Tuesday, January 28, 2014

From just-in-time delivery to just-in-time manufacturing

Last week we discussed in some detail the bullwhip effect, and its intensification as propagation delays between consumers and suppliers increases. As this week’s McKinsey’s article points out, the bullwhip effect is tightly related to issues of inventory, and a companies inventory-to-sales ratio. Exhibit 2 of the article demonstrates the recent intensification of this problem in the US, and accordingly highlights increased supply chain flexibility as a major method to justify these inventory issues.

Supply chain flexibility is becoming a much greater concern for companies nowadays, as is evident with the amount effort being put into development of “just-in-time” inventory.  The following article from the Washington Post (http://www.washingtonpost.com/blogs/the-switch/wp/2013/08/29/what-happens-when-you-mash-up-3d-printing-and-amazons-same-day-delivery/) entitled “What happens when you mash up 3D printing and amazon’s same day delivery” explains how just-in-time inventories have become increasingly important, especially for eCommerce giants like Amazon. They are already taking advantage of networked warehousing and expedited shipping, but the nascent technology of 3D printing and digital manufacturing is an untapped resource for just-in-time production. Instead of predicting demand ahead of time and either stocking inventory in distributed warehouses near to customers or spending inordinate amounts on shipping products last minute overnight, companies will be able to reduce carrying costs by manufacturing products at the point of sale and thus need only store raw material in a much more dense form, and only convert these materials into a final good when assured that finished good has already been paid for.

For myself, this has been a major driver in my current business venture with PieceMaker Technologies, a 3D technology startup creating a Factory in a Store system for brick and mortar retailers. We are making it possible for small, independent retailers to get into the 3D printing game and for the first time offer just-in-time production to their customers, and compete with discount and online retailers. It will be interesting to see how just-in-time changes and how the dynamic between retail and eCommerce will transform.

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