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3D printing in global supply chain management helps improve customer experience and service, while increasing efficiency, generating revenue and reducing costs.

3D Printing’s Potential in Global Supply Chain ManagementARTICLE

By Karen Lynch

3D printing, also known as additive manufacturing, turns software design and engineering files into three-dimensional objects by layering plastics, ceramics, metals or biological materials. That process is referred to as “additive,” compared to conventional manufacturing processes considered “subtractive,” such as milling a block of raw materials into a final product.

Companies are increasingly printing prototypes, machine tools, spare parts and finished goods. Early barriers to use, such as the high cost and slow speeds of 3D printers, are falling. The number of printers to be shipped in 2016 is projected at roughly half a million, or double what was shipped last year and on track to reach 6.7 million units shipped in 2020, according to the Gartner market research firm.1

While rapid prototyping remains the predominant use of the printers, some businesses have gone much farther. For example, the hearing aid industry is often cited for its heavy reliance on 3D printing. Beyond medical markets, other leading industries include aeronautics, automobiles and consumer products. Now, 65 percent of global supply chain managers say they use 3D printing or will invest in it over the next two years, according to a survey by Gartner.2

Benefits of 3D Printing in Global Supply Chain Management

What makes 3D printing potentially transformative for global supply chain management is its ability to fabricate products closer to customers around the world, customize those products in real time and reduce inventory, shipping costs and capital expenditures on factories and warehouses. In the Gartner survey, managers’ motivations for deploying the technology were nearly evenly split among transforming customer experience and service, gaining efficiency, generating revenue and reducing costs.

Those are the possibilities if a company strategically places printers (instead of factories) in selected markets, for example, or purchases capacity in those markets from the growing number of 3D printing services companies. If there is someday a 3D printer in every home, as some project, the “last mile” supply chain challenge would also be transformed. In the meantime, e-commerce retailers such as Amazon.com have tentative plans to put 3D printers in delivery trucks.3

The Deloitte consultancy has translated many of these potential benefits – and their tradeoffs – into financial planning terms.4 For example, 3D printing can alter the capital-versus-scale relationship, reducing the spend required to reach minimum efficient scale for production. It can also impact the capital-versus-scope relationship, reducing the cost of expanding the product line or entering new markets. Production presents other cost-cutting opportunities, such as reduced labor, readily produced spare parts for manufacturing equipment and less wasted material. Across the enterprise, benefits can include greater flexibility in market response and competitive differentiation, including mass customization and product personalization.

Case studies for 3D printing are proliferating, including some breathtaking products that could simply not be produced by any other means – a “heart on a chip” as an alternative to animal testing, to name just one.5 In global supply chain management, companies from Caterpillar (recently opening a new “mini-production” factory6) to UPS (planning an on-demand manufacturing process with SAP7) are already transforming how they do business.

3D Printing Poses Risks as Well as Rewards for Supply Chain Management

Corporate finance executives are increasingly aware of risks related to 3D printing. Among them are tax surprises, intellectual property (IP) theft and security – in addition to the risks that come with using any new technology to automate a business process.

Each potential business benefit of 3D printing carries tax implications that could undermine any anticipated operating efficiencies or returns on investment, according to a report from professional services firm EY.8 For example, in decentralized global supply chain management, placement of 3D printers in one country versus another raises different tax implications. Customs agencies have not fully grasped how to handle a situation in which software blueprints cross borders virtually, but the physical product is fabricated locally. Likewise, there is yet no consistent answer to the question of whether a 3D printer itself represents a taxable presence in a foreign country. Nor how to collect value-added taxes and other sales taxes if a consumer prints out a product at home.

Further risks include the IP at the heart of 3D printing becoming the target of piracy – just as when movies and music began to be digitized and sold online. And brand considerations will be paramount in the consumer market, if products are easily downloaded from the web and potentially modified by witting or unwitting individuals.

Security concerns about networked 3D printers were also raised recently, when university researchers showed how hackers could introduce design flaws into drones that would be imperceptible until they were put into service.9

The Takeaway

3D printing has moved beyond mere technology hype, as illustrated above by the referenced global supply chain management case studies. In any company, corporate finance executives can bring important insight to potential 3D supply chain initiatives, with early and in-depth planning that draws on an enterprise-wide team, keeps a keen eye on customers’ needs and tracks competitors’ intentions.

Karen Lynch - The Author

The Author

Karen Lynch

Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners.

Sources

1. "Gartner Says Worldwide Shipments of 3D Printers to Reach More Than 490,000 in 2016", Gartner; http://www.gartner.com/newsroom/id/3139118.
2. "What 3D Printing Means for Your Supply Chain", Gartner; http://www.gartner.com/smarterwithgartner/what-3d-printing-means-for-your-supply-chain/.
3. "Amazon Files Patent for Mobile 3D Printing Delivery Trucks", 3DPrint.com; https://3dprint.com/46934/amazon-3d-printing-patent/
4. 3D Opportunity for the Supply Chain: Additive Manufacturing Delivers, Deloitte; https://dupress.deloitte.com/dup-us-en/focus/3d-opportunity/additive-manufacturing-3d-printing-supply-chain-transformation.html
5. "3D Printed ‘Heart on a Chip’ is an Alternative to Animal Testing", engadget; https://www.engadget.com/2016/10/24/3d-printed-heart-on-a-chip-is-an-alternative-to-animal-testing/
6. “Additive Manufacturing”, Caterpillar; http://www.caterpillar.com/en/company/innovation/customer-solutions/technology/additive-manufacturing.html
7. “SAP and UPS to Simplify Industrial On-Demand Manufacturing Through End-to-End 3D Printing Innovation”, SAP; https://news.sap.com/sap-and-ups-to-simplify-industrial-on-demand-manufacturing-through-end-to-end-3d-printing-innovation/
8. 3D Printing Taxation Issues and Impacts, EY; http://www.ey.com/Publication/vwLUAssets/ey-3d-printing-taxation-issues-and-impacts/$FILE/ey-3d-printing-issues-impacts.pdf
9. "Researchers sabotage 3D printer files to destroy a drone", TechCrunch; https://techcrunch.com/2016/10/21/researchers-sabotage-3d-printer-files-to-destroy-a-drone/

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