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Commercial Implications for Industrial Goods Manufacturers. 3D printing technology is on the edge of revolutionizing production in industrial manufacturing.

It is considered to be a central element of the third industrial revolution by changing long lasting principles of industrial manufacturing. Aside from the manufacturing perspective, 3D printing is expected to shift market environments and revolutionize present business models. This article highlights commercial implications for industrial goods manufacturers and uncovers fields of action for senior management.

Industry experts agree on the fact that 3D printing will revolutionize industrial manufacturing within the next five to ten years. At the same time, it is undisputed that the integration of 3D printing technology into traditional production lines will disrupt market environments and existing business models. This applies to low volume and complex product lines in particular.

Given the rising relevance of 3D printing technology, do you feel adequately prepared regarding its impact on the strategic setup of your business?

In case your answer to this question is negative, the presented article will provide you an introduction to the following aspects of 3D printing technology:

  • Relevance
  • Benefits
  • Challenges
  • Commercial implications
  • Fields of action

Relevance
3D printing – also referred to as additive manufacturing – is “a group of layer manufacturing techniques which have the distinguishing feature of creating parts by the controlled addition (…) of material. ” In other words, 3D printing creates new objects by continuously adding one layer on top of the other according to a pre-defined shape of an object. The technology has been applied in industrial manufacturing for more than 20 years. That raises the question, why the technology received such a broad interest just recently?

The answer is simple: technological advancement. Until 10 years ago 3D printing technology was limited to the relatively slow production of small plastic objects and some specialty fabrics. Primary areas of application were prototyping and low volume production of specialty products. Nonetheless, the production was relatively expensive and created low value added. Hence, 3D printing production remained a niche production method, not suitable for industrial manufacturing of medium or large scale.

Today, the situation has changed significantly. Modern industrial 3D printers are able to produce precise, high quality products of different sizes fast and at relatively low costs. Moreover, they are able to replicate complex structures, which cannot be produced by other production technologies. The processed materials range from simple plastic to almost all kinds of metals (incl. titanium, aluminum, etc.) and even cover biologic textures. However, 3D printing technology is not expected to replace traditional production methods like material transformation or degrading. Instead, both production techniques are predicted to be increasingly combined and integrated.

Several larger manufacturers have recognized the potential of the new technology and are screening business areas to apply 3D printers. Meanwhile, small and medium size firms see 3D printing technology as a suitable and economic option to enter new markets with low volume and complex products. As of today, the most successful areas of application are prototyping, low volume specialty products as well as highly customized products – especially in the aerospace, medical, capital goods and automotive industry.

In addition, several experts have identified substantial potential to integrate 3D printing into global aftermarket and distribution processes.

Altogether, 3D printing technology is close to reaching full maturity and will become more and more relevant in the near future. With an increasing number of industrial companies dealing with 3D printing, all industrial manufacturers have to confront themselves with the strategic and commercial implications of 3D printing technology.

Benefits
There are several arguments why industrial firms should evaluate the option to use 3D printing technology. Relative to traditional production methods, 3D printing enables:

  • quicker, more economic and more flexible product development
  • shorter product life-cycles
  • less investment in production tools
  • less dependence on returns to scale
  • less production limitations for complex product shapes and designs.

Thus, the integration and application of the technology creates several opportunities to cultivate existing and new markets. Among other 3D printing provides the opportunity of:

  • flexible and on demand satisfaction of global customer requirements
  • efficient product distribution and production (e.g. digital product distribution and decentralized 3D printing production)
  • absorption of market niches with highly specific, low volume but profitable product lines.

Hence, it appears reasonable that an increasing number of industrial manufacturers will adapt the new technology and thereby revolutionize currently existing market structures and environments.

Challenges
Despite the opportunities and benefits the following three categories of challenges and obstacles still hinder a holistic integration and rollout of 3D printing technology:
1. Production speed: Relative to traditional production methods, 3D printers are slower and less economic for high volume production
2. Internal resources: Lack of skilled and technology experienced human capital, limited infrastructure and internal scepticism about the consequences of the technology, are commonly addressed challenges of companies engaging in 3D printing
3. Legal obstacles: Legal regulations and norms on the approval and admission of products produced by 3D printers are undefined and/or vague. Equally important, the international legal enforcement of intellectual property, licenses and patents for 3D printed products does not suffice the requirements of most manufacturers

Nonetheless, it is undisputed that the technology will overcome these obstacles within the next years and revolutionize the commercial environment of industrial firms.

Commercial implications
It is obvious that the adaption of 3D printers will have a commercial impact on the business of industrial manufacturers with regard to various aspects.

1. Change of competitive environment
3D printing allows the production of different products with one production line – independent from economics of scale. By offering an opportunity to produce low quantities economically, 3D printers cause a reduction of market entry barriers –especially in niches of existing markets. Consequently, the probability of cross-barrier competition and new suppliers entering established markets increases.

2. Dynamic product development
Faster prototyping, product development and production ramp-up will decrease product life-cycles. Probable consequences might be higher rates of product innovation, specialization and customization. In that context, a faster deterioration of mature product market prices is a realistic scenario.

3. Decentralization
The ability to produce products on demand at any location in the world by forwarding a digital production file to a 3D printer, will have significant impact on logistics and supply chain management. The global distribution of products and spare parts could be conducted via a completely new channel, which is faster, more reliable and more economic. Stock capacities and logistic expenses could be reduced to a minimum through regional on demand production of the required product.

4. Change of after-sales structures
Industrial manufacturers and technology experts further agree that 3D printing has the potential to revolutionize after-sales businesses. Cheaper product delivery and minimized logistics while delivering identical product quality are strong arguments for a disruption of global aftermarkets of industrial manufacturers.

Fields of action
Recording the arguments from above, 3D printing technology will have an impact on the competitive landscape, product development and after-sales business – a high margin source of revenue. At the same time, it offers a variety of opportunities to uncover new market potentials and to strengthen current market positions. Executives must deal with the opportunities and changes of the market environment and take the required actions.

On that account, Homburg & Partner recommends to evaluate the current setup of businesses on the grounds of the following checklist:

  • Effects of 3D printing technology on market environment and business model are fully transparent
  • Market strategies have been revised and adapted accordingly
  • Business areas, products and processes which could benefit from 3D printing technology have been identified
  • Required technical and commercial expertise and resources have been acquired
  • Measures to preserve and protect intellectual property have been derived
  • Sales organization and channels are prepared to the new commercial implications

In case at least one of the check-points cannot be confirmed, it is highly recommended to take action and enact necessary measures.

Moreover, an internal and external in-depth analysis and evaluation of 3D printing technology – together with the affected functions – could provide valuable insights on an operational and strategic level.

Finally, the involvement of industry experts is a viable step to prepare your business for the upcoming technological changes – especially if your organization lacks internal expertise to cope with the illustrated commercial implications.

Markus Pfeifer, Partner
Tel.: +49 151 – 52600975
markus.pfeifer@homburg-partner.com

Philipp Niemann, Associate
Tel.: +49 172 – 6047367
philipp.niemann@homburg-partner.com

Homburg & Partner: Excellence in Market Strategy, Sales & Pricing
Homburg & Partner is an internationally operating management consultancy focusing on Market Strategy, Sales & Pricing and has been founded by the renowned marketing expert Prof. Christian Homburg in 1997.

In an independent study called “Hidden Champions in the Consultancy Market” conducted in 2012, Homburg & Partner has been honored as the best consultancy for Marketing & Sales for the second time in a row. More information on: www.homburg-partner.com.

Volume:
6
Issue:
16
Year:
2015

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