Monday, October 6, 2014
3-D Printing: Disruptive in More Ways than Imagined
While reading “The 4 Technology Trends That Could Bring Back U.S. Manufacturing (And Innovation)” on the Co.Exist website, I noticed the blurb about 3-D printing and decided to do a little more digging on the topic. What I found was shocking. 3-D printing can revolutionize supply chains and the global economy in ways that are just as disruptive as advances in big data, the promise of the robotics revolution and China’s ascension into the World Trade Organization.
What 3-D printing essentially does is return the economy to its original state: one where people place custom orders to other people. This is, after all, how artisans originally operated throughout history. Someone with wealth and power would order something from a skilled craftsman, and they would custom make it. However, only the rich could afford it. The advent of the industrial revolution ushered in a new age where even the poor could afford many of life’s luxuries but at the cost of customization. Under a system of mass production, manufacturers could not custom fill orders at a rate affordable to the average person.
Enter 3-D printing. Suddenly, the old world comes back to life. A customer’s custom product gets entered into the 3-D printer as code, and the code brings the product to life. What does this mean for the future of the supply chain and the economy? For starters, it means that companies will start competing on customization as well as price, and that will change the supply change entirely.
First, it means vastly reduced labor and inventory costs. 3-D printing means ready-to-fill orders. You don’t actually need to make anything before it’s ordered. Thus, the inventory is simply the raw material for the paper. Think of how much less physical space is taken up by raw material in barrels versus completed items on shelves. Likewise, armies of assembly line workers become simply unnecessary. There’s nothing to assemble, and mass production makes no sense.[i]
McKinsey estimates that the impact of 3-D printing could reach up to $550 billion annually by 2025,[ii] but the impact will be qualitatively different. Think of an economy based around custom orders, minimal inventory to manage and few workers required to assemble products. What do companies compete on? Lead time. This will incentivize companies to set up local manufacturing units all around the world in an effort to minimize lead time, vastly changing the world.
Traditional supply chains are known for mass produced products that are distributed globally and stored in warehouses based on forecasted demand. That’s how a traditional company reduces lead time, by forecasting sales and stocking appropriate. That model will be obsolete once 3-D printing takes over. The new model will be, receive an invoice, send that invoice to the manufacturing facility nearest the invoice, print the item as soon as possible, package it, and deliver.[iii]
So in summary, let’s see how 3-D printing will change supply chain management. From a forecasting perspective, 3-D printing will make forecasting different. Essentially, what you will need to estimate is the amount of raw materials for each manufacturing site, the number of 3-D printers at each facility, the number of engineers needed to keep the machines running, and the number of facilities necessary to minimize lead time while still generating a profit.
From an operational perspective, 3-D printing is as lean as it gets. You don’t stock anything in advance and you only print once an order has been received. That’s qualitatively different from the current mass production model. Likewise with inventory management. There’s less inventory management with 3-D printing, mostly raw materials. Of course, you could preprint parts that are used more often than others, but overall, the process will be greatly streamlined.
Finally, there’s the issue of sourcing. With 3-D printing, there’s no incentive to outsource since there’s no mass production process that benefits from cheap labor, low taxes and lax environmental laws. Also, by being able to produce all the parts out of the same machine, there’s little need for manufacturers to differentiate. You can expect a lot of small, specialized firms to go out of business as 3-D printing advances and large companies begin to make everything.
Of course, these advances are all far into the future. How far? Well, it’s hard to say. A lot of that will depend on how fast the technology advances and how quickly industries adapt. A few early adopters could quicken this revolution, and, as Carnegie Mellon students, I hope a few of us will lead the way. With the promise of cheaply produced custom goods, the future looks brighter for consumers than ever before.
[i] D’Aveni, Richard A. “3-D Printing Will Change the World.” Harvard Business Review. March 2013. Retrieved from: http://hbr.org/2013/03/3-d-printing-will-change-the-world/
[ii] Intrieri, Chuck. “The Impact of 3D Printing in the Supply Chain and Logistics Arenas.” Cerasis Blog. February 10, 2014. Retrieved from: http://cerasis.com/2014/02/10/3d-printing-supply-chain/
[iii] Hessman, Travis. “The Impact of 3-D Printing on Supply Chains.” Industry Week. July 15, 2013. Retrieved from: http://www.industryweek.com/emerging-technologies/impact-3-d-printing-supply-chains-infographic