Local Motors is a company that, after eight years in business, now produces a series of vehicles built locally in a handful of facilities, but designed by a global community of enthusiasts.
Local Motors’ business model is built around its microfactories. Each looks to source components locally to the greatest extent possible. And each features a modular factory floor that can be configured and reconfigured as needed to accommodate the demand for individual vehicles.
Central to Local Motors’ operations is its online community: designers, engineers, and gearheads all collaborating to design vehicles. The company’s current flagship vehicle is Olli, a cognitive self-driving shuttle that can be hailed on-demand using a mobile app.
Micro-manufacturing: Harbinger of things to come?
Local Motors exemplifies the potential for creating small-scale distributed manufacturing networks: small, local manufacturing ecosystems enabled by shifts in the economics of production brought about by modern digital technologies. Thanks to the Internet and other communications and data storage technologies, search costs for physical and human resources have declined, knowledge sharing has become far easier, and funding models have become democratized. All of that is lowering barriers to learning, market entry, and commercialization at an increasing rate.
Manufacturing traditionally required a lot of capital. That is no longer always the case; entities like Local Motors are “hacking” the system to reduce capital expenditures.
This revival in small-scale local manufacturing will rely on economies of scope rather than economies of scale, which is to say, with increased modularization, the fixed costs of manufacturing can be spread across multiple types of products rather than just one product. The average cost decreases due to total production of a range of products and as a result of learning across the different products, rather than simply as a function of increased production of one product.
The emergence of distributed small-scale manufacturing as a viable business model holds both threat and opportunity for incumbent large manufacturers. These new, agile additions to the manufacturing landscape will likely be much more nimble than traditional, scale-driven manufacturers, and many could offer consumers the opportunity to co-create products. Large incumbents that continue to pay attention only to the moves of their traditional competitors may face the prospect of “death by a thousand cuts” due to these smaller competitors.
>>Read more by Duleesha Kulasooriya, NewCo Shift, October 12, 2016