Saturday, March 8, 2014

Additive Manufacturing's Disruptive Impact on Traditional Supply Chain Paradigms

Three weeks ago, I explored the topic of the "circular economy" and "reverse network" supply chains, the exciting potential future for industrial production and supply chain management touted by the Ellen MacArthur Foundation and their supporters. In keeping with the spirit of that post, I'd like to continue by sharing another area of the supply chain world that is receiving a lot of attention. You've probably heard and read many stirring reports about additive manufacturing (AM) - also known as 3D printing - an innovative technological breakthrough that uses a laser to melt plastics materials in specific stroke patterns that are defined by a software-built blueprint. The result is layers upon layers of synthetic materials that eventually yield a final product. Formerly used almost exclusively for design experts to fashion prototypes, the conditions have now become right for the technology and its accompanying materials to be used on a large scale and by average consumers or smaller firms.
A Stratasys OBJET1000 showing off a printed hubcap.

The benefits of AM are many and clear; its no wonder then that many are referring to AM's forecasted impact being like that of a "next industrial revolution." But the most salient and interesting for the purposes of our course are the ways in which AM is a "disruptive innovation," a new and promising technological advancement that will serve to disrupt traditional supply chain paradigms. In what ways will the increasing adoption and scaling of AM in industrial manufacturing and production impact supply chain management. As you can all probably surmise without even researching the matter, it will have enormous impacts upon the field. But lets dive into this a bit, focusing largely upon a curious 2013 white paper created by the researchers and practitioners at IBM's Institute for Business Value entitled, "The new software-defined supply chain: Preparing for the disruptive transformation of Electronics design and manufacturing."

The report covers three disruptive technologies in its review: 3-D printing (AM), intelligent robotics, and open-source electronics. They begin by outlining the ways in which the current world of production and supply have become standardized. These traditions of production and supply convention are best summarized as, "parts continue to become more standardized; assembly has continuously shifted toward modules from basic components; and complex mechanical controls continue to be replaced by simplified digital intelligence." 

There is a turning point, according to the authors, brought about by the growth and scalability of these three technologies. In particular, AM has the potential to alter the traditional model from beginning to end. In a much shorter appraisal, MIT and Technion logistics expert Yossi Sheffi offered his summary of the most important elements to the changes brought about by AM in "Outlook on the Logistics & Supply Chain Industry 2013," a July 2013 report by the Global Agenda Council on Logistics & Supply Chain Systems, one of many research subgroups assembled by the World Economic Forum. He offers the following (page 21) as the most disruptive changes to be expected:

  • Increase in stock-keeping units (SKU)
  • Manufacturing lead time reduction, resulting in tighter delivery schedules and an increase in JIT adoption
  • Waste reductions and sustainability increases in materials, packaging, and transport
  • Production cost reductions
In each case, Sheffi offers each new benefit as a something that offers a mitigating force that counters the most disruptive effects of AM's take-up and scale-up.

In the IBM report, the authors take this a step further and get into the power of AM to alter the literal network systems of supply chains. They claim that, though maintaining the requirement for economies of scale, AM will "fundamentally transform the principles of global mass production," and it will do so in three different ways:
  1. On-demand manufacturing - rapid prototyping, shorter product design cycles, stockless inventory models, lower risk in manufacturing with smarter supply chains;
  2. Customization - changes by customer, new retail models will emerge that engage this;
  3. Location elasticity - new efficiencies, AM-induced paradigms, and consumer-related shifts will cultivate location elasticity, drawing manufacturers closer to the end consumer.
In particular, I found this idea that AM will alter producers' position on location. AM's adjustments to traditional producer concerns and consumer engagement may well draw manufacturing closer to the consumer, reducing logistics expenses and also decreasing the environmental cost of the system. The European financial and professional services firm Jones Lange LaSalle offered this visual to summarize the change. But even more interesting, IBM's analysts simulated the changes to supply chains over a 10 year span for a hearing aid. The image for this is below. Notice how over time the existence of many more production locations spring up, leading to much shorter distances between the points of manufacturing and their end.

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