At A Glance
Increase in Annual Revenue
Improvement in Product Quality & Reduced Supply Chain Risk
Increase in Customer Satisfaction
Increase in Annual Net Profit
In the face of unprecedented challenges, businesses are rethinking traditional models and embracing innovation. As global supply chains undergo a paradigm shift, companies are striving to strike a balance between cost efficiency, resilience, and flexibility.
Supply chain shocks such as international conflicts and COVID-19 in particular have exposed their supply chains as brittle and expensive. Consider that 80% of U.S. consumers report that delays or shortages would cause them to entirely stop buying from a brand. During the height of the pandemic, retailers such as Benetton Group and Lululemon faced lead times up to 7-8 months shipping product from Asia to Europe, forcing some to resort to air cargo at a premium of 5-8 times ocean freight rates. For companies who depend upon repeat business and customer lifetime value while maintaining lean cost structures, this can be a mortal threat.
While large manufacturers possess the capacity to pivot towards local production and automation, they are also actively exploring other strategies in response to supply chain disruptions. Strategies such as regionalization, reshoring, nearshoring, and more have been highlighted in recent discussions, including a video by the Wall Street Journal. On the other hand, smaller organizations, especially luxury goods brands, often grapple with the high costs associated with manufacturing automation programs. Yet, the emergence of the Production-as-a-Service (PaaS) model is revolutionizing this scenario, offering a much-needed solution for these smaller entities.
As highlighted in a Harvard Business Review article by Arnd Huchzermeier and Jan Nordemann, the PaaS model enables companies to contract with independent factory operators on an as-needed basis. This approach allows these companies to spread the fixed investment costs of machinery over multiple customers, making it a feasible solution for small to medium-sized companies. The article cites Germany’s Smart Press Shop as an example of this new model in the automotive industry.
The PaaS Solution
A Game-Changer for Luxury Brands
The PaaS model is a game-changer for luxury goods companies, particularly smaller ones, seeking to bring their manufacturing processes closer to home. PaaS not only mitigates supply chain risks and improves product quality but also enables a swift response to market trends.
Crucially, PaaS provides smaller companies with the benefits of scale and manufacturing expertise without the need for major capital investments or the costs associated with developing in-house manufacturing capabilities.
Our Approach
Unlocking the Potential of the PaaS Model
At P&C Global, we’re at the forefront of unlocking the potential of the PaaS model through our integrated program design and implementation approach. Here are three recent client engagements where we’ve applied this innovative model:
1. Luxury Leather Goods Designer, Italy:
This designer faced challenges with their overseas production due to supply chain disruptions and increasing costs. We helped them implement a PaaS model, contracting with local independent factory operators to provide production services on an as-needed basis. This allowed them to spread the fixed investment costs of machinery over multiple customers, making the transition financially feasible. As a result, they reduced supply chain risks, improved product quality, and increased annual net profit by 18%.
2. Luxury Home Appliance Manufacturer, France:
A French luxury appliance manufacturer struggled to meet increasing demand for their products due to overseas manufacturing facility limitations. By implementing the PaaS model, they not only increased production capacity but also reduced their delivery times significantly, ultimately driving a 20% increase in annual revenues.
3. Luxury Jewelry Designer, Dubai:
This luxury custom estate jewelry designer faced quality control issues in their overseas production facilities. By transitioning to contracts with local independent factory operators, they gained better control over the quality of their products and the ability to respond more quickly to market trends, resulting in a 25% increase in customer satisfaction and a 15% increase in their annual net profit.
Ready to Revolutionize Your Manufacturing Process?
If you’re ready to explore how the PaaS model can elevate your business, we invite you to reach out to us. Let’s revolutionize your manufacturing process and bring it closer to home, together.
By leveraging the PaaS model, we can help you transform your manufacturing process, making it more resilient, flexible, and cost-effective. As the HBR article suggests, the PaaS model is not just a trend, but a viable solution for smaller companies looking to bring manufacturing closer to home. Let’s seize this opportunity and create a more sustainable and resilient future for your business.