The Frugal Economy, Part 2:
‘Scaling Out’ Manufacturing to Maximize Sustainable Local Impact

By scaling out their manufacturing with a distributed network of agile micro-factories rooted in local communities, businesses can gain agility and resilience and produce and deliver personalized goods faster, better, cheaper and more sustainably.

Brand Provided | By Navi Radjou | Published 1 month ago | About a 9 minute read

Image: Avatar Mobilité

Europe in the 19th century, the US in the 20th century, and China in recent decades have all experienced exponential economic growth by “scaling up” vertical manufacturing — that is, by centralizing industrial activities in large factories. But this energy-intensive mass production model has depleted natural resources and seriously damaged our environment (the industrial sector accounts today for nearly one-third of US greenhouse gas emissions).

Today, a massive reindustrialization is underway in the US and Europe as Western nations try to bring back manufacturing that they previously outsourced to low-cost nations such as China. Learning from the past, US and European manufacturers should avoid scaling up vertically their operations in gigafactories. Instead, they should “scale out” horizontally — using a distributed supply network with many small, hyper-agile factories located closest to customers (see Figure below).

The multiple benefits of scaling out manufacturing

By scaling out their manufacturing and producing in small factories located closer to customers, businesses can reap many benefits:

Slash fixed costs and operating expenses

Businesses can avoid the huge capital expenditures (CapEx) needed to build and run giant high-volume factories. For example, Tesla intends to invest $10 billion to construct its gigafactory in Mexico — which is nearly twice more than its Berlin gigafactory.

In comparison, French electric mobility startup Avatar Mobilité is building a network of micro-factories that can be set up cost-effectively and rapidly across France and in developing nations. Avatar is the creator of Ulive — an ultralight electric vehicle that weighs only 350 kg (771 pounds) and consumes three times less energy than a traditional EV. In each Avatar micro-factory — no bigger than a spacious garage — local entrepreneurs can assemble the Ulive in a matter of hours. The Ulive is sold at €15,000 ($16,600), which is a bargain compared to EVs sold in the US that cost on average $60,544.

Shrink logistics costs

Firms can curb inbound logistics costs by sourcing raw materials and components locally, removing the need to transport them from various distant suppliers to a centralized factory. And by selling their finished products directly to customers located near their micro-factory, businesses can forego intermediaries and slash distribution expenses and emissions by avoiding shipping to distant points of consumption.

For instance, Canadian startup Relocalize is on a mission to decarbonize and hyper-localize food and beverage production — which contributes 37 percent of global GHG emissions. Relocalize’s high-tech micro-factories can produce, package and pelletize food and beverage items on the spot at grocery distribution centers — hence, removing middle-mile logistics and drastically reducing GHG emissions, water use and plastic pollution.

Relocalize’s first solution is an autonomous micro-factory — which can fit inside a repurposed shipping container — that can produce packaged ice in certified plastic-negative bags on-demand and on-site at retailer distribution and fulfillment centers. This eliminates the crazy need to ship ice over 1,500 miles to distribution centers, as it’s done today.

Boost resilience and agility

Distributed manufacturing offers greater supply chain redundancy than centralized production. In case micro-factory X in location A malfunctions, micro-factory Y in nearby location B can take over the tasks and complete pending customer requests. Even better, you can expedite a “factory in a box” — a pre-assembled manufacturing facility in a container — that can be quickly set up at location A for emergency production while micro-factory X is being repaired.

For example, global biopharmaceutical firm Bayer piloted a flexible manufacturing project named F3 (flexible, fast and future) Factory — a portable, modular production unit designed to fit within a container. This mobile factory can quickly be deployed at the customer’s industrial location to manufacture and distribute a variety of customized chemicals in small quantities. The F3 pilot project demonstrated a 40 percent decrease in capital investments, 30 percent energy savings, 30 percent reduction in CO2 footprint, and a significant improvement in time to market.

Deliver personalized goods flexibly and profitably

During the 19th and 20th centuries, firms scaled up their production in ever-larger factories to achieve economies of scale. They vied to lower expenses by mass-producing standardized goods. Today, however, eco-conscious buyers seek customized products that are made closer to where they live. Therefore, businesses need to revamp their industrial model in order to achieve economies of scope. They must learn to produce cost-effectively, in low volume, a wide variety of personalized products in digitally optimized micro-factories located in proximity to customers. To realize economies of scale, you must become more efficient. To achieve economies of scope, you must boost your agility.

AI-powered industrial automation solutions can deliver this agility. San Francisco-based startup Bright Machines (BM) has created totally automated and easily configurable micro-factories, with which users can produce a wide range of items — from electronics to home appliances — near the customer, enabling flexible and eco-friendly manufacturing. Using BM’s flexible automation solutions, customers have been able to launch new products 28 times quicker compared to manual assembly and boost their production throughput by 2.5 times.

Become more sustainable

By outfitting their micro-factories with digital fabrication technologies (DFTs) such as CNC machining and 3D printing, companies can achieve four advantages:

utilize fewer raw materials
produce less waste
reduce their carbon footprint, and
lower transportation expenses.

Additive manufacturing (a fancy name for 3D printing) is “frugal,” as it generates 70-90 percent less waste compared to traditional manufacturing methods.

Industry 4.0 players including Xometry, Protolabs and Sybridge operate a distributed network of small-scale factories run by DFTs such as 3D printers that eliminate the necessity of transporting components across the globe to be assembled in a large, centralized factory. Instead, design data for a new product can be electronically transferred to the micro-factory located closest to a customer, where it can be 3D printed rapidly using materials that are easily accessible in that area.

Maximize social impact in local communities

Businesses can build capacity and regenerate “left-behind” communities — such as former coal-mining towns in the US hinterland — by setting up micro-factories that would source from small suppliers situated nearby and train and employ local talent.

For instance, textile-waste recycling company Re-Fresh Global sets up microfactories in underdeveloped communities under a franchising model. Each recycling micro-factory, run by an entrepreneur, employs people in the local community who also learn valuable skills to succeed in a circular economy. Re-Fresh is a great example of “triple regeneration” (to be covered in Part 4 in this series) — a holistic approach to creating economic, social and ecological value synergistically in disadvantaged places.

Case study: How AFYREN is scaling out the $30 trillion bioeconomy

The bioeconomy aims to replace the toxic and polluting “petro-sourced” materials used in industrial value chains with cleaner, “biobased” materials. The bioeconomy holds immense growth potential: The European bioeconomy is already worth €2.4 trillion euros; while the US bioeconomy is today valued at over $1 trillion, or 5 percent of US GDP. Estimated at $4 trillion today, the global bioeconomy is poised to grow to $30 trillion by 2050.

AFYREN is a French startup shaping the bioeconomy. It’s NEOXY plant in Northeastern France is a biorefinery that “upcycles” agricultural residues into seven valuable biomolecules called carboxylic organic acids — used in fields including animal and human nutrition, cosmetics and lubricants. AFYREN has optimized NEOXY’s industrial processes, so it produces five times less CO2 and greenhouse gas emissions compared to traditional methods of producing acids from fossil fuels.

AFYREN projects a $15 billion global market for its seven biobased organic acids. What makes its operating model most intriguing is that the majority of its suppliers are situated within a 250 km (155 miles) radius of its NEOXY factory (see Figure below). NEOXY supplies global customers through its industrial facilities in Western Europe for further product processing.

In 2023, AFYREN teamed up with Mitr Phol — a leading global sugar industry player headquartered in Bangkok, Thailand. The plan is to establish a second biorefinery in Thailand to transform sugarcane byproducts from local suppliers into high-value biobased products for Asian markets, which account for 25 percent of global carboxylic acid demand.

AFYREN is considering the option of establishing its third biorefinery in the United States that will transform agricultural waste — such as corn byproducts — sourced from US farmers into valuable products for the North American market.

Instead of scaling up its manufacturing by centralizing all its production in a single, giant factory that would supply all global markets, AFYREN wisely decided to “scale out” by running modestly sized factories located in two vital, regional markets: Europe and Asia.

Every biorefinery solely utilizes raw materials abundantly available locally and caters mostly to regional clients. AFYREN's hyper-local bioeconomy value chains minimize carbon footprint and maximize the livelihoods of local farmers, who earn more by selling their agricultural waste.

By scaling out their manufacturing with a distributed network of agile micro-factories rooted in local communities, businesses can gain in agility and resilience and produce and deliver personalized goods faster, better, cheaper and more sustainably.