For a new business planning to make things, the traditional manufacturing model can be challenging. It requires knowing which products will sell best, paying upfront for mass production, and warehousing large quantities of stock. The business faces the risk of high inventory costs and excess inventory if customer demand falls short.

On-demand manufacturing flips this script. It is a business model where production begins only after a customer places an order. This approach reduces the financial risk, letting startups launch with less risk and helping established companies control overhead costs. Learn more about how on-demand manufacturing works, and tips for using it for your business.

What is on-demand manufacturing?

On-demand manufacturing is a production method where goods are produced only to meet actual demand. Unlike traditional manufacturing, which relies on bulk production and sales forecasts, on-demand production responds directly to customer orders. By avoiding the need to stock large quantities of product, businesses can dramatically reduce inventory costs and waste.

Jono Pandolfi, founder of the artisanal ceramics company Jono Pandolfi Designs, built his business with on-demand manufacturing. 

“When it comes to a hospitality order, which is really the bread and butter of our business, that’s always made to order,” he says. “I always like to do stuff at the last minute, in terms of firing it, and then ship it the next day. So that’s on-demand manufacturing.”

The on-demand model is used in various industries, often via advanced manufacturing technologies. This includes technology like 3D printing, CNC machining that relies on computer guidance, and other forms of digital manufacturing used to create everything from apparel and medical devices to custom-tooled parts.

How on-demand manufacturing works

1. Customer places an order
2. Order is sent to production
3. Production begins
4. Product is finished and inspected
5. Product is packaged and shipped

The on-demand manufacturing workflow hinges on a tight integration between your storefront and your production processes. Unlike traditional manufacturing, which requires long-range planning, on-demand is built for rapid response. Although the specific manufacturing processes vary by industry, the sequence generally moves along the following path from order to fulfillment.

1. Customer places an order

The process begins when a customer places a confirmed order. Although this can happen over the phone or at a brick-and-mortar location, it most commonly occurs through an online store. The order contains all of the specific details needed for production: the SKU, material choices, color, size, and any customizations.

At Jono Pandolfi Designs, the bulk of the company’s business comes from on-demand orders, typically from restaurants. The brand offers two colors of clay, a variety of glazes, and more than 50 shapes. 

“So a restaurant customer comes along, and it feels very custom for them because they have access to so many shapes,” Jono says. “They can pick the color of clay, pick the color of glaze, they can access so many things that the retail customer cannot have, and it’s at a better price point.”

2. Order is sent to production

In a modern setup, this step is automated. The order is instantly routed to the production facility. This could be an in-house 3D printing device or, more commonly, an external on-demand manufacturing partner. This network of manufacturing partners ready to receive digital job tickets from anywhere is often referred to as cloud manufacturing, with retailers and manufacturers sharing resources and infrastructure using cloud computing.

3. Production begins

The facility’s system queues the order, and fabrication begins, often using advanced manufacturing technologies. For 3D printing, a form of additive manufacturing, a digital file is sent to a machine that builds the part layer by layer from metal materials or polymers. 

For CNC machining, a computer numerical control tool cuts away material from a solid block of raw materials to create the final shape. For apparel, a blank item is pulled and sent to a digital printer or embroidery machine. The digital manufacturing approach allows low-volume production—even a single item—without the costly tooling and overhead costs of traditional mass production.

For Jono, the team typically keeps a substantial stock of partially completed—or bisque—ceramics on-hand. These items have been fired in the kiln once and are ready to be customized during glazing. 

“We can’t have the order come in and then form it, and fire it, and then glaze it, and then fire it,” Jono explains. “So it makes more sense to have it in stock in bisque form. We have inventory in bisque, and then pull it out and glaze it. We can glaze fire over a thousand pieces a day.”

4. Product is finished and inspected

An unfinished product isn’t a final product. This stage, often called post-processing, is critical. It can involve sanding, polishing, or painting a part, assembling multiple components, or applying a final finish. 

Quality control is paramount. Instead of spot-checking a mass-produced batch, each individual piece must be inspected to ensure it meets the customer’s exact specifications. If a defect is found, the piece is typically reworked or remade before shipping to maintain consistency and customer satisfaction.

5. Product is packaged and shipped

Once the item passes inspection, it is packed and shipped directly to the customer. In many third-party on-demand models, this is a white label service, where the product uses the brand’s packaging. This gives the customer a seamless experience, and they may never know that the item came from a manufacturing partner—unless they read the label’s fine print. This final step completes the just-in-time manufacturing cycle, moving from a digital file to a physical product in a matter of days or even hours.

Advantages of on-demand manufacturing

• Reduced inventory cost and waste
• Increased customization and flexibility
• Decreased risk and improved market testing

Adopting an on-demand manufacturing model shifts a business from a speculative push system—which involves making products in anticipation of selling them—to a pull system that involves selling products first and then making them. This change offers advantages over traditional methods, especially for small businesses and ecommerce entrepreneurs. Three key advantages stand out:

Reduced inventory costs and waste

Traditional manufacturing processes require businesses to tie up capital in inventory. This locked-up cash isn’t just the cost of the goods; it includes ongoing inventory costs for warehousing, insurance, and inventory management. On-demand production virtually eliminates these expenses. By producing only what is already ordered and paid for, you free up capital, reduce your overhead costs, and simplify your inventory control system.

This lean approach also has a lower environmental impact. With no bulk production, there’s often no need to liquidate or discard unsold stock, cutting down on physical waste. This reduction in waste and optimized use of raw materials leads to a smaller carbon footprint, a key selling point for environmentally conscious customers.

Increased customization and flexibility

On-demand production lets businesses offer a broad range of products without stocking every variation. Jono’s ceramics business caters to customers this way. 

“It feels very custom for them. Because they have access to so many shapes, they can pick the color of clay, pick the color of glaze,” he says. “It’s something that the retail customer cannot have”—referring to the limited options available from a traditional, pre-stocked retailer. 

This level of flexibility helps businesses meet specific customer preferences and adapt to shifting market demands without costly write-offs that come with carrying excess inventory.

Decreased risk and better market testing

For small businesses and startups, on-demand is a way to test new products. Instead of committing to large-scale production for an unproven idea, you can use rapid prototyping of a planned product or low-volume production to gauge consumer interest. If something sells out, it signals interest rather than creating a costly problem—because you haven’t tied up money in unsold inventory. 

Limitations of on-demand manufacturing

• Higher per-unit production costs
• Potentially longer lead times
• Scaling and supplier challenges

Although the on-demand model is useful for reducing financial risk and avoiding excess inventory, it is not a perfect solution for every business. It introduces its own trade-offs and challenges involving cost, speed, and scale.

Higher per-unit production costs

The primary trade-off for the flexibility of on-demand is the loss of economies of scale. Setting up specialized machinery or production processes for a small-batch manufacturing run, or even a single item, often results in a higher per-unit cost. Although this is partially offset by eliminating waste and inventory costs, on-demand is generally not the most cost-effective solution for simple, high-volume goods where mass production still rules. It also means that remakes or replacements must be produced one by one, which can add cost if a product needs to be reworked.

Potentially longer lead times

Unlike traditional manufacturing, where an item ships from a warehouse, on-demand means the customer must wait for the product to be made. This creates a challenge in an age where fast-shipping operations have set customer expectations for near-instant delivery. Even a clearly stated lead time for a custom order can feel too long and lead to lost sales. 

This problem becomes critical if the manufacturer also experiences unexpected production delays—for example, supply shortages or a long production queue—which can push fulfillment times from slow to unacceptable, damaging customer satisfaction. 

Scaling and supplier challenges

This model can make it difficult to scale production to meet a sudden surge in demand. A system built for low-volume, custom orders can be quickly overwhelmed if an item goes viral. A manufacturer has finite machine capacity, a limited on-hand supply of raw materials, and a fixed labor force for post-processing and quality control. 

A sudden influx of orders creates bottlenecks, backlogs, and frustrated customers. This highlights the importance of a redundancy plan, such as having multiple, pre-vetted manufacturing partners to manage overflow. 

Tips for utilizing on-demand manufacturing

• Focus your offering
• Establish core values
• Move beyond the drop model
• Partner with on-demand manufacturers

Adopting an on-demand model requires a significant mindset shift, especially for artisans. For businesses and artisans looking to make the leap, Jono offers several best practices built on 20 years of experience.

Focus your offering

The temptation to offer infinite customization options can reduce efficiency. 

“Make sure you know what you’re good at,” Jono says. “If that lines up with what the people want, hone your product offering, and make it as trimmed down and stripped down and reproducible as possible.” 

Focusing on a smaller set of reliable, repeatable products helps streamline production and reduce complexity.

It’s also important to establish a need for your product. 

“Does the market want what you are trying to make?” Jono says. “If it doesn’t, be realistic about that, but pivot if necessary.”

Establish core values

Jono suggests embedding the on-demand mindset in your company’s core values. His, for example, were modeled after Toyota-style production tenets—the very philosophy that underpins lean, on-demand systems.

“I onboard all team members, and that’s the main thing that I teach them about,” Jono says. “Our core values spell out BRICK: built from scratch, resourceful, improving constantly, collaborative, and keeping it positive.” 

These tenets reinforce the on-demand model. 

“There’s things about on-demand manufacturing that I learned well after I started my business that deeply resonated with me, because they are the things that I instinctually wanted to do all along,” he says.

Move beyond the drop model

For many artisans, the drop model—making what you can and selling it all at once—is tempting. Although a successful product drop proves market demand, it’s rarely a long-term growth strategy because it’s built on scarcity and exclusivity, not steady on-demand availability. It creates a boom-and-bust cycle: a flurry of sales followed by an empty, sold-out storefront. This can frustrate potential new customers and prevent the reliable, repeatable sales needed to scale a business. 

Jono urges business owners to abandon this business model. 

“If you want to grow your business, you need to start making the same things over and over, and keeping them in stock at all times,” he says. 

This reliability—having staple products consistently available—is what turns one-time buyers into long-term customers. 

“When things are out of stock, you’re just not getting the sale,” Jono says. “Yes, you can collect the email. Yes, you can come back after that person later. But is it better if it’s just in stock all the time?” 

Partner with on-demand manufacturers

You don’t have to build the factory yourself. For small businesses, outsourcing is a powerful strategy. 

“These kinds of relationships are what built my business,” Jono says. “The job that put us on the map was the Nomad Hotel in New York, a 6,000-piece order. Six hundred place settings of dinnerware, so I couldn’t fathom making that myself.”

Jono was able to find a plant in the US to help fulfill the order. For artisans or small businesses, having an on-demand manufacturing partner allows them to take advantage of big sales opportunities. 

He also recommends asking critical questions to find the right manufacturing partners: 

• What are the minimum order quantities?

• What are the startup costs?

• What are the lead times?

• Are you willing to white label? 

These on-demand manufacturing services, part of the growing cloud manufacturing industry, can handle production while you focus on design and marketing.