Traditionally, only businesses with abundant capital and clout could readily obtain deals with suppliers and pay for large manufacturing orders. Many manufacturers would not accept orders if they were too small. This effectively shut out many small businesses and entrepreneurs. Although they are being broken down today, there were several barriers of entry.
Traditional barriers of entry
Before the fourth industrial revolution, many companies wanting to manufacture products encountered the following barriers:
1. Economies of Scale
As the size of a production order increases, the product’s cost per-unit decreases. It was less profitable to create a smaller batch of products than it was to create a larger one.
2. High Capital Requirements
To maintain sufficient profit margins, companies needed to have large amounts of capital to submit large production orders. Small businesses did not have enough funds to cover large orders, let alone obtain supplier contracts, store inventory and sell to end-customers.
3. Securing Product Ownership
Businesses had to worry about protecting their intellectual property. Otherwise deep-pocketed competitors could swoop in and steal market share by producing more of the same product on a larger scale. They also had the resources to pay legal fees for securing patents.
4. Access to Distribution Channels
Being unable to connect with the right suppliers charging reasonable prices was also a common obstacle. Not having the supply chain infrastructure to manufacture a product at sustainable profit margins kept many prospective entrants out of the game.
Cloud-Networked Manufacturing on Demand
The Fourth Industrial Revolution has brought us fast Internet, inexpensive cloud storage and improved integration with IoT. Thanks to these, Manufacturing-as-a-Service (MaaS) has been made possible and it is changing how goods are produced around the world.
MaaS allows businesses to share a cloud-networked infrastructure to produce better goods at a much lower cost. Along with 3D printing, MaaS also helps reduce the need for companies to maintain large inventories.
But that’s not the end of the story. Blockchain technology has also been taking the manufacturing industry by storm.
How Blockchain-Based MaaS lowers barriers ofentry
Blockchain is a distributed ledger technology where transactions are secure, immutable, time-stamped and permanent.
Incorporating blockchain technology with MaaS is drastically reducing barriers of entry as new entrants take advantage of manufacturing like never before.
Using IoT and a worldwide production protocol, blockchain technology helps speed up processes without costly ITintegration. Through decentralization, the removal of middlemen and increased interconnectivity helps companies enter a large international marketplace, rapidly scale new business models, and sell customized products at minimal extra cost.
Small businesses and individual entrepreneurs could also sell products without fear of getting pushed out by the “big boys”. Any individual could use the blockchain to secure patents and ownership of digital assets. Because the blockchain is immutable, they could now manufacture new products and not worry about getting their ideas hijacked by bigger companies.
With blockchain technology and a worldwide production protocol, small businesses could now create pay-as-you-go manufacturing orders. Manufacturers could also integrate smart contracts with IoT devices connected to their facilities, effectively automating their supply chains.
They can process orders much faster than before, making manufacturing much cheaper than it used to be. This allows eCommerce entrepreneurs and small businesses to find a manufacturer to realize their ideas at competitive prices.
ARXUM, a business bringing blockchain to the manufacturing industry, is pioneering within this field. They show several examples of how these new technologies can lower the barriers of entry and decentralize manufacturing.
Author: Nabeel Keblawi