(2/3) How to Test if Your Organisation is Ready for Distributed Manufacturing?
A step wise guide to design experiments to explore the feasibility of aligning a distributed manufacturing system with procurement processes in organisations.
Based on insights derived from BRAC’s experience in exploring the scope, challenges and opportunities in mainstreaming distributed manufacturing in South Asia
*Written by Chathuri Weerasinghe, Social Innovation Lab, BRAC*
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Our last blog set the groundwork for designing experiments to test how distributed manufacturing systems can best be introduced to robust institutional procurement practices. We talked about how BRAC’s attempt to experiment with a distributed manufacturing platform involving local makerspaces rolled-out in three phases: Plan, Prepare, Launch.
How to Design a Distributed Manufacturing Experiment?
This blog will elaborate on the ‘Prepare’ phase, which can be completed in 4 steps out of the 14 steps framework.
Phase 2: Prepare
Consider the preparation phase as a bridge that connects the planning and launching phase of the experiment. Preparing to launch the experiment would mean knowing the relevant stakeholders inside out! In our experiment, the user base of the expected distributed manufacturing system was already explored at a very early stage of the process. The preparation phase, therefore, mainly focused on understanding the organisation’s procurement units, the local manufacturers that will be involved in the distributed manufacturing network, and building the distributed manufacturing system architecture.
Step 5: How well do you know your organisation’s supply chain and procurement?
A distributed manufacturing network can be considered as an alternative approach to mobilise resources along a supply chain, but aligning such an approach to a certain organisation’s supply chain/s requires greater insights into how its procurement units operate.
At first, this may seem like the easiest step to get through. However, in the case of the experiment conducted by BRAC, it was observed that getting the organisation’s procurement unit to adapt a relatively novel concept was the most challenging part in mainstreaming distributed manufacturing, particularly in the context of South Asia. In a Systems Change Evaluation we conducted on BRAC’s Aid Supply system, we identified some adverse incentives, including:
- A mindset around bulk-purchasing being more convenient and cost-effective
- Considerations around having a set system to follow as more convenient, less resource incentive, and requiring less time and effort
These adverse incentives, in turn, were found to create structural barriers that hinder the procurement stakeholders’ willingness to adapt to and embrace change.
Considering these adverse incentives towards the conventional procurement processes along the supply chain, several other institutional constraints, and the robustness of the current procurement operations at BRAC, it was initially challenging to inspire procurement stakeholders to take part in a distributed manufacturing experiment. However, once the alternative incentives and relaxed constraints that can be established by a distributed manufacturing system were discussed, the team was able to onboard the procurement units with a positive response towards this novel supply chain concept.
Example:
In the case of the experiment conducted by BRAC, several discussions with both the stakeholders that constituted the procurement unit in the ecosystem (BRAC Procurement and BRAC HCMP Procurement) were conducted. These helped the team understand:
- The different types of approaches BRAC procurement use to procure items, depending on the context
- The different types of approaches BRAC HCMP procurement use to procure items depending on the context
- The type of institutional vendor contracting required to onboard the targeted manufacturers to be involved in the distributed manufacturing platform
- Legal requirements expected from the manufacturers
The following incentives, relaxed constraints, and opportunities offered by a distributed manufacturing platform were highlighted to the procurement stakeholders during the above-mentioned discussions:
- Ensuring social surplus: 60–70% of development sector expenses are spent on procurement. Procuring locally manufactured products can allow BRAC procurement units alone to work on ensuring social surplus in terms of sustainability and cost-effectiveness
- Shorter lead times without having to compromise on the quality of the products
- More transparency and accountability along the process
- A system that allows customizability and easy access to user-centric products
- Less dependence on the existing market
- Ability to use manufacturing as a service
- Quality, trust, and accountability are offered by the system and do not have to be individual vendor/ manufacturer dependent
Step 6: Know your manufacturer and their fit to your organisation
Now that the procurement requirements are identified, it is time to see if your targeted manufacturers fit the system’s criteria. There are two major pathways through which you can explore a manufacturer’s fit to a distributed manufacturing system that is under exploration to be aligned with an institution’s supply chain:
- Manufacturers’ production ability in terms of the availability of technical facilities, manpower, and quality control capacities
- Legal channels through which they can be contracted under the organisation (I.e., Possession of the legal documents as per procurement requirements)
Understanding the production capacity
Since what BRAC envisions to understand is how local makerspaces and Fab Labs can be leveraged by integrating them into a distributed manufacturing network, our initial step was to first map the geographically dispersed makerspaces and Fab Labs, followed by a comprehensive capacity assessment (I.e., Fabrication expertise areas, availability of technical facilities and tools such as 3D printers, CNC machines, and laser cutters, production capacity per day for each product in the product portfolio, availability of manpower and quality control capacities). For the purpose of the experiment, the manufacturer sample was developed by purposively onboarding only the manufacturers with the highest production capacities.
Legal fit
The legal due diligence process will depend on the requirements put forth by the organisations’ procurement and legal departments. In BRAC’s case, to be eligible for a production contract under the procurement policies, the manufacturers were required to possess the following legal documents:
- Tax Identification Number
- Trade License
- Value Added Tax Registration and Business Identification Number
Thus, understanding the manufacturer capacity at a legal layer involved conducting due diligence for all manufacturers that were shortlisted in the capacity assessment stage. This led the team to the revelation that not all makerspaces and Fab Labs have equal legal capacities to fit into a manufacturing process under BRAC policies.
Step 7: Building the system architecture
This is where the backbone of your distributed manufacturing platform will be developed, factoring in all the learnings and observations made throughout the planning and preparation phases so far. As per the capacity and legal assessment conducted in step 6, BRAC placed the makerspaces and Fab Labs under the following categories:
- Principal Manufacturers: Makerspaces with the highest production capacity and with all legal documents required in possession
- Secondary Manufacturers: Makerspaces with the second highest production capacity and with some of the legal documents required in possession
- Facility Partners: Fabrication Labs affiliated with universities who have high production capacities but with no legal documents required in possession, restricting their legal channels to be contracted under BRAC procurement.
While designing the distributed manufacturing system architecture for BRAC’s experiment, the engagement of manufacturers of all three categories was ensured. The principal manufacturers were directly contracted under BRAC, while the secondary manufacturers were subcontracted by the principal manufacturers to ensure the full production is completed within the provided time frame (Two weeks). The facility partners supported both the principal as well as secondary manufacturers by providing manpower and technical support (I.e., 3D printers).
Example:
The image below is the non-digital system architecture we designed for BRAC’s distributed manufacturing experiment. The left side of the diagram represents the demand generation, and the right side represents the manufacturing and supply. In the middle, all the different types of manufacturers that were involved in the experiment, their legal requirements, and the role they played in the ecosystem are illustrated.
Step 8: The pricing portfolio
The next step entails negotiating the production costs and finalising the production contracts for the onboarded manufacturers. Once the system architecture is designed, it becomes more convenient to work around the added layers of time and costs for each manufacturer type.
Determining the pricing portfolio should not only take into account the costs around manufacturing, but also the costs associated with quality control, raw materials, assembly charges, packaging charges, labour charges as well as profit margins. It is also good to provide the manufacturers with the option to suggest their production costs for multiple levels of production units (I.e., Production cost for 100 units, 500 units, and 1000 units), accounting for the production capacity of the manufacturers.
One thing to remember is that initial experiments around distributed manufacturing may not always have many variations around pricing. From our experience, we observed that creating pricing variations among manufacturers in the initial stages can lead to complicating the whole process. Hence, in our case, this first experiment did not pay much attention to pricing variations, which is otherwise an integral part of a distributed manufacturing system that stimulates competitiveness among manufacturers, leading to higher quality outcomes.
In the current experiment, we maintained a more or less uniform pricing portfolio for all vendors. We plan to test the role of pricing variations in creating competition among the vendors in the upcoming experiments!
