COVID-19: Utilizing additive manufacturing to digitize warehouses
COVID-19: Utilizing additive manufacturing to digitize warehouses
- The pandemic revealed the fragility of the world’s economy and the global supply chain and its over-reliance on China; risks of future disruptions loom stemming from the potential of new pandemic waves, but also natural disasters and geopolitical factors such as trade wars
- Managing supply chain risks is emerging as the major aspect of business sustainability in the future
- Push for economic sovereignty is gaining traction in an attempt to localize or regionalize supply chain and mitigate the risk of future disruption
- 3D printing offers solutions to emerging supply risks by digitizing warehouses and enabling manufacturing objects at or near the point of use. The distributed production on demand reduces the complexity of the production chain, allowing the companies to leverage on-demand and decentralized production.
What COVID-19 has revealed about the global supply chain
The COVID-19 pandemic demonstrated the vital role that well-functioning supply chains play in the economy and the whole society. Causing an unprecedented disruption around the world markets, the pandemic brought to spotlight the need to transform traditional supply chain models, exposing the vulnerabilities of many companies, industries and whole economies and, in particular, those highly dependent on China to fulfill their demand for raw materials or final products.
Figure 1: China’s Rising Role in Global Economy; Source BakerMckenzie (2020)
Global manufacturing production has been organized in global value chains (GVCs) where raw materials and intermediate goods are shipped around the world and then assembled in yet another location with the final product re-exported to consumers located around the globe. For an increasing number of products, China is the “world’s factory,” right at the center of such GVCs (UNIDO Industrial Analytics Platform, 2020). For example, China accounts for around 50% to 70% of global demand for iron, copper, ore, nickel, and metallurgical coal (McKinsey Executive Briefing, 2020). Figure 2 demonstrates how the pandemic affected China’s exports virtually overnight.
Figure 2 China’s exports to the rest of the world; Source: Unido Industrial Analytics Platform (2020)
Over the past several decades, the focus of such supply chain optimization was on cost minimization costs, inventories reduction, and the increase of asset utilization, leading to the elimination of buffers and flexibility to absorb disruptions. As a result, the vulnerability of supply chains to global shocks increased and COVID-19 revealed that many companies lacked awareness of this fact (Deloitte, 2020). The unprecedented economic shock brought upon the world economy by the pandemic warned that specialized global value chain GVC increases a “trade fragility” and that the paradigm of today’s GVC needs to be re-assessed (UNIDO Industrial Analytics Platform, 2020).
A number of developed countries have started re-thinking their local companies’ approach to overseas outsourcing of production, with an intent to prevent future supply bottlenecks and increase the resilience of supply chains, thus ensuring “sovereign” and “independent” supplies. These calls for “national” supply chains suggest that companies need to re-think production distribution across the world. However, it needs to be a balanced approach as a considerable nationalization or regionalization of supply chains will lead to the reduction of diversification of suppliers in the world economy, exposing companies to yet another form of supply chain risk (UNIDO, 2020).
Although companies around the world are worried about the possibility of a second COVID-19 wave amid the rising potential that pandemic risk will become enmeshed into modern business, it is not only the pandemic risks that can cause a significant disruption due to overreliance on China. Geopolitical events in the most vulnerable nodes of GSCs and trade wars are becoming the norm of today’s business environment, while natural disasters equally threaten the resilience of global trade flows.
Emerging supply chain technologies that transform the traditional linear supply chain model into digital supply networks (DSNs) can dramatically improve visibility across the whole supply chain, empowering companies to mitigate such shocks. Digital supply networks refer to supply chain models where functional silos are broken down and companies become connected to their complete supply network to ensure end-to-end visibility, agility, collaboration, and optimization (Deloitte, 2020). 3D printing as an emerging technology can facilitate the overhaul of GVCs.
What is 3D printing technology?
3D printing, also called additive manufacturing (AM), is an innovative technology that allows manufacturers to create a three-dimensional object by robotically layering material under computer control. This approach includes specially developed methods used to transform a 3D digital object into a physical one by adding material layer by layer, instead of subtracting the layers like in a conventional manufacturing process.
This emerging technology enables on-demand production of both components and end products, improving the responsiveness of the supply chain, and reducing the inventory costs as well as the obsolescence risks. 3D printing allows small scale or “one-off” production as economies of scale and standardization are no longer requirements. As the technology matures, the parts could be printed on-site from available materials.
The capability to produce high-quality objects dramatically broadened the practical application of this emerging technology and many industries have been quick to capitalize on its potential.
Recognizing the immense potential of the 3D printing industry to transform the traditional manufacturing process, investors, including those most established such as Sequoia Capital, are flocking to invest capital into 3D printing companies leading to the emergence of three companies valued more than $1 billion in this space, or so-called unicorns.
Benefits of 3D printing
With conventional manufacturing, materials are sourced and shipped from various locations to centralized factories where the final product is assembled. In contrast, 3D printing allows the production of a variety of products from a single 3D printer, reducing the complexity of the production chain, enabling companies to leverage on-demand and decentralized production.
The additive manufacturing technology ensures a critical competitive advantage for manufacturers as it allows the flexibility to develop and test products multiple times and quickly build prototypes, helping them to reduce uncertainties while improving product functionalities and accelerating design cycles as well as reducing time to market.
What 3D technology means for the supply chain in the future
“Distributed production on-demand”— or demand production in distributed locations—represents one-way 3D printers that can enable the redesign of the supply chain to better meet customers’ needs. In this configuration of the supply chain, a decentralized network of 3D printers replaces some or all of the centralized conventional production facilities. Manufacturing objects at or near the point of use reduces the inventories required to respond to customer availability expectations, considerably reducing lead time, and the need for forecast accuracy as the supply chain based on the distributed production on demand is flexible enough to respond to unpredictable customer demand virtually at no additional logistics costs, such as transportation, taxes, customs, and others.
The applications of 3D printing technology
3D printing has the biggest impact on industries that manufacture low-volume, high-value parts such as the aerospace and medical industries. The ability to produce complex objects autonomously in a remote environment is also immensely beneficial for resource extraction companies, space agencies, and the military. For example, resource extraction projects such as oil platforms are usually placed in remote areas with limited access to infrastructure, which hampers the delivery of spare parts. The transformative power of 3D printing technology also extends to the military sector and others that involve high costs of producing small scale but complex parts where the conventional production is proving expensive. The military has already allocated resources to investigate the potential of this emerging technology for producing replacement parts, which can save billions of dollars per annum for military equipment maintenance as 3D metal printing has spread across the Air Force.
UPS has piloted an on-demand AM program in its stores, while NASA and the US Navy have also been experimenting with using AM to improve supply chain performance. NASA is testing 3D printing for on-site, in-space manufacturing of hardware upgrades and tools on the International Space Station, rather than conducting a space launch to deliver them. The Navy is exploring the use of 3D printing to manufacture spare parts while at sea.
3D printing is also well suited for the aerospace industry, where the weight of the parts is critical for optimized performance. Exceeding what is possible with traditional manufacturing both in terms of complexity and production efficiency 3D printing permits significantly reduced development times of prototypes and the downtime in the spare parts business, reducing supply chain constraints, minimizing warehouse space, and decreasing waste materials compared to conventional manufacturing processes.
The list of industries embracing technology is expanding. As the industry matures, 3D printing companies are increasingly specializing in individual verticals, such as dental, machine tools, aerospace, construction, automotive and oil and gas, but also medical and bioprinting.
Two giants, Siemens and HP, teamed up into an alliance to make Siemens manufacturing software and HP’s latest industrial 3D printers work smoothly together and encourage big companies to adopt 3D printing (HP Inc, 2020).
The future of 3D printing in supply chain management
As noted by a recent Euromoney article, the pandemic should not be interpreted as the end of global supply chains as local and regional supply chains may not necessarily be sustainable on a standalone basis. However, as 3D printing becomes more scalable, this might change, although it is a long-term goal.
The 3D industry is charging ahead firmly toward high growth and scalability. This nascent technology, set out to disrupt the $12 trillion global manufacturing industry, is expected to grow at a 21.8% CAGR, reaching $44.39 billion by 2025, according to a report published by (Allied Market Research, 2020). Similarly, a report published by Verified Market Research revealed that the global 3D printing market is valued at USD 15.78 billion in 2020 and is projected to reach USD 86.11 billion by 2027, growing at a CAGR of 25.5% from 2020 to 2027 (Verified Market Research, 2020).
A recent survey by Essentium, an innovator in industrial 3D printing platforms and engineering filament materials, conducted to explore the practical experiences of companies that have invested in 3D printing beyond simple prototyping, revealed that although the technology has exceptional potential, the industry has been rather slow in adopting it for mass production. Still, 99% of respondents confirm that the use of this technology will grow over the next three to five years, enabling mass customization in the automotive, aerospace, consumer goods, and biomedical industries, while allowing manufacturers to better respond to the demands of modern consumers.
The emerging 3D printing industry has been expanding at the annual rate of 35% for the past three decades, gaining momentum among manufacturers and investors alike. According to the 3D Printing Media Network article, it will continue to grow for the next decades until it eventually becomes the primary manufacturing method. This striking growth pace is equivalent to the industry’s doubling in size every two years, leading to an exponential growth well beyond a once tight-knit, enthusiastic group of professionals and maturing into an industry that will transform manufacturing as we know it today.
The industry still needs to solve several considerable challenges hindering its growth at scale. For example, 3D printing has a higher cost per unit than conventional manufacturing. On the other hand, no set-up costs are incurred between batches of different product lines and smaller parts are more cost-efficient as print time and material consumption are the dominant costs for 3D printing (OECD, 2017). Another challenge is to ensure repeatability, reliability, and consistency across different 3D printers and geographies (Deloitte, 2015). Security will become increasingly important as decentralized inventories and on-demand production continue to gain traction. This will require the development of tailored solutions to ensure security and IP protection across the entire 3D printing ecosystem (AMFG, 2019).
The pandemic has exposed the risky over-reliance on vulnerable points in global supply chains and, in particular, those that are placed in China. It may accelerate companies’ quest for ways to mitigate supply chain risk and the probability of future disruption. The impact heightens the need for companies to diversify their supply chain and implement innovation targeting logistical bottlenecks. 3D printing or additive manufacturing acts as a disruptive technology that will reconfigure how factories operate in the future and the way we build and transport things, from consumer products to industrial equipment and the defense industry.
It has the potential to revolutionize future supply chains as production will move from make-to-stock in offshore or low-cost locations to make-on-demand closer to the consumers’ market. This will lead to a drastic reduction of inventory and transportation costs, particularly pronounced in low volume, high-value production. It will also reduce lost sales due to the non-availability of products. It may also affect the configuration of the logistics industry, transforming its dynamics by decreasing freight business since 3D Printing companies can provide services in warehouses.
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- 3dnatives (2019). Essentium’s latest survey: what is the future of industrial 3D printing? Retrieved from https://www.3dnatives.com/en/essentium-190320195/
- Allied Market Research (2020). 3D Printing Market is Expected Excessive Growth to $44.39 Billion by 2025, at 21.8% CAGR. Retrieved from https://www.globenewswire.com/news-release/2019/09/03/1910174/0/en/3D-Printing-Market-is-Expected-Excessive-Growth-to-44-39-Billion-by-2025-at-21-8-CAGR.html
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