Small Business Says: Your Wish is…On Demand
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Employees at PHP's Alabama sewing facility assemble garments to order. |
Sometimes opportunity knocks at the strangest times. For Kirby Best, the rap, tap, tap at the door came in the middle of the night, while his wife, who was undergoing chemotherapy at the time, was suffering from one of its many unfortunate side effects: Night sweats.
“We were trying to come up with a pair of pajamas that were made out of a moisture-wicking fabric that would absorb the moisture away from her skin so she didn’t have to keep getting up and changing clothes in the middle of the night,” said Best, now CEO of Performance Healthcare Products (PHP), which manufactures many versions of the pajamas they dreamed up that night.
The manufacturing model Best has adopted has led him down a path increasingly more travelled by American manufacturers. It’s called on-demand manufacturing and it is bringing manufacturing jobs back to the United States. It’s also creating opportunities for small businesses, which traditionally have not been able to afford the investment money required to manufacture, transport and warehouse large runs of mass-produced products.
In Best’s case, producing products on demand means that his company, which produces both pajamas and high-performance medical scrubs, makes each pair to individual customer’s specifications. Customers can choose their color, size, accent colors, fit and style. The garments, which are precut, are sewn to specification in PHP’s factory in Cullman, Ala.
“There are big benefits to producing the products this way,” Best said. “We have complete control over the process and the quality and it’s very quick.” Orders can be shipped within 48 hours of a customer’s online purchase.
The nature of the on-demand business also allows PHP to keep its inventory levels low, change its product assortment quickly and save on both shipping from overseas and storing inventory until it sells.
It has also restored jobs to a town that was once a thriving garment manufacturing hub, but had lost many jobs to overseas outsourcing.
The concept of on-demand production has been used in the book industry for several years. One company, for example, Lightning Source, an Ingram Content Group company, offers publishers a way to print books on demand without having to hold any inventory.
The company, based in Tennessee, allows its clients, including publishers such as Simon & Schuster, John Wiley & Sons and Oxford University Press, to print as few as one copy of a book at a time. The ability to do this allows publishers to offer a huge range of titles without having to keep them physically in stock.
John Wiley & Sons, for example, started out using the technology in 2003 and only offered 20 titles. Now, it adds as many as 2,000 titles per year to the program, with some being entered digitally and others being manually scanned from paper pages, according to a case study on Lightning Source’s website.
Wiley uses the service in a number of ways, but the result is that it always has what it needs available to customers, even if the book hasn’t been in print for years.
“On-demand manufacturing…allows firms to quickly produce products and tailor them to the end-market (and to specific products),” said Gad Allon, associate professor of managerial economics and decision sciences at the Kellogg School of Management at Northwestern University.
But, Allon is careful not to overstate the impact that on-demand services could have on restoring American manufacturing jobs.
“We hear more and more about firms bringing production back home due to quality issues, intellectual property issues or long lead times (and disruptions),” said Allon, who added that on-demand manufacturing is just a small part of the equation.
He believes on-demand manufacturing’s greatest potential is that it is allowing smaller companies to introduce new products without a taking a huge financial risk.
“It makes it easier for firms to design and introduce new products. Most product innovation nowadays is U.S.-centric due to the fact that it requires a significant investment in equipment that has low utilization,” he said. “On-demand manufacturing will enable smaller firms to introduce new products and quickly alter their offering.”
This is exactly how StyleFactory, a new furniture design company, which "crowd-sources" its product offering, is using on-demand technology.
The company, which debuted last year, makes furniture prototypes with designs submitted by designers and the general public. It then posts pictures of those prototypes on its website and lets users vote on which products get produced. Once a style is voted a winner, the company takes orders for the product. Once it has received a minimum number of orders, it has the furniture produced, in small quantities, by manufacturers in the U.S. that are willing and able to handle small production quantities. Designers get a commission if their product is manufactured and sold.
While the cost of producing domestically may be higher than it would be to manufacture overseas, in the long run, the costs are offset by the benefits, said StyleFactory CEO Markus Rauschnabel.
“Sourcing in U.S. allows flexibility,” Rauschnabel said. “We can start with smaller sized orders and scale up.”
Savings are realized by cutting out the middlemen, saving on inventory storage, shipping costs and shipping containers, Rauschnabel said.
The domestic on-demand production model is allowing Rauschnabel to keep his New York-based company lean.
“The cost of operating is very low,” he said. “There’s Web development and the prototype cost.” No investment gets made in inventory until it’s sold. It’s a business model Rauschnabel thinks will catch on, especially as political changes in China drive up labor costs for outsourced production.
“We hope we’re not the only ones who are going back to basics,” Rauschnabel said.