Estimates are that most manufacturing equipment in the U.S. sits idle about 50% of the time.
So comes as no surprise several companies are trying to become the "Uber of manufacturing" by creating online marketplaces to connect customers who need parts made with companies who have spare manufacturing capacity.
The Quartz article An Uber model for manufacturing is ready to upend the industry covers the distributed manufacturing company MakeTime. Key quote:
Under a model known as distributed or on-demand manufacturing, MakeTime is meeting small businesses’ manufacturing needs in much the same way Uber meets the needs of passengers looking for rides. Companies, entrepreneurs, and inventors can rent time on nearby equipment, be it CNC milling machines, water jets, or laser cutters—any of which can cost from $50,000 to $250,000 apiece to purchase.
MakeTime's tagline is "Your Supply Chain in the Cloud".
MakeTime, of course, isn't the only company offering this type of online marketplace.
Xometry (tagline: Manufacturing on Demand) has an online platform connecting small to medium sized manufacturers with customers in a wide range of industries. They claim to have over 4,000 customers and manufacturing partners in 35 states. They recently raised $23 million from GE Ventures and VC firm Highland Capital.
The process is similar with both firms. Customers upload CAD drawings and pertinent information such as preferred materials, tolerances and quantity required. Manufacturing firms then bid on the projects.
According to both companies, this saves time and money compared to traditional outsourcing options.
More broadly, this is another example of shift to variable costs. Instead of owning their production equipment - which is a fixed cost - more firms are looking for ways to buy parts on a variable cost basis.
For the buyers, this increases business agility and flexibility while also reducing the need for capital. For the manufacturing firms, this increases their efficiency.
As we said in a recent article, we consider the shift to variable cost business models to be one of the major megatrends of the new economy. Key quote on the switch to variable costs:
It's a driver in the growth of sharing and gig economy firms like Airbnb and Uber, it's a major reason businesses large and small are increasing their use of contingent labor, it's one reason there are more online only businesses, including restaurants and it's the main driver behind the rise of platforms, ecosystems and cloud computing.
Despite its importance, the shift to variable cost business models get little attention. We think this is because it's a fairly wonky topic. Also, few people get excited about accounting concepts.
It's also having a major social impacts. Again from our prior article:
... it's driving a lot of change, and not just business change.
Consumers are also avoiding fixed costs and long term commitments. They're delaying or not opting for marriage and kids, they're renting instead of buying homes and they're reducing or delaying large purchases of all kinds, and they're even choosing pets over children.
The shift to variable costs is covered in more detail in 2016 Intuit Future of Small Business Dispatch From the New Economy.