How new technology is about to change how we think about economies of scale and our supply chain practices

The transportation and logistics practices so ingrained into our business culture – from JIT deliveries to global supply chains — stem from trying to most efficiently distribute goods produced in massive production runs and reliant on economies of scale. But there is a new manufacturing technology that may change both manufacturing and the supply chain practices that support it.
In a recent cover story, the Economist declared this new technology “may have as profound an impact on the world as the coming of the factory did,” proclaiming a “new industrial revolution may be on the way.” Professor Richard Hague heads a world-leading manufacturing group and is so enamored with the almost limitless freedom the new technology gives to designers that he was quoted in the UK’s The Engineer magazine as calling it “almost as close to Nirvana as you’re ever going to get.”
And this is no far into the future vision. Dr. Hod Lipson, director of the Computational Synthesis Laboratory at Cornell, recently told the BBC: “In 20 years this technology will be mainstream.”
The technology I’m talking about is called additive manufacturing. It’s also often referred to as three-dimensional printing as it works in a similar way to a laser printer. Using this technique along with a blueprint on a computer, a solid object can be built up gradually from a series of layers – each one printed directly on top of the previous one. The raw material used is a powder, which can be a metal, plastic, aluminium, stainless steel, etc, or a combination of these. The object – a spare part for a car, a hearing aid, a bicycle frame – is built by either depositing material from a nozzle or by selectively solidifying a thin layer of plastic or metal dust using tiny drops of glue or a tightly focused beam.
When production becomes that easy, it does not require a factory in many instances and so greatly reduces the cost of manufacturing by making production lines and the expensive tooling they require unnecessary. Smaller items can be made by a machine like a desktop printer, in the corner of an office or the back of a shop, maybe even a house. And as the Economist and the other publications I read explained, three dimensional printing makes is as cheap to produce single items as it is to produces thousands. Just as important, since this new technology allows each item to be created individually, rather than from a single mould, each item can be made slightly differently at almost no extra cost. This could push business away from mass production and towards mass customisation for all sorts of products. For example, Digital Forming is a company already using 3D design software and offers a service to mobile-phone companies in which subscribers can go online to change the shape, colour and other features of the case of their new phone.
These three factors combine to undermine the economies of scale our current manufacturing business models – and the supply chain strategies that support them – are built upon.
Three dimensional printing is not new to manufacturing; 3D printers have been used in factories for more than a decade, but mostly to make prototypes faster and more cost effectively than with traditional methods. As the advantages provided by the new technology became more apparent they were put to use making final products rather than prototypes. Already more than 20% of the output of 3D printers is final products and that figure could more than double by the next decade.
This is certain to change transportation and distribution practices. Customization is certain to lead to smaller and more frequent shipments. And when that is the case, would it make sense to have such products made overseas or would the move away from economies of scale reset the economics of regionally-based manufacturing and shorter shipping distances? That possibility was already on the agenda of a conference put on by DHL last year.
Add it all up, and the future of transportation and logistics could be significantly different from what we have become used to.

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With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics.

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