Principle: On-demand production consists of launching the production of a product once the customer has confirmed his order. On-demand production is therefore used a lot for items with a low sales volume or items with a very high storage cost.
Advantages & challenges: For a company, the cost of storage is a heavy financial burden. By producing on-demand, it allows them to move towards a zero stock policy, to avoid waste and to have a stock of unsold products. In this way, companies can save money on stock management and avoid financial losses. In the case of on-demand production where a company offers customisable products, flexible production lines are required, which is very costly and can be restrictive in terms of production, maintenance etc. imposing a higher budget. For the customer, one of the disadvantages is that his product or service will not be available immediately. He will have to wait for the whole production process before he can get it back.
Evolution & Maturity (key figures): Historically, the on-demand production model is one of the concepts of Toyotism: Toyota Production System. The success of TPS has led many car manufacturers to adopt this management system and today it is used in many industries. For example, in 2018, Ferrari, which follows this model, announces that its order book is already well filled for production in 2019, exceeding 10,000 confirmed customer orders. The digital revolution has led to a real leap forward. Thanks to connected factories, it is possible to monitor all these parameters very precisely. Solutions via ERP systems such as SAP have also emerged with the digital revolution. On-demand production also fits in perfectly with sustainability. Indeed, by producing only what has been requested, all the articles manufactured will be sold. It is therefore a good way for the company to avoid wasting even raw materials and does not encourage overproduction or overconsumption.
Products & Services: The on-demand production model adapts very well to niche or luxury markets where there are few items for sale as it requires much less inventory. Concerning more general products that are sold on a larger scale, the on-demand production system is used when products and services can be personalized (cars, clothing with personalized inscriptions...).
On IntelligenceMaker, our competitive intelligence platform, you can get more information on this business model and learn about inspiring players that already deployed it:
Contact us to get the complete analysis: email@example.com