manufacturers to provide the latest products and services, with more flexibility, at lowest costs.
4 Emerging Manufacturing Business Models
In Microsoft's 2019 Manufacturing Trends Report, they found that manufacturers are responding to new buyer demands and X-economies, by embracing 4 new business models: On-demand services, sharing economy & online consignment, subscription box services, and XaaS.
On-demand services such as car service, food delivery, dog walking, and many other categories, are growing rapidly in popularity. Microsoft discovered that on-demand services had a projected growth of $57 billion in 2018.
So how does this apply to manufacturing? With the decrease in costs of 3D printing and the increase in demand for personalization and artisan goods, on-demand manufacturing makes sense. Customers are beginning to expect to have the ability to customize without breaking the bank or wasting too much time.
On-demand manufacturing is not just beneficial for the customer. Inventory costs can be almost eliminated, production waste is reduced, and the “guessing game” of what features your customer wants is gone.
Sharing Economy and Online Consignment
Instead of going directly to retailers and distributors, consumers are “sharing” and reselling products and services. They are reducing waste and costs by, crowdfunding, ride-sharing, house/apartment renting, and using reselling/trading services such as eBay and Craigslist.
Many workers are using digital platforms to do freelance work instead of working in traditional settings. At first glance, this trend seems like it would be very bad for manufacturers but in actuality, it's a new opportunity.
Freelancers provide a way for manufacturers to outsource good, flexible talent that tends to be cheaper than traditional workers. This is particularly helpful for companies that often hire temporary or seasonal employees.
Microsoft found that Samsung used this method of hiring for their quick turnaround projects. Samsung saw a 60% decrease in costs and a reduction in administrative time of 64%.
Subscription Box Services
Subscriptions box services open the door for manufacturers to sell direct to consumer. Subscription boxes are highly targets boxes containing items from a specific category that matters to the consumer.
From cooking kits and dog supplies to makeup samples and clothing, these boxes cut out the middleman and take the product straight to the consumers. Selling direct-to-consumer allows for brands to build relationships and personalize the consumer’s experience.
The cost of entry in this marketplace is relatively low. It’s important to know that this causes a saturated market.
To be successful in this competitive market, include products in your box that have some mystery to them. Customers buy these boxes for a unique experience that surprises and delights them.
Anything as a Service (XaaS)
XaaS is most often seen in "pay-as-you-go" or "subscription" models. Since the rise of cloud computing, companies are able to provide everything from platforms and infrastructure to transportation and shopping as services.
XaaS paves the way for "Manufacturing as a Service". Manufacturers can share machines, maintenance, software and even networks in order to produce goods more efficiently.
For example, a singularly managed network allows work to be routed to the most efficient facility to carry out the job. This eliminated manual job sorting, decreases the project's start time, and reduces production cost by sending the task to the most efficient facility.
Change in Manufacturing
With advancements in technology and changing buyer habits, manufacturers have the opportunity to innovate and adapt. To ignore these new trends and the changing market means losing competitive advantage and staying stagnant.
Customers want manufacturers to be more understanding, more agile and exceed expectations. Platforms such as Microsoft D365 and The Supply Chain Cloud, provide manufacturers with trackable analytics, more visibility and flexibility, and the ability to go above and beyond the demands of your customers to provide them a unique experience.
If you have any questions about how to transform your manufacturing business, please contact us.