Manufacturing Industry

Manufacturing is the fabrication, processing, or preparation of products from sources of raw materials and/or commodities. This industry predominantly follows a fairly unsustainable and linear value chain. Manufacturing is really the process which perfectly fits to the linear ‘take, make, use, dispose’ model, manufacturers roles are generically include the processing of raw materials to create a product. Often manufacturing firms deliver products to businesses that are closer connected to the end users, or manufacturers create parts of overall services or products. This model often puts them in a supplier position of other businesses, making their primary channels predominantly B2B.

It is often the case that manufacturing firms, when acting as a supplier, have static specifications and information behind exactly what their products should look like, what materials are used, and how they are to be manufactured. This minimizes the opportunity for design alterations, and a more sustainable production process. However there are techniques by which manufacturers can offset some of their more rigid properties

with a circular business model, creating flexibility in the way products are created or the way in which they are delivered to the customers. Manufacturing firms have been designed to complete a linear business model efficiently and cost effectively, this has been their focus for years, and the value of a CBM that does not disrupt the competencies that have been built up will be the most suitable for a manufacturing firm.

The basics of a manufacturing firm’s business model are relatively linear. The flow is generally a in the line of R&D, design, supply chain management, production, go to market, and aftersales service. It is often the case that manufacturers are disconnected from the disposal phase of their products, leaving waste management to governments and organisations. This means that materials are processed into products to create value and this value is sold on to the customer, at which point the manufacturers engagement is ended. The reason that manufacturers use the LBM is due to the ease at which such a model can be managed, and additionally the way in which a LBM acts is in line with the functions that manufacturers carry out.

8.6.1. Business Model Canvas ‘Manufacturing’

The generic BM canvas of a manufacturing firm is built up of rigid parts, often involving large fixed costs for machinery acquisitions, and workforce costs for machine control and maintenance, and standard revenue per product manufactured incomes. Manufacturing firms are often not the organisation that delivers the product to the end users, and are often seen as suppliers for product parts, or fully realized products. For this reason the customer interface section of the BM canvas is lacking some definition, since each manufacturer acts independently and is often advised by customers on what its products should be. This leaves very little room for customer relationship and a variation of the channels by which products are received by the customers.

The Infrastructure of manufacturers consists of the procurement of raw materials and/or commodities, which is transformed into a product via fabrication, production, and processing methods, by using the resources at hand such as machinery and a company’s workforce. This is a good example of a traditional linear business model canvas, representing exactly what needs to be done in order to create the value propositions. However with the increasing pressure from governmental legislations and public opinions on the matters of sustainability it is time for manufacturers to begin to rethink their business model canvas, and attempt to find ways to create new value from stricter regulations.

The value proposition consists of the products being manufactured, it is the core competency of a manufacturing firm to create a full product, or part of a product. The ability to realize the creation of a product outlines the success of a manufacturer, this success can be attached to the cost price of manufacturing, quality of the product, time taken and other factors that play a role in the value of a manufacturers product. It is important to note that value can be seen as not only the translation from raw material to product, but also by the speed at which this is done, the quality of the manufactured part, or the ‘cheapness’ of manufacturing. These are regularly seen as points of differentiation for manufacturers and often define the firm’s USPs. These are important factors for a manufacturing firm to consider when realizing a transition to a CBM.

A manufacturer’s customers include other businesses, manufacturers, and occasionally the end users, depending on the customer segments, the customer relationship and channels are directly affected. CBM’s are often designed to disrupt the way in which a business brings value to the customers, this is done to reduce the amount of a product that is needed or extending the lifetime of a product so less are required, using less raw materials. Section 7.7 will outline an example of a manufacturer which attempts to employ the

service oriented BM, and section 7.8 outlines extended value of products, where quality is key and a longer life cycle becomes a USP for the manufacturer.

The financial aspects of a generic linear business model and that of the manufacturing BM are relatively similar. Manufacturing firms often have the majority of their costs in the key resources, and the revenue stream coming from the value proposition being delivered efficiently to the customers. The raw materials, work force, and machinery make up the prominent cost structure of a manufacturer, as with each product being produced, raw materials are used and a workforce and machinery are needed to realize the value propositions. For each product created revenue is generated from the customers, who are used to offset the costs for the products.

8.6.2. Opportunities for Sustainable Product Design

Since the majority of manufacturing firms operate under strict specifications from consumers, it is difficult for the firm to reorganize the design of products. The pressure for adhering to sustainable design principles should be placed on the customers, and often the businesses which are in direct contact with the end users. Manufacturing firms can try and create pathways for efficient production, and waste reduction, this creates the room for a design for cost effectiveness. Cost effectiveness can be used for the firm’s processes, material usage, and even logistics. Cost effective products are those which can be manufactured and shipped efficiently, this can lead to the manufacturers sparing costs in unnecessary areas.

Efficient work flows, material usage, and cost effective products are design strategies that manufacturers have used to increase sustainability while reducing costs. The firms are however still hindered by the LBM they are currently using, often requiring them to manufacture products which do not follow the sustainable design principles. The disruption a CBM may cause is to create new avenues by which manufacturers can better reach sustainable targets, not being limited to a linear value flow can create new opportunities for value recapture and resale.