Impact of Macro Trends on Supply Chains: Digitization of Products

By Dr. Chris Caplice Executive Director. MIT CTL. January 30, 2014,

Signalling change. NASA aims to use 3-D printing on the space station, a technology that is transforming products, and potentially, distribution networks.

Signaling change. NASA aims to use 3D printing on the space station, a technology that is transforming products and possibly distribution networks (Photo: NASA).

Product digitization is not a new trend, but recent developments in this space could transform distribution networks at the local, regional, and global levels.

In my last blog post Impact of Macro-Trends on Supply Chains: Diversification of Sales Channels, I looked at the splintering of sales channels and the possible impact on distribution. This third post in a four-part series on broad trends that could transform supply chains considers the effects of digitization.

The digitization of products, where the design and manufacture of a product are carried out using a digital set of instructions, is not a new concept. Computer Aided Design (CAD) software systems have been used since the 1980s to assist in the creation and modification of product design. The output of a CAD system is usually a digital file that can then be fed into a Computer Aided Manufacturing (CAM) system that controls the actual machining of the product. While the widespread use of both CAD and CAM systems has decreased the cost of design tremendously, the technology did not change the actual manufacturing techniques used.

Two innovations have changed this picture. The first, which has occurred over the last decade, is the digitization of information-based products such as movies, books, and pre-recorded music. For these products, digitization has annihilated the supply chain since the physical product is no longer needed for the information to be consumed. The information (music, movie, story, etc.) consists of files that are downloaded to a listening, viewing, or reading device. Interestingly, the idea of “buying” a download is slowly fading as the idea of renting or streaming the information is becoming more common. Subscription- based streaming of music, for example is up 50% in 2013 from 2012.

The second change is the introduction of additive manufacturing technologies that essentially require a digital design. CAM systems used computers to control traditional machining tools (turning, milling, drilling, etc.) that can be described as “subtractive” in that they remove excess material to create the final product. Additive manufacturing – sometimes referred to as 3D printing – works by adding material to create a final product.

While there is an excess of hype surrounding 3D printing – with many comparisons to Star Trek’s replicators – the actual adoption is increasing quite rapidly. It is important to note that additive manufacturing is not a single technology; there are dozens of different technologies that fall under the additive umbrella, such as Material Extrusion, Material Jetting, Binder Jetting, Vat Photopolymerization, Sheet Lamination, and Power Bed Fusion. These different methods have been developed to create products in a wide range of materials to include polymers, composites, metals, ceramics, paper and more.

The common element of these methods is that the product is built up layer by layer under the control of a digital design. This reduces the need for a highly-trained machinist, speeds up the time from design to production, enables the creation of a highly customized (one of a kind, if needed) product, and allows for the creation of products that could not previously have been manufactured.

Some of the initial and most widespread use of additive manufacturing has been in product prototyping. Designers can test and experiment different configurations in a very short period of time. For example, Australia’s Commonwealth Scientific and Industrial Research Organization needed to create a new form of streamlined tags to use with large fish. Using additive manufacturing, they were able to test several prototypes within a single week – each new version built on improvements from the previous one. Traditional methods would have taken months. 3D printers are used heavily now in the prototyping of products ranging from jewelry to automobiles.

Another niche area where additive manufacturing is flourishing is in medical devices. Because every person is unique in terms of his or her physical dimensions, 3D printing is able to produce patient-specific products. These have included customized titanium knee caps, hips, and other bones. The dental industry, in particular, has adopted 3D printing for making customized replacements and dentures.

More interesting than these niche applications, however, is the increasing use of additive manufacturing in traditional production. For example, Kelly Manufacturing is involved in the production of the M3500 instrument, which is a “turn and bank” indicator for aircraft. At the heart of the instrument is a toroid housing that contains the coil used to power the gyroscope. The housings were previously made of urethane castings so that new tooling had to be produced at a considerable cost whenever the design changed. Delivery lead-time for 500 castings was three to four weeks. By switching to additive manufacturing the company is now able to produce 500 toroid housings in a single run! Essentially, Kelly starts a run in the evening and has a batch of parts ready by morning. Not only has the lead-time been reduced from weeks to days, the per-piece cost has been cut by 5 percent and any re-tooling costs eliminated. Interestingly, the new process also achieves higher tolerances than traditional methods.

Another example is the fuel nozzle for GE’s new LEAP engines. Traditional methods for creating this complex product required the tooling and assembly of 18 individual components. Using additive manufacturing, the nozzles can be produced as one item. Additionally, the new nozzle is 25% lighter and five times as durable because cooling pathways and support lattices can be built in to the product. This was not possible with traditional methods. GE estimates that they will produce more than 100k of these parts by 2020.

So, additive manufacturing is starting to be used in direct part manufacturing in addition to its more niche areas such as prototyping. This trend will continue as the technologies improve and manufacturers better understand where and when these new additive processes fit into their portfolio of production techniques. It is extremely doubtful that all manufacturing will shift to additive – but the process will grow into those areas where it makes economic sense.

There is a lot of testing by different firms to find out exactly where these processes best fit. For example, UPS announced this summer that they will test 3D printing services in their UPS Stores. The outlets will be equipped to produce items such as engineering parts, functional prototypes, acting props, architectural models, fixtures for cameras, lights and cables. Similarly, NASA plans to introduce additive manufacturing to the space station so that replacement parts can be made on the spot instead of stocked. The US military is doing the same thing with its Rapid Equipment Fielding expeditionary lab in Afghanistan that can quickly create or prototype products close to the point of need.

But will the digitization of products (necessary for the use of additive manufacturing) disrupt the dominant design of distribution? It certainly will, and generally has for information-based products, and will most likely do so for other large classes of products such as spare parts (where the SKU count is very high and individual demand is exceptionally slow and geographically dispersed). The ability to make almost one-of-a-kind customized products on demand could, in the long term, reduce the demand for mass-produced products. The likely outcome is less long distance shipping of finished products and a shift towards transporting the base stock materials used by 3D printers. These changes could have tremendous impacts on the entire distribution network.