3D printing will not reshape the manufacturing landscape completely. However, over time, a new market structure with many opportunities for value creation will emerge.
KNOWLEDGE BI: Technology Strategy
Direct Digital Manufacturing – 3D printing – may become a general purpose technology with wide-ranging implications for: supply chains, production and strategic positioning in a market flooded with tailor-made products. The race is on. Are you ready for the upheaval in your industry? Alternatively, do you want seize the opportunities and become a central player in the emerging market structure?
“3D printing or additive manufacturing is a process of making three dimensional solid objects from a digital file. The creation of a 3D printed object is achieved using additive processes. In an additive process an object is created by laying down successive layers of material until the entire object is created. Each of these layers can be seen as a thinly sliced horizontal cross-section of the eventual object”. The typical sequential phases include the digital design of the product (creation, modification, copying or scanning), the additive manufacturing process (i.e. the printing) and finishing.
“Gold rush” or niche phenomenon
While 3D printing will undoubtedly affect the economy, perceptions of the scope and magnitude of 3D printing’s implications are polarized. The popular press optimistically conceives of 3D printing as a new “industrial revolution,” a “gold rush” that will dramatically change supply chains, firm strategies, competition, and industrial geographies.
In contrast, the academic literature highlighting technological limitations, high material costs, lack of safety and quality standards, and high energy costs largely confines 3D printing to specialized situations and particular and complex products.
Room for 3D printing
We argue that within existing manufacturing there is a much room for the incorporation of 3D printing to complement existing traditional manufacturing technologies. Manufacturers with complex bills-of-material will adopt 3D printing to extract additional scale advantages from traditional manufacturing. Hence, product variability, not merely product launch, is a pivotal antecedent for the co-location of and complementarity between traditional manufacturing and 3D printing.
Demand for specialized products and demand from specialized geographies will reduce 3D printing’s raw materials costs (Ruffo, Tuck & Hague 2007), and advance 3D printing technology. We propose that resulting cost reductions and quality improvements will make 3D printing viable for urgent, otherwise disruptive production in existing manufacturing facilities. Manufacturers will allocate expedite orders for low and sporadic demand parts to 3D printing, reducing setup and changeover on traditional production lines.
The new economic structure
How will a 3D populated economy market structure look like? Which opportunities does this market structure entails to existing firms and startups?
The mass adoption of and production by 3D printing technologies will first, make many more products accessible to customers; second, distributed production will partially replace today’s concentrated production (from a handful to numerous production entities); third, on-site production for instantaneous demand fulfillment will partially replace the current production model which entails the anticipation of demand, delay, production, delay, product exhibition, delay and purchase; fourth, we will see wide-spread commoditized manufacturing infrastructure.
The combination of these four mechanisms will enable a new economic structure requiring innovation and repositioning of existing activities.
- First, similarly to the home printer, home 3D printing will become a standard allowing the production of replacement products, unique gifts, accessories etc. More importantly, opportunities for design creation in the ready-to-download automated production instructions are limitless. An individual 3D printer is not a necessity. The sharing economy of 3D printers, as in the 26,780 3D printers, mediated by www.hubs.com, waiting for your order around the globe, without the fuss of traditional unwilling-to-change professions like Taxi drivers.
- Second, street corner printing firms (7-Eleven of most things) will create opportunities for the fast food and magazine stores to reposition their role in society. Opportunities exist in this transformation process by focusing on higher value added printers that allow a combination of more raw materials and the stock of such raw materials not available for home users.
- Third, tremendous opportunities exist for regional and national supercenter printing firms. Supercenters are sites with numerous 3D printers of higher quality than the street corner printers, a wide range of raw material in stock and which are competitive due to scale economies.
- Fourth, for the many existing Norwegian firms specializing in excavation and other raw material gathering (e.g. forest industries) raw-material printing will allow moving up the value chain. Raw-material printing is 3D printing activities next to the location of costly to transport (e.g. wood) and difficult-to-handle raw-materials (e.g. chemicals). This will come at the expense of traditional manufacturing, wholesale, retail and long-haul logistics firms. Finished or semi-finished products as opposed to raw materials will be shipped for the location of production.
In summary, rather than completely reshaping the manufacturing landscape or being confined to niche consumer goods, we propose a blended scenario where manufacturers with complex bills-of-material adopt 3D printing early to isolate production variability and individuals and specialized firms will produce very small batches of unique products.
Over time, as technology improves and adoption grows exponentially, a new market structure with many opportunities for value creation will emerge. Are you read to invest?
Sasson, A. & Johnson J. C. (2016). The 3D Printing Order: Variability, Supercenters and Supply Chain Reconfigurations. International Journal of Physical Distribution & Logistics Management, 46(1), 82-94.
This article is published in BI Strategy Magazine 2016.
BI Strategy Magazine is a Science Communication Magazine published by the Department of Strategy at BI Norwegian Business School.