Q&ARobert L. Mitchell

NO. 157

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What Business Models Will Emerge Around 3D Printing?

Q&A: What Business Models Will Emerge Around 3D Printing?2 NO. 157©2015 SAP SE or an SAP affiliate company. All rights reserved.

Of course, 3D printing will change traditional manufacturing methods and the ways companies manage their supply chain. But it also has the potential to create entirely new business models. Here’s how.

3D printing will affect every area of the manufacturing value chain: design, manufacturing, supply chain, and distribution – eventually. Right now, though, 3D printing, also known as additive manufacturing, is too slow and expensive to replace most conventional manufacturing applications.

However, as equipment and material costs continue to drop, as throughput increases, and as maximum build sizes expand, 3D-printing usage will expand dramatically. Nearly 50% of manufacturers in the consumer, heavy industry, and life sciences industries will be using it by 2018, says Gartner.1

Not every manufacturing application will be a fit, but companies need to build a strategy, find the sweet spots, and begin exploiting 3D printing within their unique business contexts before the industry begins changing around them.

We asked four industry experts to interpret those changes.

Terry Wohlers is Principal Consultant and President at Wohlers Associates.

Jarrod Bassanis Senior Consultant at CSC.

Mark Cotteleer is Research Director at Deloitte Services.

Uwe Kylau is a development expert at SAP, where he manages 3D-printing activities and workshops in SAP’s maker program, d-shop.

Q&A: What Business Models Will Emerge Around 3D Printing? 3NO. 157 ©2015 SAP SE or an SAP affiliate company. All rights reserved.

In what ways will 3D printing affect how manufacturers design products?

Uwe Kylau: You can print pretty much anything, so you’re a lot more flexible, a lot more versatile. You can produce parts optimized for geometry, form, and shape. That will give manufacturers more freedom.

Terry Wohlers: Conventional methods of manufacturing require you to produce and assemble many different parts. This has meant lots of part numbers, inventory, and assembly labor. With 3D printing, you can do part consolidation digitally in the design phase. GE Aviation, Boeing, NASA, and others are consolidating 20 or more parts into 1. 3D printing will change how parts are designed and built.

Q&A: What Business Models Will Emerge Around 3D Printing?4 NO. 157©2015 SAP SE or an SAP affiliate company. All rights reserved.

How will it affect manufacturing processes? Jarrod Bassan: 3D printing enables manufacturers to

economically produce just in time and at very low volume and to switch between the production of different types of components or products very quickly. We expect much lower inventory levels and much more just-in- time production.

Kylau: It will be all about programming the machines and then the machines will do the work. It’s mostly about getting the modeling right and pushing a button; there will be less actual craft work.

What are the manufacturing sweet spots for 3D printing today? Wohlers: The best applications are those where the volumes

are low, parts are complex, and product values are high. These criteria fit well with the aerospace, medical, dental, and jewelry industries. The technology has also been adopted by a much broader range of industries, such as automotive and consumer products, but mostly for prototyping.

Kylau: Some companies are experimenting by putting a few 3D printers in each warehouse for parts that are requested only every now and then. They manufacture those parts on demand, which frees up shelf space and reduces warehousing needs. That system will change inventory management processes. What’s the availability of a part that you don’t have in stock but that you can manufacture on demand? Does that virtual part have some kind of special value? How do you handle that in your inventory processes? You’ll need to integrate 3D printing into the business processes and then change the business software.

How will the move to 3D printing affect the supply chain? Bassan: The ability to integrate just-in-time manufacturing will

change the nature of the relationship between suppliers and assemblers. On the shop floor, suppliers will provide a 3D printer that produces a part designed by the supplier that’s then used directly in the manufacturing process. Rather than receiving large batches of subcomponents from suppliers, manufacturers will produce components just in time on the factory floor, reducing inventory levels. This, in turn, will reduce delivery times and, ultimately, overall manufacturing costs.

Kylau: At some point the scales will tip, and for some products it will be easier and cheaper to manufacture locally instead of in low-cost countries thousands of miles away. For a few industries, manufacturing will move back to where it was outsourced from in the first place, and the supply chain will get a lot shorter.

What new business models will evolve around 3D printing?

Kylau: You’ll see this business model of providing people with the facilities to do the modeling, the product prototyping, and the production printing. You will rent your production from a specialist, and all you will do is the design and marketing.

Bassan: We’re going to see new business models that provide income streams from selling designs rather than from selling physical products or manufactured subcomponents. But if you take somebody else’s design for a particular plastic component and incorporate it into your own product, how do you provide some reimbursement to the person who designed the part you incorporated? We don’t have viable models for that today.

How will 3D printing change the business models for incumbent manufacturers?

Wohlers: As 3D-printing machines become faster and as materials improve, the number of parts in a product affected by 3D printing will get much bigger. Today, maybe it’s only 5,000 units that you can affordably build using 3D printing before traditional manufacturing becomes cheaper. At some point in the future, it could be 50,000 or even 500,000 units.

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of things that make life meaningful for people. What are their personal goals? For example, is environmental responsibility a priority for a job candidate or a new hire? Is there a way they can pursue those priorities in the context of your organization? Are they into running? Is there a way they can pursue that within the organizational context and find ways to connect that form of exercise with the company’s social responsibility initiatives? Ultimately, we may see a complete evolution of the whole manufacturing landscape, where manufacturers 3D print every type of material, every type of chemical compound, every type of consumable, perishable, and so on. That might sound a bit utopian, but it could be a reality in the next 20 to 30 years.

Will 3D printing ever replace traditional manufacturing?

Bassan: At the moment, 3D printing is 20 to 150 times more expensive per part than traditional manufacturing. A 3D-printed component is not going to be cheaper on a one-to-one basis than a traditionally manufactured component for a long time.

The question today isn’t so much whether we can move the cost curve. The question is whether we can use 3D printing to create products that are superior in some way. Are there products that we can create only through 3D printing or that may be more expensive to manufacture using 3D printing but that reduce overall costs due to the way the parts integrate into the manufacturing process?

Mark Cotteleer: Additive manufacturing can play a role as flex, or emergency, capacity when manufacturers print parts in volumes that allow them to keep running during a shutdown. Those components will be much more expensive to produce, but the cost of doing that over two weeks is nothing compared to the cost of shutting down the whole operation.

How will the use of 3D printing evolve going forward?

Bassan: Companies have started by adopting 3D-printing technology for design and prototyping. Next, they will progress to using some 3D-printed components supplied to them by other parties. Then we’ll see a shift to niche suppliers that are specialists in 3D-printing technology supplying components that are either cheaper or superior in some way to traditionally manufactured components. Finally, we’ll see a shift to 3D printing on the shop floor at the point of assembly.

Kylau: You want to be looking for people whose approach to work matches the nature of the jobs. But you also want to dig deeper to get at the kinds

Robert L. Mitchellis an independent writer and editor focusing on emerging technologies.

TO LEARN MORE ABOUT HOW COMPANIES ARE ADOPTING 3D PRINTING, DOWNLOAD THE IN-DEPTH INQUIRY 6 WAYS 3D PRINTING WILL DISRUPT MANUFACTURING IN THE NEXT 5 YEARS – AND BEYOND.

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1 Pete Basiliere and Zalak Shah, 3D Printer Market Survey Reveals Enterprise Demand Drivers for Technology, Printer and Vendor Deci-sion Making (Gartner, Novmber 11, 2014) https://www.gartner.com/doc/2906317