Manufacturer Business Model

The word "servitization" was created in the last 20 years to refer to the creative services
that companies that were previously just recognized as manufacturers have combined
(integrated) with their products (Vandermerve and Rada, 1988). Through servitization, a
manufacturer can become more and more connected to their customers and their fundamental
needs. The manufacturer must have some degree of substantial influence over the downstream
components of its supply chain in order to make this "reach" toward the client. But we
frequently forget that manufacturing firms did not begin this way since we are so accustomed to
seeing them push ahead toward the market and the customer.

Almost all manufacturing enterprises just did manufacturing from the start of the
industrial revolution until the latter part of the nineteenth century. Additionally, they did not
offer packaged services, and they did not use vertical integration to manage their supply chains.
As a matter of fact, distributors and other individuals situated nearer to the client frequently held
them in contempt (Lamoreaux et al., 2002, p. 30).

In the late 1800s, it was novel to gain control over supply chains by integrating forward
(and occasionally backward) to the non-manufacturing, service aspects of the supply chain. This
approach proved crucial to the success of many businesses.

Supply Distribution
Production
SALE

Profit/Revenue

Manufacturer - operates by transforming raw materials into marketable products. This

framework may also encompass integrating prefabricated components to craft new items, as
seen in industries like automobile manufacturing. Manufacturers have the choice to directly
market their products to end consumers, a strategy termed as business-to-consumer (B2C)
model. Alternatively, they can opt to delegate the sales aspect to another entity, referred to as
the business-to-business (B2B) model. In the B2B scenario, manufacturers typically distribute
their goods to retailers, who subsequently sell them directly to customers. For instance, a
clothing manufacturer might supply its products to a retailer, which then offers them to
consumers.
Maryville University. (n.d.). Traditional types of business models
Importance of Manufacturing Business Models in the IT Industry
The increasing of Industrial Production and Information and Communication Technologies (ICT)
has brought the so-called Industry 4.0 into the manufacturing world (Ibarra et. al, 2018).
Industry 4.0 is increasingly being explored by academics, researchers, practitioners and other
relevant stakeholders. The idea of Industry 4.0 is underpinned by the advancement of
information and communication technologies (ICTs) and data storage. In this sense, it is possible
to integrate the workflows of advanced technologies into continuous improvement
methodologies, incorporating factors such as the Internet of Things (IoT), augmented reality,
additive manufacturing (AM), big data, cloud computing, simulation, industrial automation and
cybersecurity (Nascimento et. al, 2019).

As the manufacturing industry has difficulties generating revenues through digitalization, the
implementation of innovative business models are essential to remain successful. Physical assets
are often capital-intensive and require a more complex manufacturing process than subscription
business models (Schuh, 2019). Due to the penetration of the manufacturing industry with ICT
technologies, more and more data is available. Essentially, this data serves as raw material for
new services, by helping us to create a digital image of the real processes and to understand
them better and better (Schuh, 2019). Interconnectivity between manufacturers and the
widespread of IoT and cloud computing has offered a new manufacturing ecosystems by allowing
companies to communicate their manufacturing needs and capacities automatically
(Ghobakhloo, 2018).

Businesses that uses Manufacturer Business Model

Known for their computer processors, Intel adopted the lean manufacturing techniques to
provide a higher quality product to an industry that demands zero bugs. This ideology has helped
reduce the time to bring a microchip to the factory from more than three months in the past to
less than ten days. With items so precise and technical, Intel quickly realized that producing a
higher quantity of lower quality was not the way to improve profits and increase customer
satisfaction. Instead, by implementing quality control factors and waste reduction techniques,
both parties benefit. This is even more so true in the tech industry where products are changing
and being upgraded so frequently (Lombardi, 2018).

AMD is a company known for its innovative approach and commitment to delivering high-
performance computing solutions. It operates within the larger technology industry,
characterized by rapidly changing trends and the need for constant innovation. To stay ahead of
the competition, it has developed a business model emphasizing collaboration with other
industry players, such as software developers and hardware manufacturers, to ensure its
products are optimized for the latest technologies and applications.

TSMC created the semiconductor Dedicated IC Foundry business model when it was founded in
1987. In 2023, TSMC served 528 customers and manufactured 11,895 products for various
applications covering a variety of end markets including high performance computing,
smartphones, the Internet of Things (IoT), automotive, and digital consumer electronics (About
TSMC, 2024). They are most well known for being one of the most prominent chip manufacturer
in the IT industry, with clients like AMD and Intel being one of their customers.
References
● Ibarra, D., Ganzarain, J., & Igartua, J. I. (2018). Business model innovation through
Industry 4.0: A review. Procedia manufacturing, 22, 4-10.
● Schmenner, R. W. (2009). Manufacturing, service, and their integration: some history
and theory. International Journal of Operations & Production Management, 29(5),
431-443.
● Nascimento, D. L. M., Alencastro, V., Quelhas, O. L. G., Caiado, R. G. G., Garza-
Reyes, J. A., Rocha-Lona, L., & Tortorella, G. (2019). Exploring Industry 4.0
technologies to enable circular economy practices in a manufacturing context: A
business model proposal. Journal of manufacturing technology management, 30(3),
607-627.
● Schuh, G., Frank, J., Jussen, P., Rix, C., & Harland, T. (2019, June). Monetizing
industry 4.0: Design principles for subscription business in the manufacturing
industry. In 2019 IEEE international conference on engineering, technology and
innovation (ICE/ITMC) (pp. 1-9). IEEE.
● Ghobakhloo, M. (2018). The future of manufacturing industry: a strategic roadmap
toward Industry 4.0. Journal of manufacturing technology management, 29(6), 910-
936.
● “4 GOOD EXAMPLES OF COMPANIES THAT USE LEAN MANUFACTURING” by
Sam Lombardi, 2018 -
https://refinedimpact.com/4-good-examples-of-companies-that-use-lean-
manufacturing/
● “AMD Business Model” by Daniel Periera, 2023 -
https://businessmodelanalyst.com/amd-business-model/
● “About TSMC” by TSMC, 2024 - https://www.tsmc.com/english/aboutTSMC