Innovation is the key to success of any business. It enhances their ability to stay longer in the market. But a wave, popularly known as disruptive innovation has always threatened the way in which an industry works and as a result many companies have been forced to either adapt or fizzle out. The wave strikes frequently creating a new market, with a different and unique set of values. From a low cost mass produced Ford Model T, which revolutionized the transportation business to digital photography, disruptive innovation has made its presence felt at unknowing times.
We are currently living in an era where technology is changing at a rapid pace. Many companies doing business by the traditional methods are living in the fear of being outpaced and outmatched by companies that readily accept and incorporate such disruptive innovation in their business. 3D printing is yet another classic example of disruptive innovation that has garnered much attention lately. Though used for prototyping in early stages, it has now gained acceptance in the daily business operations. As this technology gains momentum and because of its simpler, smaller and more convenient nature, many industries will be forced to rethink their business strategy and realign with the change.
The impact of 3D printing can be felt in different industries at different levels, biggest being on the supply chain of any industry. IBM has identified 3D printing as one of the leading disruptive innovation which in conjugation with intelligent robots and open source electronics have the ability to transform the global supply chain.
A typical supply chain consists of manufacturing, assembly line, distribution, warehouse and retail. All these departments work in sync with each other to help the product reach its final destination i.e. end customer. Currently, the challenge for the industries is to keep the average costs down while the maintaining high volume of production. This puts a lot of pressure on the supply chain of the company which becomes complex and operates at various levels. Also there are suppliers and sub-contractors that take on different roles of raw materials supplier, manufacturer, assembler etc. The production itself is very scattered and distributed. We have factories in different parts of the world with China being the hot favorite at the moment. The traditional methods have been benefitting all those involved in the process and the economies on the whole. But as seen in the past, new technology demands new rules to be laid down thus changing the economics of the market.
With 3D printing a product can directly move from ideation/conceptualization stage to end user bypassing all the intermediate steps as shown in the above diagram. This will change the foundations of a traditional supply chain management. The current model has its roots deeply embedded in standardization, modularization and digitization. Each of these processes has helped productivity reach new heights. Standardization has reduced the production time of a good, modularization has produced assembly of integrated modules and digitization has made the processes simpler. Together these three have impacted global trade, investment opportunities and changed the employment scenario. Standardization has made supply chain big because it supports economies of scale and as each company today wants low cost, efficient products supply chain has truly turned global.
3D printing has more or less reversed the standardization approach as companies will again turn to customization instead of mass production. Goods can be tailor made to suit personal and demographic needs and need not to be made at an isolated location. 3D printers accustomed with software defined designs have started to redefine the old age hardware driven approach. Listed below are some of the key impacts of 3D printing that will alter the landscape of supply chain management and open new retail opportunities in the coming future.
- Economies of Scale : Low volume, batches of one , low cost, low carbon footprint
- On demand production
- Localization(Consumption and Production at one place)
- Shortened Development Cycle
- Change in Manufacturer-Wholesaler-Retailer relationship
Economies of Scale
The economies of scale is very evident as use of 3D printing can help manufactures produce lower volume of goods suited to the needs of particular demography. Though the cost of 3D machines is higher it can be compensated with reduction in transportation costs, cheaper cost of finished goods in that particular area, improved efficiency in production and elimination of other in between processes. The era of small and simple has already begun. As per IBM, the standout result of using the software defined supply chain will be lowering of costs and that too an extent of 23% in ten years.
A 3D printing machine has the capability to produce different models and it will be a big blow to the traditional methods of manufacturing where an assembly line is setup to produce one type of models. Altering the assembly line means long term investments and also stopping the production thus lowering the productivity. But now with a small change in software and computer programs, machine will be able to produce different products on the go.
Today’s globalization will lead to tomorrow’s localization. Off shoring models of business are under huge threat as 3D printing expands its wings. Today in a traditional supply chain, point of consumption is geographically isolated form point of manufacturing. This leads to large transportation costs and increased lead time. Any change in the consumers buying pattern generally leads to alteration of the product to reflect the latest trends. In traditional methods a lot of time is wasted in transit which may also lead to spoilage of some products. But with 3D printing as production and consumption takes place at the same place, companies will be in a better position to distribute the goods and serve the customers. The distribution channel will be very short and will involve minimum movement of goods and that too directly to the consumers.
Shortened development cycle
Big companies usually have various assembly lines for their different products which require huge manpower to operate. 3D printing will eliminate this phase altogether and thus reduce the labor costs and the lead time of new products. New products would be built at a much faster pace. A recent experiment by Akaishi, a Japanese manufacturer who used 3D printing to make footwear and massage devices reported reduction in almost 90% of the production time as opposed to normal methods. 3D printing will also help in reducing redundancy that is present in the supply chain to dispatch some parts in very short span and get machines working again. These expenditures can be avoided by just clicking and downloading the design of that part from internet.
Change in Manufacturer-Wholesaler-Retailer relationship
3D printing involves process called additive manufacturing, which essentially builds solid objects by depositing a layer over the other one at a time. This is a shift from modern day manufacturing which is based on tearing and cutting to make the product. This will lead to less stock of raw materials in the warehouse and also printing will be done on the basis of demand (made to order). Ideally products will be directly made in the buyer’s house saving huge costs on supply chain. Combing these advantages we will be able to remove the need to have warehousing altogether and stocks of inventories will be a thing of past. Manufactures will save money on storage, handling and distribution. In addition to lesser inventory and warehousing cost, the scrap generated by this method of manufacturing will be negligible and companies will be able earn higher profits due to lesser wastage.
As 3D printing gains momentum, build to order strategies will be employed by all the manufacturers. This will eliminate the need to have retailers in some sections or they will turn into shop windows for manufacturers. Orders will be directly delivered from manufacture to consumer. These cost benefits will make companies commit for the switch in their approach.
10 years from now and we will see our markets be flooded with goods made from 3D printers. Consumer Products, transport, fashion, food, medical, defence, auto and all other industries that rely heavily on supply chain management to carry out their business in an efficient manner need to rethink their strategies.
Auto Spare parts: The automotive spare part industry is large and growing. There are many organized big as well as small players that have built their business in this domain. As 3D printing comes of age, manufactures and end consumers will directly print the parts needed to replace existing ones rather than buying it from these vendors. The after sales service provided by these players will also go down as the accuracy and durability of printed parts improve. This industry which is close to 2.7 Lakh Crores will definitely take a hit and many players will be force to adapt quickly.
Defence Industry: Defence Industry is riddled with products like guns, tanks, missiles that have been built using an extensive and very complex manufacturing process. If the machine breaks down in the middle of a training exercise or battlefield, instead of discarding the machine altogether or ordering the part from the manufacturer, it will be possible to replace the defunct part by printing the new one then and there. The time and cost gained by using this technology can prove to be the difference between winning and losing.
Food Industry: Though 3D printing started with plastics it has now expanded its portfolio by producing materials like human tissue and food. Many attempts have been by researchers in Universities like Cornell and Exter to produce different food items like chocolates and cheese. This will drastically impact the food supply chain where farm inputs form a major component of the nation’s GDP. Food shops or the points of consumption will find it difficult to stay in the market. People will start printing food items in their homes. Though the health benefit and ethical issues can been debated at large, the impact will be big nonetheless.
Fashion/Garment Industry: 3D printing will have a huge impact in the fashion industry where the product life cycle is low and customization is the key. Artists and designers will be able to work together to make infinite models and come up with a new fashion every other day. The designers will be the new manufactures and distributors. They can then send the design to the customer at a given price who can in turn produce the output at his home. The entire traditional supply chain of manufacturing, planning, inspecting at different levels, quality control, wholesaler, retailer can be wiped out at an instant.
3D printing as seen above is a new wave in engineering. The traditional hardware based design of products is taking a backseat and is slowly giving way to new software based model. A new model of logistics and supply chain will emerge that will feed raw material directly to 3D printers. These printers can be at a manufacture’s place or consumers home.
As the prices of 3D printers fall, and they become more affordable, extensive training is required to make people aware of this technologies full potential. Today companies are reluctant to absorb this technology because of the costs and lack of knowledge. At least 70% of leading supply chain leaders today are yet to assess the impact of 3D printing on their business. But latest data suggest that the big shift is already in place. The costs are reducing, accuracy of the printers are improving i.e. build quality of products is improving and supported materials are increasing in variety. Though at present, printing very large objects is a concern, It’s just a matter of time when this transition picks up pace.
– Shaurya Gulati & Vivek Jajodia, XIMB