Online Manufacturing is the key to price-stable custom parts procurement

Online Manufacturing is alleviating the problem of material price fluctuations - enabling companies to focus on innovation.

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18 Jun, 2022

Introduction

The global market is currently facing price fluctuations in the procurement of raw materials. The primary causes of this predicament are the supply chain issues derived from the COVID-19 pandemic. The lockdowns caused the shutdown of steel production facilities globally and the closure of mines. Consequently, lithium, which has become notably scarce, and other commodities such as copper, nickel, steel, and aluminum are expected to remain in short supply between 2022 and 2029.[1]

The Russian war against Ukraine[2] has further stressed the already vulnerable global supply chain. Ukraine emerged as a prominent exporter of raw materials over the past decade, while Russia is a significant producer of copper and nickel. These challenges have left international trade difficult, worsening the crisis primarily due to an increasingly unstable geopolitical climate. Consequently, the world is now facing significant imbalances in the supply and demand of materials for custom-engineered parts. It has resulted in significant price fluctuations for production parts, particularly affecting small to medium-scale enterprises that are more sensitive to financial risk. 

This article examines how Online Manufacturing of custom parts offers countermeasures for the price fluctuations by using AI-powered resource management to find a smart selection of parts suppliers

Online Manufacturing reduces the price fluctuation risks

Online Manufacturing works by precisely managing a diverse network of manufacturing partners. By intimately knowing these partners’ specializations, current price offering and capacity, an Online Manufacturing platform can offer the best priced, fastest, and most appropriate quality to its customers. The price fluctuations usually incurred when procuring custom parts are removed as the Online Manufacturing platform uses its back-end power to find the manufacturer with the lowest price available for example the manufacturer who has a big stock of a certain raw material or order their raw materials from geographic regions that are less affected by the price increases. 

Working with an Online Manufacturing platform to reduce price fluctuation risk. 

Take the example of a company that needs to procure steel sheet metal parts. They would select an Online Manufacturing platform and submit their request. On the backend, the Online Manufacturer would select from its wide network the most appropriate manufacturer, the system would select the manufacturer based on factors related to logistics, price, and material. The company requiring the parts does not need to do anything else. The Online Manufacturing platform does all the hard work of finding the right manufacturer and negotiating the costs etc. The agreement between the company requiring the sheet metal parts and the Online Manufacturing platform will not change, no matter what other factors such as sudden raw material price hikes, etc., occur.  

It is insightful to understand how using Online Manufacturing differs from the conventional approach. Traditionally, customers/procurement agencies have to manually search for the available manufacturing partners/vendors. This approach makes finding a suitable manufacturer cumbersome and requires extensive research. Additionally, it makes it difficult for the manufacturers and the consumers to keep up with the ever-changing production prices due to market volatilities for raw materials. 

Meeting customer needs and addressing price fluctuation with FACTUREE

FACTUREE is an established Online Manufacturing company based in Osram Höfe (the landmarked former production facility of the first German light bulbs) in Berlin, managing an extensive digital network of roughly 2000 OEM suppliers.[5] Consequently, the company possesses the capacity to identify the best-priced material and manufacturing partner within its intricate plexus of manufacturing partners utilizing its AI-based software. With more than 15000 machines constantly available, FACTUREE can take on all kinds and sizes of projects, from prototypes to large series of productions, be it parts that require micro-precisions or working with tons of material. 

The FACTUREE headquartes based in the old Osram Höfe building.

FACTUREE does not operate as a marketplace. Instead of only ‘connecting’ the manufacturers and the factories, FACTUREE absorbs the risk of being the sole contractor within the exchange – from the quotation to the invoice. The company takes full responsibility foTecr quality management and continuous monitoring. This agile approach allows the procurement of custom-engineered parts to be high quality and at an industry-competitive price.

In addition to that, a significant aspect of FACTUREE’s management process is ‘Smart Selection.’ Even if you have a giant network, it may prove inefficient if the chosen partner is not perfect. FACTUREE’s AI-powered software selects suitable manufacturers to ensure the price and delivery by distributing or reallocating orders (as per needs). The machine-learning algorithm finds the most suitable manufacturers for the quotations, determined by 1) the number of free resources and 2) the shortest possible delivery period. FACTUREE itself screens the partners, and as a single-source contractor – the company takes full responsibility for the quality of work of these vendors.

The whole process is semi-automatic; customers receive a response to their quote quickly, reducing wastage of time, confirming the availability of materials or parts, and absorbing price fluctuations as predicted by the AI. This framework has allowed FACTUREE to offer competitive and desirable prices to its clients and has thus penetrated its way through the Online Manufacturing industry within two years. 

Through this intelligent approach, it is possible to relieve the crisis of raw material price fluctuations for factories, which are being caused by these shortages. The significant heterogeneity of FACTUREE’s network allows the company to absorb price fluctuations, enabling it to retain the price offers for 14 days.[6] Thus, if the raw material prices fluctuate after the quotation for an order has been approved, FACTUREE would maintain the stable prices for approximately half a month. Any change in material costs is not generally passed on to customers, making FACTUREE an extraordinarily versatile and reliable contractor.

The future of manufacturing will corporate significantly more digital manufacturing platforms. Image credit: World manufacturing Report

Furthermore, FACTUREE has a strong approach towards a ‘Greener Future.’ The company provides 100% Carbon Neutral shipping – primarily achieved by offsetting the majority of its CO2 emissions in cooperation with South Pole - a Swiss carbon finance consultancy - in projects in New Caledonia, where 8 percent of all laterite reserves are located.[7] 

FACTUREE is not just alleviating the price fluctuation of engineered parts but also making Online Manufacturing mainstream. With over 10,000 satisfied customers, including established names such as Siemens Energy, Festo, Parker Hannifin, various Fraunhofer Institutes, and the German Aerospace Center (DLR). FACTUREE has also recently started working with CERN[8], which operates the most prominent international particle physics laboratory.

Conclusion

The COVID-19 pandemic, alongside the Ukraine conflict – and related international sanctions, has caused adverse ramifications to the manufacturing industry over the past two years. Online Manufacturing has put forward an innovative solution to custom-engineered parts price fluctuation problems related to these disruptions. By using Online Manufacturing, companies can procure engineered custom parts with lower price fluctuation risk. 

About the sponsor: FACTUREE

FACTUREE, an established Online Manufacturing platform, focuses on providing the customer with their desired product without compromising quality in the shortest possible time. Its AI-based software handles the work related to selecting suitable suppliers/manufacturers on the back end. The nature of the process, manufacturers’ network, and software make it possible for FACTUREE to minimize the effect of price changes in the market. Customers can receive the requisite product without contacting the vendors, hassle of manual selection, and, most importantly, without worrying about price fluctuations.


References

1.     Newton E. How the Steel Shortage Impacts the Manufacturing Industry - Materials and Engineering Resources - Matmatch [Internet]. Materials and Engineering Resources - Matmatch2021 [cited 2022 Jan 10]; Available from: 
https://matmatch.com/resources/blog/how-the-steel-shortage-impacts-the-manufacturing-industry/

2.     Tan W. How a Russian invasion of Ukraine, the “breadbasket of Europe,” could hit supply chains [Internet]. CNBC2022; Available from: https://www.cnbc.com/2022/02/23/impact-of-russia-ukraine-on-supply-chains-food-metals-commodities.html

3.     FAQ | FACTUREE – The Online Manufacturer [Internet]; Available from: 
https://www.facturee.de/en/about-us/faq/

4.     Chen X, Despeisse M, Johansson B. Environmental Sustainability of Digitalization in Manufacturing: A Review. Sustain 2020, Vol 12, Page 10298 [Internet] 2020;12(24):10298. Available from: 
https://www.mdpi.com/2071-1050/12/24/10298/html

5.     About us | FACTUREE – The Online Manufacturer [Internet]; Available from: 
https://www.facturee.de/en/about-us/

6.     About us | FACTUREE – The Online Manufacturer [Internet]; Available from: 
https://www.facturee.de/en/about-us/

7.     FACTUREE and South Pole: Six wind farms built for New Caledonia [Internet]; Available from: 
https://www.facturee.de/en/facturee-and-south-pole-six-wind-farms-built-for-new-caledonia/

8.     TECHNIK and EINKAUF [Internet]. 4th ed. 2021 [cited 16 June 2022]. Available from: 
https://www.technik-einkauf.de/magazin/heftarchiv/ausgabendetail/technikeinkauf-04-2021.html

18 Jun, 2022

Writer @Wevolver

Wevolver 2022