Not long ago, during his 2013 State of the Union Address, U.S. President Barack Obama called attention to 3D printing, saying it “has the potential to revolutionize the way we make almost everything.” While the technology is expected to alter the way consumer goods are made, 3D printing could also affect the entire supply chain—from warehousing to profit models.
Collapsing the Supply Chain
In the not-so-distant future, manufacturing may no longer be associated with warehouses filled with stacks of finished products waiting for shipment. Instead, 3D printing allows manufacturers to easily produce goods to order.
According to Ed Morris, director of the National Additive Manufacturing Innovation Institute, 3D printing brings an on-demand business model to suppliers. “Whenever you need a product, you just make it,” he recently told third-party logistics company Cerasis. “That collapses the supply chain down to its simplest parts, adding new efficiencies to the system.” This simplification will spread throughout the entire supply chain, from assembly and carrying to distribution.
The value of 3D printing is maturing from its early days of product prototyping and expanding into the realm of finished products. Currently, finished products make up just 28 percent of the money spent on printing technology. That figure is expected to jump to 80 percent by the end of the decade. For manufacturers looking to cut costs, the advantages of moving toward 3D printing are numerous. On-demand printing requires little physical storage space, allowing manufactures to reduce overhead by moving production closer to the intended market, and shortening the length of the chain.
Printing is also well suited for low-volume and specialized products, particularly replacement parts. Shifting this segment of work to printers from factory floors frees up traditional manufacturers to focus their time, energy and talents on other goods. Some experts expect the change to be drastic. Cutting the need for high-volume production facilities and low-level assembly workers, 3D printing effectively cuts out half of the supply chain in “one single blow,” according to Cerasis.
Caution: Bumps Ahead
Despite the advantages and positive growth, the expense of 3D printing machines, materials and maintenance is slowing mass adoption. Printers now range from $1,000 to over $1 million. The price of materials remains high. Data collected by Supply Chain Quarterly with the Center for Supply Chain Research at The Pennsylvania State University’s Smeal College of Business revealed 3D polymers can cost up to 104 times more than the polymers used in injection molds. Metals also cost more, some 7-to-15 times more than metals used in traditional manufacturing methods.
But 3D printing can reduce the expense and complexity of production, lowering the cost of entry for new manufacturers. Printing allows for low-cost prototyping and the ability of small orders opening up the market for new companies to challenge legacy companies or to cater to a niche market. The increased level of competition could force suppliers and manufacturers to find ways to differentiate themselves or offer additional value-added services.
Profit-making potential expands beyond the classic buyer-seller relationship in the new 3D printing supply chain. In its review of the disruptive forces that accompany the 3D printing revolution, McKinsey & Company highlighted the option for businesses to sell blueprints to be printed somewhere else. As the tools needed to print products become more widely available, buyers could print aftermarket or replacement parts on their own equipment using data supplied by manufacturers.
The on-demand wave has hit many aspects of B2B transactions, from credit cards to business travel, as buyers demand to do business in real-time. Now, that wave is washing over manufacturing, too – and the opportunity could be quite lucrative. McKinsey Global Institute research estimates 3D printing could have a yearly impact of $550 billion on the manufacturing process alone by 2025. But for now, high costs are likely to keep 3D printing a pipedream for many manufacturers today.