ADDITIVE MANUFACTURING DEFINED
CAPITAL VS. SCALE: MINIMUM EFFICIENT SCALE SHAPES SUPPLY CHAINS
The research concludes that AM production, using a variety of materials, can provide an efficient alternative for low-to-medium-sized production runs. Furthermore, expected reductions in material costs leave open the potential for breakeven points to substantially increase in the future.7Improvements in throughput and reductions in the cost of AM equipment can only serve to further amplify these effects, increasing the production quantities at which AM might compete with more traditional manufacturing methods.
CAPITAL VS. SCOPE: ECONOMIES OF SCOPE INFLUENCE HOW AND WHAT PRODUCTS CAN BE MADE
Economy of scope refers to the inherent flexibility of a unit of capital. Specifically, scope economies deliver advantage by allowing for the production of multiple different end products using the same equipment, materials, and processes.9Unit cost falls as the number of products that can be made using the same invested capital increases.
Scope economics may also facilitate production approaches that are impractical or impossible through traditional manufacturing methods. For example, design for manufacturability rules advocate for simple designs with fewer parts.10However, traditional manufacturing processes often impose design limitations that can proliferate the number of parts required to produce a product or component. As the geometric complexity of a component increases, it can prevent a part from being fabricated as a single piece. Issues of internal accessibility or surface configurations may prevent desired machining approaches.11
Furthermore, complex geometries, including the fabrication of internal features, are more easily handled with AM.12The case of GE Aircraft and its use of AM to produce fuel nozzles for its next generation LEAP (aircraft) engine provides a good example of manufacturing capabilities. In this case, GE was able to manufacture, as a single unit, a component that previously required the welding together of 20 small pieces. The AM approach for the new part led to reduced labor and scrap while yielding a part with lighter weight—a critical attribute for fuel-conscious airlines.13
PRACTICAL IMPLICATIONS OF AM-INDUCED SHIFTS IN SCALE AND SCOPE ECONOMIES
The scope impact of AM is a result of the technology’s flexibility. In many cases, no changes to tooling are required to shift the AM device from producing one object to producing a totally different object (i.e., AM could sequentially produce a sword and then a plowshare without alteration to the production equipment).14Changeover time is reduced, and potential variety expands. Just as important, the increased scope that AM technology affords can enable the production of entirely new components, which cannot be created by any other means. Combined with AM effects on minimum efficient scale, this implies that a relatively low capital investment could substitute for a wide variety of higher-capital-intensity applications when applied to appropriate contexts. Furthermore, these contexts may be more geographically scattered than traditional manufacturing approaches allow—essentially democratizing manufacturing by making it accessible at a much lower investment level.
- Path I:Companies will not seek radical alterations in either supply chains or products, but they may retain interest in exploring AM technologies to improve value delivery form current products within existing supply chains.
- Path II:Companies take advantage of scale economics offered by AM as a potential enabler of supply chain transformation for the products they offer.
- Path III:Companies take advantage of scope economics offered by AM technologies to achieve new levels of performance or innovation in the products they offer.
- Path IV:Companies alter both supply chains and products in pursuit of new business models.
PERFORMANCE, INNOVATION, AND GROWTH: STRATEGIC IMPERATIVES FOR AM
ANALYZING THE TACTICAL APPROACHES TO VALUE DELIVERY WITH AM
If a company is trying to improve its competitiveness with little risk and limited change, AM can play an important role in addressing the speed and profitability of its current operational model.
PATH I: STASIS—A STARTING POINT FOR ADDITIVE MANUFACTURING
A key performance enhancement offered by AM is the ability to streamline and accelerate the design process. The result of this can be a reduced time to market, improved product quality, and reduced cost.18For example, the ability to print complex designs using stereolithography (one of the oldest and most common AM technologies) is used in the aerospace sector for producing engine parts, wings, and other design components for flight tests.19
Efforts have also delivered value by producing lower-cost tooling and other fixtures used in production.20For example, jewelry manufacturers use AM to reduce the lead time on the creation of assembly jigs, while aerospace manufacturers use it to print masking for parts in their chroming and coating processes.21
PATH II: SUPPLY CHAIN EVOLUTION—AM IN PURSUIT OF PERFORMANCE AND GROWTH
Evolution in supply chains is also evidenced at the business-to-consumer level with multiple big-box retailers and other service providers leveraging scale and scope economies to deliver on-demand printing at local sites. For example, UPS started putting AM capabilities into local franchises in an effort to service the prototyping needs of small businesses.23It is the specific shifts in minimum efficient scale enabled by AM that enables this business model. In the long run, such shifts in supply chain structure may represent a key growth vector, as firms large and small try to capitalize on the ability to deliver faster, cheaper, and more precisely than their competitors.
PATH III: PRODUCT EVOLUTION—AM IN PURSUIT OF PRODUCT INNOVATION
In addition, AM technologies are increasingly allowing the use of multiple materials and the ability to embed sensors, electronics, and other technologies within components and products. The US military has demonstrated capability in this area, embedding strain gauges and other sensors within aerodynamic structures in order to monitor performance and wear. Embedded designs can also extend to the use of conformational cooling channels for thermally conductive materials.24Such designs can be used to more efficiently dissipate heat during casting and other manufacturing processes.
The scope economies provided by AM technologies enable a variety of new custom-product alternatives that might be used to create and expand markets that otherwise could not economically be served. 3DMeTM by Cubify, for example, represents one of a number of new product companies built around the ability to place photorealistic depictions of individuals on custom collectibles and other products (see figure 4 for an example).25Apparel companies are also getting into the act. For example, researchers have demonstrated economical approaches for improving footwear performance using AM.26Footwear manufacturers are putting this and other insights to use, for example, in the development of custom manufactured spike plates tailored to individual runners’ biomechanics in designs not possible with traditional manufacturing.27
PATH IV: COMBINED SUPPLY CHAIN AND PRODUCT EVOLUTION—AM IN PURSUIT OF BUSINESS MODEL INNOVATION
Similar attempts to simultaneously transform both supply chains and products are underway within the health care industry where AM technologies are rapidly shifting approaches to medical planning and execution. Advancements in imaging combine with the ability to deliver low-cost, multi-material AM technologies to the point of use in medical clinics in ways that reduce costs, accelerate the delivery of services, and improve quality.30In health care, the strategic imperative may be more related to innovation in the delivery of services to patients than to growing the overall segment.
