I woke up on Sunday morning, made some coffee, and then logged on to Amazon.com and conveniently made a purchase from my couch. This simple set of two common daily tasks got me thinking about additive manufacturing (3D printing) and its potential to transform both current business models and their supply chains.
My colleague Steve Banker has written on Logistics Viewpoints about 3D printing, its use for additive manufacturing and potential impact on logistics, and ways in which it can be used in the spare parts warehouse. Also, my colleague Sal Spada is an expert on the technical aspects of additive manufacturing and its feasibility for the production of various parts. I am intrigued by the competitive advantages that the technology can provide, the potential business model/s surrounding its use, and how that will affect supply chains. In essence, the potential changes in the competitive space and in value chains from the use of the technology.
Disruptive Potential, Form of Delivery, and Product Value
Sal Spada discussed the process of appropriately evaluating a production part’s suitability for additive manufacturing, as there can be shortcomings in accuracy and production rates. However, Steve and Sal noted that there is a solid business case for “using additive manufacturing to produce complex, high-value parts for which small order quantities are required.” This use case can be applied to spare parts warehouses, allowing these operations to hold lower quantities of inventory in a more basic form (raw materials) that can then be used to potentially produce a number of different SKUs. This business case offers potential benefits in the form of quicker order-to-delivery, greater flexibility, and lower storage costs. The technology is also used for some consumer products such as custom dentistry. But from a business strategy perspective, I believe that the technology’s importance lies in its ability to separate intellectual property in the form of design (CAD design) from the actual product (physical part). I see this as the same dynamic that has propelled the increase in sales of e-books while reducing the demand for physical books. Just think about the turnaround time for an e-book on Amazon (seconds) as opposed to front door delivery (a day or more). A physical book is simply a representation and delivery form of the intellectual property. So how can additive manufacturing be used in a profitable, scalable business model that disrupts the status quo?
I foresee additive manufacturing’s most disruptive, scalable business model as one that must separate intellectual property from the physical product and go to market through licensing and partnerships. I see this occurring in a similar manner to that of Keurig, the company that manufacturers the machine that brewed my cup of coffee on Sunday morning. I believe there are certain products that will be more suited than others for this business model. Regardless of the product line/s, I believe the above mentioned characteristics are essential to the business models’ success. For example, how about unique, trademarked jewelry sets that are brand protected (I can image a branded jewelry operation similar to Alex and Ani successfully leveraging additive manufacturing)? Or maybe even an officially licensed athletic hardware operation. These are examples where a supply chain and business model can be radically changed in a consumer market for a high quantity of non-complex items. The company can partner with the brand or IP owner, the supply chain will involve the management of raw and work-in-process materials (a sort of “postponement” model), and the IP and the raw materials will come together to produce the final product at or near final consumption. What are your thoughts? Ponder that over a cup of coffee at an internet café (by the way, do internet cafés still exist?)