Large brands and online retailers previously dominated their respective markets.
This was in large part due to the high barriers to entry young companies faced. The big brands had built large technology back-end infrastructures that gave them unmatched strength in customer service, fulfillment, distribution, and other key functions.
This is no longer the case.
I’ve seen that evolving technologies have democratized access to these business functions—and the abovementioned barriers to entry have all but disappeared. This has paved the way for new, disruptive brands to capture market share, compete with flat-footed incumbent giants, and thrive. Manufacturing innovation has played a major role in leveling the playing field.
Manufacturing Ecosystems Have Become Friendlier to Smaller Companies
Shenzen is the anchor of China’s Special Economic Zone, the global epicenter of consumer goods manufacturing. While the major manufacturers in this southern Chinese city are large, well-known companies, some of the more interesting players are part of a network of smaller factories, called Shanzhai, that evolved around the giants.
Shanzhai was originally known for manufacturing gray-market or pirated products. Today these factories are entering legitimate commerce.
The interconnectedness of Shanzhai, plus its smaller size, enables those involved to optimize small-batch manufacturing and iterate at incredible speed. Their operators—many of them former factory workers—have mastered the ability to produce high-quality products at low volumes and a reasonable cost, using an ecosystem of small- to medium-sized factories and individual experts.
The result is a system that can take on the larger Shenzen factories—a system well-suited to emerging supply models. The beneficiaries are all brands that want to jump in and iterate quickly and cheaply, and scale as needed to meet demand.
Dynamic manufacturing hubs similar to Shenzhen have appeared elsewhere in China, with footwear manufacturing in the Fujian region and motorcycle manufacturing around Chongqing. Other, more traditional global manufacturing hubs have the potential to spawn similar loosely coupled networks, mirroring the Shanzhai system.
Local Manufacturing Offers Young Companies Low-Cost Agility
For many young companies, large production runs simply aren’t feasible. When introducing a new product with less market certainty, manufacturers may choose to opt away from large production volumes—especially if the product design needs to be refined.
In short, overseas production and freight shipping force minimum manufacturing quantities to compensate for long lead times. For smaller items, the cost of air freight and short fulfillment cycles may trump the cost of holding inventory, the cost of capital, and obsolescence.
But local manufacturing helps young companies leverage both technology and communities to keep costs down. Brands are now using facilities like Manufacture New York to aggregate demand and provide accessibility to manufacturing technology, ensuring responsiveness to local and small-batch demands. Manufacturing tools have also become both smaller and less expensive, allowing small shops to enjoy the same basic toolkit as larger, more capital-intensive facilities.
The combination of proximity to local markets and technological flexibility has made young companies more responsive, not to mention more flexible to consumer needs.
Platforms like OpenDesk—a connected community of designers, local machine shops, and users—have made headway in allowing multiple facilities to share tools and talent. OpenDesk in particular has driven momentum for the local and distributed manufacturing movement. Ultimately, the goal of the platform is to reduce the environmental impact of shipping, boost local employment, and provide consumers with customizable designer furniture for a fraction of the retail price.
Additive Manufacturing, Robotics & Materials Science Are Game Changers
3D printing technologies—also called “additive manufacturing”—have seen significant advancements in the last decade, while the cost of equipment has decreased over the same timeframe. This has allowed young companies to bring designs and prototypes into production much faster, at a highly reduced cost.
And while this technology is still developing in terms of speed, material, and precision, many industries are already using it to create high-value parts at a low volume.
This is because the plummeting costs of advanced manufacturing robots are strengthening manufacturing ecosystems around the world. These robots are not necessarily replacing human workers, but complementing them. This stands to benefit young companies that have been challenged by rising labor costs, as lower-cost robots are projected to take an increasing share of the manufacturing floor.
New generations of materials—including advancements in memory foam, carbon fiber, nanomaterials, and optical coating—are pushing overall costs down and making top materials more accessible across the board. Materials science is now allowing gains beyond making it cheaper to manufacture high-end items. Advanced battery technologies, carbon nanotubes, electroactive polymers, and thermal bimetals feature revolutionary potential in terms of providing top functionality and features to young companies with limited R&D budgets.
While not everyone will have immediate access to new development materials, the barriers to entry for advanced, customized manufacturing will continue to crumble as advancements in materials science progress. This will keep making room for the new players who choose to leverage these cutting-edge technologies.
In closing, digitization—paired with the growth of enabling technologies—has made manufacturing more accessible, repeatable, and portable. Young companies can now produce high-quality goods at a low cost. Technologies in this space will likely further depress the cost of customization, allowing young companies to be even more responsive to customer needs. For these brands, innovations in small-scale local manufacturing have completely leveled the playing field.