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All about Project based manufacturing

Project based manufacturing is very different type of manufacturing. Its differences are especially highlighted when compared to manufacturing methods such as engineer-to-order, and manufacturing-to-stock. This is because unlike other forms of manufacturing, project-based manufacturing designs a product to be a product, before the needs of the consumer are even considered. This is directly opposite of manufacturing-to-stock and engineer-to-order methods, that both focus on putting the needs of the customer first.

Project-based manufacturing is similar to other manufacturing methods in that it also keeps an inventory on hand. Typically the items that are being built, are sub-assembled, and then built on site. It is important to understand that the main factor that drives project-based manufacturing is the revenue and profit stream. Businesses that implement project-based manufacturing are normally looking for ways to increase their efficiency. Some of the most common aspects of project based manufacturing include the following:

  • Working to create maximum efficiency in a project-oriented environment.

  • Using software that enables businesses to access one specific project, with one click.

  • Working off of actual cost projecting, and supply and demand outlook.

  • Using valuation of a product based on its manufacturing cost, project costs, and actual revenue stream.

Project based manufacturing works, because customers of these businesses usually do not need an estimate of how much the product will cost, and they do not need it tailor-made to fit their needs. The bottom line is that they simply need the product, to fit within their budget means, and suit their needs. Businesses that implement project-based manufacturing usually develop a product based on consumer trends and opinion. The initial product can be considered an engineer-to-order product, because they are creating a product that was custom-made for a customer. Then once they receive positive feedback, they start manufacturing the product for others.

A crucial part of this type of manufacturing is keeping an eye on cash flow. This is a necessary part of project-based manufacturing. Like every other product that is made, the product needs to maintain a high level of quality, at the lowest possible price. Cash management becomes a critical part of project-based manufacturing, since you are not paid until the customer receives the product; you need to have enough money to cover your business costs until you are paid. In addition, there is also a long lead time, because the products are initially designed to meet the specifications of one consumer. Manufacturers who are successful with this method must be able to identify how much time it will take to design the product, and then install it at the customer's facility. Keep in mind that even installing a smaller product, can take a few days, to make sure it is working properly.

Manufacturers using this method find that in order to find these customers, they must bid aggressively against competitors. You must show potential customers that you come with a low amount of risk, and that you have a large customer satisfaction rating. Experts advise that the best way to win a customer is to give them an accurate projection of the costs. After you give a customer an accurate projection, you must follow it up with timeliness. If you can release your product to the customer close to the scheduled date, you will win over a customer for the long term.

Studies have shown that businesses that have implemented project-based manufacturing often reduce their production costs by 30 percent of more. Best if all their revenue costs increase by 35-50 percent, and their customer satisfaction rating significantly improves. They can also eliminate non-value adding processes, and save thousands of dollars a year in manufacturing costs.

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