What’s trending?

At the moment,  a large proportion of consumer goods is produced in big factories, enabling economies of scale. Many of these factories are in low-income regions and this has led to significant cost savings for businesses and customers. However, there are signs that this is changing as manufacturers re-assess their offshore production facilities. Minimum wages in many of these countries are rising while fears of supply chain insecurity are on the rise. In addition, more and more customers are seeking products that are personalised/customised.

An alternative to the traditional model of manufacturing – large factories mass-producing items – is emerging. Microfactories are growing in popularity. These are small-scale, highly automated, technologically-advanced facilities. With their use of robotics, artificial intelligence, and the Internet of Things (IoT), microfactories are poised to help manufacturers improve margins and meet sustainability targets. They can produce a wide variety of products as opposed to the mass production of a few items, or even a single item.

Automotive, garment, consumer appliances and electronic waste treatment are some of the leading industries currently using microfactories for commercial production. Arrival, a UK-based start-up that produces electric utility vans, uses the microfactory concept. The factories are set up in areas of demand using existing commercial spaces or warehouses. In July 2022, GE Appliances’ CoCREATE centre began the production of their Monogram Smart Flush Hearth Ovens, the first product made at their microfactory. From these small-batch runs, GEA can scale up to larger-volume production in its traditional factories that already exist across the globe. In July 2023, Nestle South Africa opened a new plant in Hammanskraal. It is run mostly by technology with minimal human help. Only 27 people have been hired to work at the plant but 1 200 coffee mixes per minute are packaged there.

Why is it important?

• Democratises manufacturing: Opening large manufacturing facilities requires significant capital, making them beyond the reach of many businesses. This results in a stifling of innovation as many new ideas do not come to fruition because of a lack of finance. Companies can use microfactories to rapidly prototype an item and determine if there’s sufficient demand. This lowers the risks of innovation, decreasing the costs of taking a chance on new ideas.
• Supports local economies and communities: Microfactories can bring manufacturing processes closer to the point of consumption. Mr Price and Woolworths are two local retailers which have focused on localising production. Local economies and communities are bolstered through the generation of employment opportunities and the support of local supply chains.
• Sustainable: Businesses are facing mounting pressure to adopt sustainable manufacturing practices. Using locally-sourced materials, reducing transportation emissions and adopting energy-efficient processes serve to reduce a business’s carbon footprint. Microfactories avoid overproduction by producing smaller quantities of goods and generating less waste.
• Offers flexibility and agility: Microfactories are a more flexible manufacturing solution and are able to adapt quickly to customer needs, evolving technologies and trends.
• Increased cost-effectiveness: They require less floor space compared to traditional large factories. The capital required for construction of a microfactory is much lower than traditional factories. The technology required to run a microfactory enables greater efficiencies in many areas of production leading to cost savings. Less energy is required, fewer materials and a smaller labour force. 
• High levels of customisation and personalisation: Traditional factories produce large volumes of a product or a small number of products. Microfactories allow smaller batches to be produced, offering the possibility of highly personalised solutions. Microfactories can keep up with the changing demands of consumers by using automated systems that facilitate quick changes in production requirements.
• Demand-based manufacturing: Products can be manufactured only once confirmed orders from the customers are received, operating on a demand-based rather than supply-based model. The factory itself can function as a retail centre. 

What can businesses and policymakers do about it?

Companies should continually monitor market trends and consumer preferences to identify opportunities for microfactory deployment. But the first step for a business is to thoroughly evaluate whether microfactories are the best solution. If a company has large volume requirements, for example, the microfactory production process may not match the required  scale. There are instances where large-scale factories are still needed. 

Maintaining an extensive network of small-scale microfactories may be more complicated than maintaining one large factory. The transition to microfactories for larger, established corporations will be especially challenging. A phased approach whereby these manufacturers set up satellite microfactories close to their target demographic is advisable. Employees of microfactories need to be trained in automation and robotisation and companies should invest in such training programmes. Although automation may seem like a threat, in the future there will always be the need for human supervision and an integrated workforce.

There are business opportunities for start-ups that help businesses wanting to launch microfactories. Already several companies have developed the new and advanced technologies required for establishing these set-ups. Bright Machines, San Francisco, provides AI-driven automated microfactories, combining software, machine learning, computer vision and adaptive robotics. South Africa-based company AFRI.CAN has developed a range of microfactories in the agri-processing industry. The production of biofuel is one such example. 

Policymakers could incentivise investment into microfactories in rural areas through grants, tax credits, or low-interest loans. As of May 2023, Xiejiapu Township, China had built microfactories for suitcase processing in 7 villages of the township. Lawmakers should develop and implement regulatory frameworks that support microfactories being established and operated. Collaborating with educational institutions and industry stakeholders to develop specialised training programs and curricula tailored to the needs of microfactory operators and workers, is also advisable. 

By Flux Trends 

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