In the previous post of this series, I used somewhat extreme examples to illustrate the benefits of postponement with additive manufacturing i.e. 3D printing (space exploration, ships amidst oceans and warfare). In this post I use more common examples about how the promises of these new techniques will disrupt existing businesses and bring new benefits to competitors and customers.
Spare parts for automotive industry, appliances, etc.
Spare parts are needed for mending cars or appliances for example. Until now, spare parts must be produced and kept in inventories in the eventuality someone needs a part. This happens eventually but it is hard guess to tell which parts, when and in which quantities parts will be required.
Therefore, spare parts production is launched according to complex and more or less scientific guessing, based on statistics. Once these parts are produced, they’ll go for various locations through the proprietary network or through importers, distributors, retailers and repair stations.
Huge amounts of cash are kept frozen in inventories, scattered in many warehouses in various locations.
- These inventories are likely to grow with each new specification change that affects a part, as the adequate replacement part must be provided
- These inventories’ value will have to be depreciated when parts become obsolete and the probability of their sales diminishes
Storing and distributing spare parts is a business per se, but the value-added remains limited (which does not mean it is not profitable!), especially for the “players in the middle” who act more like cross-docking platforms taking their share of profits and risks.
Over time distributors and retailers slightly changed their business model and drift away from their original business: storage and retail.
In old days it was important to be the reliable parts provider and huge inventories were normality.
More and more those companies embrace a financial, more profit-driven purpose and keeping inventories is for them a necessary evil at best. Distributors and retailers try to get delivered at short notice in order to keep inventories – that is frozen capital and risk – low.
They push the problem upstream to manufacturers, the latter being required to reduce delivery lead time, which most often ironically means holding inventories to serve “off-the-shelf”. Distributors and retailers become a kind of post-office collecting orders, passing them over to manufacturers, who in some case have to deliver to the point of use, by-passing the distributor/retailer.
I worked in some industries facing this “problem” and the distributor / retailer channel in this way does not seem sustainable as manufacturers try to get rid of these “order collectors”.
Now with the rise of additive manufacturing techniques, new opportunities appear. Distributors and retailers may use them to become manufacturers themselves. What they need are competencies to use such equipments and managing CAD files from OEMs’ libraries, “print” spare parts at will: at the right moment, in the right version, without holding huge, costly and risky inventories of parts in huge warehouses, with high fixed costs.
Furthermore, customizing parts locally would yield additional revenue, as customers with specific and maybe urgent needs are willing to pay a premium.
So would scanning and redesigning no longer supported parts for which no CAD files are available.
This kind of service is an ultimate postponement because the manufacturing of parts is on hold until the very last moment, when the orders are confirmed or the parts paid!
This is one example about additive manufacturing (i.e. 3D printing) techniques can disrupt existing businesses and bring new benefits to (some) competitors and customers. The financial barriers to entry dropping significantly, OEMs could reconsider to re-integrate this kind of activity and keep the value creation all by themselves.
This post being a prospective analysis, I would be glad to read your comments.
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