The Cloud Factory
Manufacturing of the future?
Imagine manufacturing a product in 2025. Each customer will be able to design its own product which will be produced through a network of (small) digital manufacturing organizations, a so called Cloud Factory. This scenario was introduced in the Industry 4.0 blog on Deloitte.com and triggered questions on the impact for all kinds of stakeholders. In this blog we will explain the consequences of this scenario for three roles in a new environment: the asset owner, the platform owner and the supply chain specialist.
Ivo Rothkrantz & André Barneveld Binkhuysen - 21 november 2016
Cloud Factory will differentiate the sequence of stakeholders in the production process, starting with the customer. Its rising interest in personalization, customization and creation of products blurs the lines between customer and designer. This results in a change, with far-reaching consequences for the existing roles of asset owner and supply chain specialist, and will lead to the development of the new role of platform owner.
The asset owner
Cloud Factory increases production flexibility, decreases product life cycles and rapidly changes products, which results in testing new products more quickly and launching them instantaneously into the market. Add a more open and competitive market to that, and it is clear that Cloud Factory will challenge current operations of asset owners. Especially owners of asset-heavy production sites should be aware of these changes. Relying on economies of scale, their production sites produce at most five different products per day on a production line. This unambiguously conflicts with rising customer demand for flexibility and design-to-order practices and should somehow trigger asset-heavy companies to rethink their current operations.
Asset-heavy companies need long term investment plans to achieve a good ROI, as an asset-heavy company should look beyond the horizon to what new technologies will do to their business model. An option is to switch from asset heavy to asset light. Factories of tomorrow can win by adopting technology, digitalization, connectivity of machinery and strategic geographical decisions.
With an increased focus on specialization, Cloud Factory enhances a separated, rather than integrated organizational landscape. This forges the need for a platform, in which the different asset owners are connected to deliver their combined product to the customer. Creating such a platform requires traditional business-to-business supply chains to transform towards ecosystems. Properly activated, these ecosystems can reduce costs, improve services and create agility across business.
Recently, it has been demonstrated that new business can arise within ecosystems. Initiatives such as Airbnb, Alibaba and Uber have grown to big platforms and disrupted traditional business. A similar trend can be expected in the area of production. This very platform should be able to match all the asset owners in order to consolidate the separately produced parts towards a uniform whole for the client. Also, as is the case with Airbnb, Alibaba and Uber, the Cloud Factory platform should create a supporting profit sharing mechanism, that enables fair profit sharing and retain long-term enthusiasm for all the parties.
Supply chain specialist
The development of platforms should trigger supply chain specialists, which have traditionally positioned itself between business and customer. The coordination between business and customer is expected to shift towards the platform owner. However, the supply chain specialist can maintain a major role in the transportation of products between the connected parties and the customer. In the new ecosystem the supply chain specialist will be a service delivery partner for the platform. The ability to quickly adapt to changing conditions will help the supply chain specialist to use new ways of (lean) management, deal with logistical challenges and reduce costs.
Although the specific development and meaning of Cloud Factory is subject to uncertainty, change and environmental factors, it is certain the current manufacturing business will be impacted largely. It is therefore key for current business to challenge itself: where am I now? Where will my business be in 10 years? Which role do I want to take in a new environment? Only by continuously asking these questions, manufacturing businesses can be prepared to adapt to the changing rules of the manufacturing game.
Cloud Factory is a network or marketplace in which manufacturing supply and demand come together. (Small) asset owners can offer their operation abilities and capacity in a flexible, dynamic and modular production environment. The end product can be composed by designers or consumers and will be coordinated through the network of (multiple) asset owners with corresponding process steps by smart flexible algorithms. The end product will be delivered to the customer within the right time frame and with the promised quality.