Will 3D printing revitalize strategic analysis?

It seems to me that in the last decades strategic analysis focused mainly on monitoring new entrants from low-cost countries, struggling with competitors and entering emerging countries’ markets.

Compared to Michael Porter’s model of five forces, the above takes care about two at best; Threat of new entrants and intensity of competitive rivalry.

Reminder of the five forces:

  • Threat of new entrants
  • Threat of substitute products or services
  • Bargaining power of customers (buyers)
  • Intensity of competitive rivalry
  • Bargaining power of suppliers

With the rise of additive manufacturing techniques, 3D printing being a flagship for them all, competitors in some businesses may have to reconsider the basics and the neglected forces.

Threat of substitute products or services

Among the neglected forces, the threat of substitute products or services comes to mind quickly. What have been manufactured in traditional way with several machining and assembly steps could be produced in one step with additive techniques, for cheaper* and in many cases faster.

*Cheaper remains questionable if considered in high volume. What seems obvious is the cost of manufacturing replacement parts in additive manufacturing vs traditional manufacturing. In the first case, parts can be printed in units when needed while in traditional manufacturing, parts would be produced in minimal batches, regardless the real demand. If the other parts of the batch aren’t sold, they’ll be total waste thus no saving with economies of scale.

The new techniques have to be mastered but do not seem so difficult to master to be barriers to entry. If they would, it would be irony to see a long established competitor locked out of his own business because he didn’t prepare for the substitute. A case not totally unlikely to happen.

The new techniques are/soon will be available to anyone, which means capital investment or access to these technologies are no barriers to entry either.

This brings us to next threats: threat of new (unexpected) entrants, bargaining power of suppliers and buyers.

Threat of new (unexpected) entrants

With the new techniques made easy and affordable (still taking 3D printing as example), literally anybody can establish him/herself as competitor. This could be former buyers, customers, enabled to manufacture themselves what they had to buy before. Many of them may not create a business, but as they are many, if a majority prints products or parts themselves instead of buying them, it can be enough to kill an established business.

Former buyers like distributors may be more serious potential new competitor as they may consider creating value from raw material instead of storing and distributing goods. Manufacturing with additive techniques will require few capital while distribution requires huge capital sitting in warehouse, carries over costs and all the risks.

These new competitors would no more (not only) provide a service by selling off-the-shelf, but manufacture-on-demand and possibly modify, improve or adapt the products.

Bargaining power of customers (buyers)

Former customers, now new competitors, like distributors could enforce their bargaining power as they will not be competitors for the whole product panel thus keep being customers, which in turn could enforce bargaining power of suppliers.

Bargaining power of suppliers

The first suppliers of substitute products will certainly have some bargaining power, yet their position will most likely be quickly challenged, revealed “blue oceans” being attractive to competition and barriers to entry not really existing.

Additive manufacturing will very probably disrupt many businesses, yet I do not believe everything can be provided cheaper and better (what ever better means) with 3D printers and the like. Mundane items of daily use, produced in very large batches may still continue to be manufactured the way they are.
In many cases, consumers will continue to trust genuine parts and original maker’s products. Therefore, in some trades and businesses where the choice will exist, traditional makers may regain some bargaining power when it comes to compare quality, safety, trust, reputation, esteem value, etc.

Will 3D printing revitalize strategic analysis?

Finally will 3D printing revitalize strategic analysis? I do think so. Threats will multiply as well as opportunities and new options in manufacturing require to broaden the scope of analysis.


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Michael Porter’s five forces (video)

In several past posts related to additive manufacturing / 3D printing I mentioned Michael Porter’s five forces model, its real name being The Five Competitive Forces That Shape Strategy.
In this post, I pay credit to Mr Porter and let himself explain what the five forces are.


You may also like a brief video on this subject provided by Harvard Business Review: The Five Competitive Forces That Shape Strategy


Creativity breaks loose from constraints with additive manufacturing

Chris HOHMANN

Author: Chris HOHMANN

New additive manufacturing technologies – let’s take 3D printing as symbol for them – are freeing designers from constraints that came with traditional manufacturing and the assembly methods.

Additive manufacturing means adding layer of material after layer instead of cutting out material from a bigger raw chunk, allowing the design of complex and odd shapes without having to care how to let cutting tools do it.

Hollow and curved shapes, spirals, double helixes, or even a Moebius band are no more problem to produce. Shapes that required sophisticated machining or expensive molds can now be 3D printed relatively fast and low cost.

With additive manufacturing, it is possible to 3D print a fully functional ball bearing directly in its place in a complex shaped part. This is also very important because it means there is no more need to source the ball bearing and design the part to receive it, which may ease the design, suppress several assembly steps and all the attachments.

Production is not only faster, it is cheaper because lots of intermediary steps are removed, including sourcing of parts and components.

Additive manufacturing speed itself may not be very fast, but has to be considered relatively to traditional manufacturing requiring to source and supply material and parts first, prior to manufacture and/or assembly. With most of material and parts coming from Asia, even if machining and assembly are fast, the shipment from supplier takes at least a month to arrive.

Faster, cheaper, less suppliers dependent and highly customizable, these promises of additive manufacturing offer opportunities not only to free designers from a lot of constraints but companies to settle their business next to their customers, amidst their markets.

This reduces furthermore logistic costs and delivery time, probably balancing the other (higher?) costs and allowing reshoring or nearshoring businesses.

It allows also new entrants to step into business without having to master all traditional manufacturing techniques or supply chain constraints.

On this topic read my >3D printing and Porter’s five forces post

What is true for manufacturing is true for after sales servicing. Spare parts or replacements can be printed on demand, long after a model have been discontinued. No need to store costly inventories of numerous references, just print them when needed, in the proper suitable version.

Additive manufacturing / 3D printing may revitalize industries in the US and Western Europe, which is good news!

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3D Printing and Porter’s five forces – opportunities

In a previous post on this topic I highlighted the threats of 3D printing – as symbol of any additive manufacturing technology – disrupting traditional businesses, wondering if threatened business owners and professionals are aware of it. In this post I’ll take the opposite point of view, as a challenger to established businesses, breaking the rules with the help of new manufacturing techniques.

With these new techniques and new printable materials, virtually anyone can become a manufacturer, almost overnight. Reconsidering Michael Porter’s five forces model for industry analysis and business strategy development from the point of view of a potential new entrant, the analysis could go like this:

Threat of new entrants

Chris HOHMANN

Author: Chris HOHMANN

The new entrant will threat established businesses by disrupting the way business is done, for instance the offer itself, the prices, customization and speed of delivery. Enter business is easy with new technologies breaking former barriers to entry. 3D printers are not very capital intensive assets.
As a reaction, threatened competitors can lobby to harden regulations and keep new entrants out or limited to niches, trying to raise new barriers. But this is more likely a local strategy as a global world-wide consensus to ban new tech or protect businesses is hard to imagine.
Once in business, the challenger will probably meet others having similar objectives and aggressive offerings. The challenger should therefore fear other new entrants. This leads us to intensity of competitive rivalry.

Intensity of competitive rivalry

New opportunities will probably attract many challengers, especially in dull economies, fuelling competitive rivalry.
Competitors in place may adapt and switch themselves to new technologies. In some cases, their former experience and/or customer base is a real advantage compared to new entrants.

On the other hand, established businesses may still use old capital intensive assets or equipment not yet free from amortization. In many cases this could be a (bad?) reason for them to stick to old ways.

Finally, customers themselves may enter the competition by manufacturing for themselves, turning into competitors of sorts. They may have personal 3D printers or go to a 3D print shop or the next fablab. Customers will probably not 3D print on large scale and setup a business, but doing themselves for family and friends they reduce sales opportunities. This threat should not be underestimated as a lot of small individual players can “capture” a significant market share.

Threat of substitute products or services

Additive manufacturing is relatively new. 3D printing in various materials may see further progress and innovation, allowing new applications, new products and services to emerge. At the actual pace of innovation, hard to say if it will go on or mature as it is. Would I be a challenger or an established business owner, I would keep active watching what may come anyway!

Bargaining power of customers (buyers)

Each time the offer exceeds the demand, the power goes to customers. With the relative ease to establish as a manufacturer, service provider, etc. the number of competitors should increase and their rivalry thus giving more choice, hence bargaining power to customers.

Bargaining power of suppliers

For equipment and raw material suppliers, the trend could go opposite: from few suppliers at the beginning, their number may increase. One can imagine the 3D printing following inkjet printing model: low cost or even free printers but relatively expensive (read profitable) material, just like ink cartridges (or some coffee capsules).

If the printing material becomes a convenience, the number of suppliers may decrease again because of limited profit. The last survivors will regain some power concentrating the supplies on fewer actors.

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3D Printing and Porter’s five forces

In a previous post on this topic I wondered about the pace of announcement of new amazing possibilities offered by 3D printing. I also wonder how the potential disruptions of 3D printing are ignored or underestimated.

With the new techniques and new printable materials, virtually anyone can become a manufacturer. While this is good news for revitalizing a declining industry, it can mean doomsday for those not paying attention.

Chris HOHMANN

Author: Chris HOHMANN

3D printing reminds me Porter’s five forces model for industry analysis and business strategy development. In this model, Michael Porter had outlined five forces that determine the competitive intensity within a market:

  • Threat of new entrants
  • Threat of substitute products or services
  • Bargaining power of customers (buyers)
  • Intensity of competitive rivalry
  • Bargaining power of suppliers

From my point of view, 3D printing is all five at once, threatening existing businesses and trades and bringing new opportunities to many actors, to enter or transform existing businesses and trades.

>Lisez-moi en français

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Threat of new entrants

Virtually anyone equipped with 3D printer can establish him/herself as manufacturer. This may not bother established manufacturers at first glance, as these new “competitors” may be geeks or techno lovers giving a try on some new toy.

Yes but if 3D printing comes cheap and easy as it seem to come, many households may become small manufacturers for themselves for some parts or products. And if the number of households becomes significant, it means significant amount of turnover swaps from buying finished parts or products to buying 3D printers and raw printing material, users generating added value themselves, at will.

What can happen with households, geeks and techno lover can happen with anybody: investors sensing opportunities, companies eager to diversify, entrepreneurs…

This is not only about producing small widgets, plastic ornaments or cartoon figurines, as I mentioned in my previous post, it could/does threat prosthetics, dentists, podologists and also many other businesses and trades like spare parts for aftermarket, construction, etc.

New companies establishing as manufacturers can operate close to their customers, further improving responsiveness and delivering short term. The advantages of customization, delivery speed and other cost savings could question the large manufacturing facilities abroad, especially when local labor cost rise quickly and logistic routes remain extended, hence delivery speed slow and responsiveness poor.

Threat of substitute products or services

3D printed insoles, dentures and braces already exist, even 3D printed firearms exist as substitutes for the traditional ones, which is not only a threat for gunsmiths by the way.

Some of these new products come with better characteristics (3D printed insoles are allegedly washable, printable in many shapes and color and anti–microbial for instance), many times cheaper and faster.

Furthermore, customers will be/are able to modify the original model to fit their taste or specific needs and print them at will, without holding costly inventories of finished goods.

Services like designing, customizing products or fast delivery simply disappear as taken over by customers themselves.

Crowdsourcing and hacking are other kinds of substitution for R&D, development, engineering, design!

If you take time to consider differences between traditional subtractive manufacturing and 3D printing / additive manufacturing, you’ll see who is potentially threatened: mold makers, machine-tool makers, tool vendors, subcontractors, distributors and more.

Distributors, instead of providing stocking, cross docking, commissioning and shipping could turn on-demand manufacturers, shifting their risky business to a safer and higher adding-value one. Yesterday’s customers becoming new competitors.

The ability to manufacture replacement parts on demand using 3-D printers could transform the economics of aftermarket service and the structure of industries. Relatively small facilities with on-site additivemanufacturing capabilities could replace large regional warehouses. The supply of service parts might even be outsourced: small fabricators (or fabs) located, for example, at airports, hospitals, or major manufacturing venues could make these parts for much of the equipment used on site, with data supplied directly by the manufacturers.

Source: 3-D printing takes shape, McKinsey

Bargaining power of customers (buyers)

Customers will gain tremendous power, as well B2B customers as B2C customers, being able to manufacture by themselves or to source parts and products, even services, among new competitors.

What leads us to intensity of competitive rivalry, turbocharged by new entrants, innovations and all kinds of disruptions.

Bargaining power of suppliers

Bargaining power of (surviving) suppliers will also increase as does the position of the last survivors in declining markets. Fewer suppliers means greater power for themselves. This will be true for businesses and trades having 3D printable or additive manufacturing viable substitutes.

It will also be the case for the new manufacturing techniques equipment, specific software and specific material vendors, mastering their inherent properties and/or difficulties.

Initially, these new competitors will be niche players, operating where consumers are willing to pay a premium for a bespoke design, complex geometry, or rapid delivery. Over the longer term, however, they could transform industries in unexpected ways, moving the source of competitive advantage away from the ability to manufacture in high volumes at low-cost and toward other areas of the value chain, such as design or even the ownership of customer networks.

Source: 3-D printing takes shape, McKinsey

Amazon launches new 3D Printers & Supplies section

There is no way to stop 3D printer’s home invasion. Though Amazon’s CEO Jeff Bezos believes 3D printing will not change the distribution of products anytime soon, the company sees also the explosive growth of 3D printing. Amazon decided to seriously involve in the 3D printing market by launching a new section for 3D Printers & Supplies under Industrial & Scientific > Additive Manufacturing Products category.

Source: http://www.3ders.org/articles/20130608-amazon-launches-new-3d-printers-supplies-section.html

Amazon launches pilot program selling 3D printed items

“When it was announced that Amazon would begin selling 3D printers and supplies last summer, the industry heralded it as a defining moment, a clear indication that 3D printing was going mainstream,” says Hauer. “We think the decision to sell 3D printed products sends an even bigger message. Consumer products are the next frontier.”

Source: http://www.3ders.org/articles/20140306-amazon-launches-pilot-program-selling-3d-printed-items-teams-with-3dlt.html

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>Next: 3D printing and Porter’s forces – opportunities

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Online community connects 3D printer owners with people who need prosthetic hands

Gigaom

Around the world, there are people who have lost all or part of their hand, or were born without one. There are also people and institutions with 3D printers. Pair the two, and you can print a custom mechanical hand for $20-150 — thousands less than the typical prosthetic.

e-NABLE, which functions through a website, Facebook page and Google+ page, stepped up to connect the two after site founder Jon Schull came across work by American prop maker Ivan Owen, who made a metal mechanical hand for South African carpenter Richard Van As. Van As had lost four of his fingers in a carpentry accident.

Owen was then contacted by a mother whose 5-year-old son needed a hand. He again made a metal hand for the boy. But then he turned to 3D printing. MakerBot gave both Owen and Van As a 3D printer.

The pair developed…

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Technologies alone will not regain competitive advantage

Smart factories, high level of automation, robots, cobots and industry 4.0 concepts will not be enough to regain competitive advantage for Western European* companies. The reason is very simple, these technologies will be available to everyone and there is no real barrier to entry. These technologies won’t be very expensive and the ease of mastering them is their core claim.

Christian HOHMANNThus, everything else being equal, technologies alone won’t change contestants’ actual competitive advantages once they all acquired and mastered them.

Will the innovations therefore be useless? Surely not, they’ll enhance tools and processes and open new perspectives, but technologies alone won’t regain competitive advantage.

* This post is written from a French perspective which may be valid for Western Europe and United States as well

What can differentiate a competitor from his peers is the attractiveness of its offers, as it already did and still does before the next techno revolution. Attractive offers are based on:

  • Innovative products and services
  • High level of customization
  • High perceived value
  • Fast deliveries

These features are responses to common customers’ expectations like:

  • the fascination for novelty, originality
  • the desire to distinguish from the mass with something custom made
  • the ratio from perceived quality and value to its cost
  • the instant satisfaction of desires

In other words, it is not the means – read technologies – used to please customers that determine performance but the way of using them. The keys to competitive edge do not relate to machinery, automation nor sophisticated IT alone but to smarter use of them.

Hints for future successes, with a bit of high-tech

Analyzing voice of customers, soon greatly improved with big data.

Big data brings all kind of heterogeneous information together, analyze them and refine customers’ preferences better than traditional inquiries could achieve. For a simple reason: inquiries are based on limited questions with limited answer options and too often biased. Respondent keep much of their expectations and desires unspoken, implicit and thus hidden. Big data allows gathering small pieces of information in tweets, facebook posts, online orders, blog comments, etc. and finding correlations that allow to refine the offering to customers’ unspoken and maybe unconscious longings.

Innovation

Innovation is not only responding to customers’ whishes but surprise them with something new, different. Here TRIZ may help. TRIZ is one of these powerful methods and tools that didn’t really make it into the light so far.

TRIZ is a problem solving method based on logic and data, not intuition, which accelerates the project team’s ability to solve these problems creatively. TRIZ also provides repeatability, predictability, and reliability due to its structure and algorithmic approach. “TRIZ” is the (Russian) acronym for the “Theory of Inventive Problem Solving.” G.S. Altshuller and his colleagues in the former U.S.S.R. developed the method between 1946 and 1985. TRIZ is an international science of creativity that relies on the study of the patterns of problems and solutions, not on the spontaneous and intuitive creativity of individuals or groups. More than three million patents have been analyzed to discover the patterns that predict breakthrough solutions to problems.

source: http://www.triz-journal.com/archives/what_is_triz/

The TRIZ pioneers used a big data approach in time big data as technology and tool did not exist. Now that big data is growing mature, methods like TRIZ and QFD (Quality Function Deployment) could be boosted and jointly used for invention.

Speed

Speed, both for launching often new products/services and deliver them fast to market, is a key success factor. Additive manufacturing (3D printing) may be a technical response, but when it comes to speed Lean can help a lot.

Lean is not only about reducing lead time, but also avoiding loops (e.g. rework), unnecessary dwelling (e.g. waiting for next process step or waiting for inventory queue to flush). Lean also cares about doing things right first time, improving in-process quality and doing what is really necessary to deliver value and thus stop over processing and needless tasks. While all this reduces lead time, it reduces also costs and improves quality.

Profitability

Profitability means that all the previous should not be done at the expense of company’s profit. Profit making is essential for company’s sustainability. What’s the use of a one-shot success?

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How disruptive 3D printing can be

In the early days of 2014 there is none without announcement of new amazing possibilities offered by 3D printing. The new additive manufacturing techniques – adding material layer by layer – are accessible to a growing number of players to ever lower costs and with increasingly diverse materials.

The new possibilities are both exciting and disturbing because they will lead to changes that we should anticipate.

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For the best and the worst

Among the possible applications of 3D printing we find ingenious prosthetics whose cost are ridiculously low, allowing more disabled people to improve their lives, especially those who could not afford or had no access to prosthetics.

>Read more about this

3D printing will not be limited to produce cheaper affordable (expendable?) prosthetics, but will certainly boost how to design prosthetics in general, integrating the new possibilities offered by these additive manufacturing techniques, new materials and unleash creativity of clever amateur designers and other generous or disinterested persons (crowdsourcing).

Unfortunately, there are also more dubious applications such as printing perfectly functional and potentially undetectable firearms.

If the development of affordable prosthetics is part of the generous idea to offer a significant improvement of living comfort to people, making uncontrollable firearms obeys motivations of an entirely different nature. While few people will complain about the proliferation of prostheses, we can bet that the proliferation of firearms suddenly made accessible to virtually anyone will cause legitimate fears and other reactions.

The latter should concern the authorities, both to prevent explosion of gun crimes as well as accidents that gunsmiths’ apprentices may suffer or cause.

Transformation and disappearance of trades

Let’s stay positive and consider the peaceful applications of 3D printing and take the example of figurines collections.

So far the business of collectible figurine such as comic book or movie heroes was based on the ability to create the original model, than a mold to produce copies and distribute the figurines. With 3D printing the mold becomes superfluous, just as manufacturing and distribution since the collector equipped with suitable 3D printer can print it himself in a specialized store or even at home. One can theoretically print infinite number of figurines once he got the model’s digital file.

This business is likely to evolve in creating the digital files for 3D printed figurines, offer application downloading and the ability to edit the original file with dedicated tools (apps) .

Thus, just as the music consumption is largely freed from physical media and thereby has completely undermined the business model of the sector, a number of sectors should know a similar revolution.

For some of them IMHO, too little attention is paid to technological developments that still seem far from their trades or years away.

Take the case of orthopedic insoles. So far it is the responsibility of a podiatrist (3 years minimum of specialized studies in France) that manufactures insoles by cutting, forming and pasting various materials such as leather, cork, etc. Consequently, these insoles are expensive, often unique and moderately durable.

Here 3D printing allows customization of insoles not only from the perspective of correction but also from the point of view of the look like color choices and possible multiple copies for matching various shoes. A feature the ladies in particular will appreciate.

Allegedly the benefits of these new printed soles are multiple: cheaper, washable, anti -microbial, colors and shapes to choose and more.

If this trend continues, what will happen to podiatrists? Will they convert themselves as creators of digital models for insoles that patients will print themselves? Do they / will they have the skills? Will a podiatrist still be necessary or is it a 3D scanner (already existing) coupled to smart software that may determine the forms to print for adequate correction?

These questions show how a specialized profession may be affected by technological innovation.

After soles, think of dentures and braces  – already 3D printable – and all the other examples of products, which certainly become cheaper for their users but will also come at some social cost.

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3D printing as additive manufacturing

Every day sees new surprising applications of 3D printing and most of them are forerunners of disruptions, larger applications, breakthroughs, etc.

The fast maturation of 3D printing techniques and their proven abilities make them stand as symbol of the factory of the future.

In this near future additive manufacturing with 3D printing should tackle the problem of “High-Mix, Low-Volume” and help to bring new products faster to market.

Additive manufacturing is building objects layer by layer by 3D-printing layers or extruding material, e.g. metal or concrete. As the name tells, additive manufacturing adds material, compared to “subtractive” techniques where material is taken away, by machining for example.

This article is inspired by McKinsey Quartely’s article “3-D printing takes shape” (2014)

3D printing appears ready to emerge from its niche status and become a viable alternative to conventional manufacturing processes in an increasing number of applications.

Adding material with 3D printing techniques to create an object carries many advantages:

  • Less wasted material as when subtracted from a bigger piece, e.g. by lathing, milling, etc.
  • Presumably cheaper in regard of tooling, molds or die costs
  • Faster, again because no special tools or molds must be created first and because it is possible to “create complex shapes and structures that weren’t feasible before”.

Complex shapes means primarily geometry but means also full functional moving parts that can be encased one in another and printed at once. In traditional manufacturing that may have required at least producing the two parts and assemble them, thus multiplying time and cost.

In comparison to additive manufacturing, subtractive manufacturing is about cutting and grinding, taking away material, while additive manufacturing is building to shape, adding layers over layers. Layers can be of different materials, allowing composite, sandwiched structures using the just necessary amount of material.

3D printed items costs compared to traditional manufacturing ways seem to favor additive. Cost in one of the key success factors, among others.

Speed, one of the key success factors

Being first on the market with a new offer is an opportunity to yield earnings and make profit without competition. Being fast often (increasingly?) means making profit as long as it is possible, before the next fashionable product or disruptive technology shows up.

To get faster a product to market, additive manufacturing vith 3D printers allows to cut or eliminate time:

  • for prototyping
  • for tooling
  • for production

The ability to make prototypes without tooling lets companies quickly test multiple configurations to determine customer preferences, thus reducing product-launch risk and time to market.

Letting customers participate in early engineering choices and giving their input is called crowdsourcing.

High-Mix, Low-Volume

For items that can be 3D printed, additive manufacturing may be an elegant solution to the High-Mix, Low-Volume problem. In theory, batch size of one is no problem for 3D printer as there is no such a thing as tool changeover (provided the material is the same or automatically switched/fed), no adjustments, no preproduction runs nor sample tests before unleashing the production.

Many benefits of 3-D printing could cut the cost of market entry for new players: for example, the use of the technology to lower tooling costs makes it cheaper to begin manufacturing, even at low volumes, or to serve niche segments.

More to come on this subject!