In distributed manufacturing, production facilities are scattered throughout an extended geographical area, each one serving their local market, with their work coordinated with the help of cloud-based software. Distributed manufacturing is gradually gaining ground thanks to providing benefits such as shorter lead times and lower distribution costs.
- What is Distributed Manufacturing?
- Benefits of Distributed Manufacturing
- Examples of Distributed Manufacturing
- Distributed Manufacturing and ERP/MRP
- Key takeaways
What is Distributed Manufacturing?
Distributed manufacturing is a business model wherein the manufacturing facilities of an operation form a network over an extended geographical area. These dispersed facilities often produce customized products for the local market while being decentralized or managed centrally from elsewhere with the help of cloud-based software.
Although big conglomerates have benefitted from having manufacturing plants in various parts of the world for decades, distributed manufacturing refers to autonomous networks or smaller companies that employ local micro-manufacturers to produce and distribute their products on a more limited scale. Under the motto “design globally, produce locally”, designs are freely shared among the members of the network, and products are manufactured according to local demand.
For example, in the traditional approach, a company would find or create a large manufacturing plant anywhere in the world that would produce their goods with the lowest cost possible while upholding the necessary quality standard. Goods would be mass-produced and shipped from the factory to the target market, which could be very far away due to offshoring.
In distributed manufacturing, however, a company could find micro-producers that are local to the target markets, provide them with product designs and customer orders, sometimes even manage their inventory and purchases. Goods would be produced in smaller quantities and promptly shipped to customers located in the same area. Although production is likely to be more expensive, this disadvantage would be offset by much shorter lead times, lower distribution costs, and often higher quality products.
Benefits of Distributed Manufacturing
The distributed manufacturing business model has various advantages that are rapidly bringing the approach to the attention of the mainstream. These include:
- Reduction in distribution costs. One of the central tenets of distributed manufacturing is to produce close to the end consumers. This cuts out lengthy shipping processes and saves a lot of money on distribution and logistics.
- Shorter lead times. As deliveries are made locally, lead times are cut by a rather large margin. Ideally, materials would also be sourced from local suppliers, which would shorten the time to market even further.
- Less capital investment needed. A distributed manufacturing company usually requires much less capital investment before they can kick start their business. Instead, they would seek out and employ local micro-producers that already have their own equipment and manufacturing facilities (e.g. a workshop).
- More flexibility in capacity. Utilizing the labor of independent contractors that are only working when there is demand for the products in their area gives companies a chance to increase or reduce production capacity as seen fit. The business can be contracted or expanded according to demand and the company can remain agile in the face of fluctuations.
- Better capacity utilization. Small manufacturing shops can benefit from the distributed manufacturing model