Path II: Supply chain evolution

- Hi there. In this segment we're going to continue our exploration of our additive manufacturing framework by delving into path two, supply chain evolution. I'm going to begin by reminding us of what path two is all about and expressing why we think that's important, and then talk about how additive manufacturing is acting today, and into the future, to influence performance within the supply chain. Let's remind ourselves about what path two is about. Path two companies take advantage of scale economics offered by additive manufacturing as a potential enabler of supply chain transformation for the products they offer. Now, why is that important? Well, we all know that great products are important to the success of the organization. Great services are important to the success of the organization. But so is delivery. So is good old-fashioned logistics, and that's what supply chain is about. Getting the right product to the right place at the right time, for the right quantity, at the right price, right? So what we're interested in doing is understanding how supply chain can impact in those particular ways. Now, like path one stasis, the supply chain evolution path presents a significant opportunity to improve performance, this time through the supply chain transformation. There's really three ways we can think about it. One is we can think about reducing investment. Two is we can think about improving responsiveness. And three is we can think about reducing inputs. Let's take a look at each of those in kind of a process model. When I introduced the framework I talked about the fact that added manufacturing offers firms the opportunity to reduce the fixed cost of production, thus reducing minimum efficient scale. It does that in some cases by reducing the amount of initial investment required in the equipment itself, but also in tooling, which we talked about in a previous segment. When we reduce minimum efficient scale we have the opportunity to locate production closer to demand. Two, improve responsiveness. We also talked in the introduction to the framework about the ability of additive manufacturing to produce swords and plowshares sequentially. That is we can use the flexibility to produce many different objects and to change over very quickly. That improves our responsiveness, so we get an opportunity to locate close to demand and to produce on demand whatever it is we think we need. Two big benefits. Third, reducing inputs. Additive manufacturing offers us the opportunity to consolidate products, to reduce assembly steps, and therefore to take labor out, as well as to reduce in some cases the amount of material actually involved in production. Because rather than using a subtractive process where we're machining material away, which essentially goes to scrap, we can produce a product in a near net shape that is actually close to the final form or exactly the final form that we're going to use, recycling all other material. So we get this combination of this reduced investment, this improved responsiveness, along with reduced inputs, and we can do a much better job of, again, delivering that product, right product, right place, right time, right quantity, right price. Couple of examples we can think about. First, we can go back to the military example of the Apache helicopter rotor blade. In that case we talked about the tooling implications because we're able to produce that tooling on demand in a field location. If you think about it, that's a supply chain issue as well because the only other alternative we would have would be to take that rotor blade and literally ship it back to a depot. Well, that's tremendously expensive. In fact, it's so expensive that that's not the option that was being chosen. Rather, those rotor blades were simply, when they failed, were simply being thrown in the scrap heap. Yet using additive manufacturing, they're able to alter the supply chain for the repair parts for the rotor blades and repair them in place, thus saving a substantial amount of money. Another great military application that I like comes in a field surgical setting. That is when soldiers are wounded, are injured in the field and require some sort of surgery. In pilot programs the U.S. military has demonstrated the ability to produce field surgical kits on demand in the field surgical location, thus eliminating the need to stock those kits, eliminating the risk of stocking out of those kits when you have an injured soldier, and improving overall lead time because you can produce on demand, on location, in a relatively short time instead of having to communicate with the depot and have delivery. A second medically related application comes in the use of hearing aids, especially custom hearing aids. The traditional process by which custom hearing aids were manufactured involved a doctor taking an imprint, literally making a physical model of the ear canal, and sending that off to a casting operation where they would produce an initial form for the hearing aid shell. That would be shipped back for fitting with the patient and then back again for final assembly, resulting in a product that'd hopefully fit well. Using additive manufacturing for this process, today the doctor will simply take a laser, a digital image of the ear canal and transmit that directly to the fabrication facility where they'll use a process such as SLS to actually print out a custom-made perfectly fitting hearing aid shell for assembly, and then direct shipping back to the doctors for a fit that in many cases is superior to the old model, while reducing costs and accelerating lead time. So, again, another big example of how we modify the supply chain in order to deliver improved performance. So how is it that we think about the products that actually can benefit the most from additive manufacturing in the supply chain? Couple of criteria to think about. Number one, production volumes. Remember the minimum efficient scale arguments that we've made, where production volumes are low yet we have requirements for tooling or fixed equipment, there's a big advantage for additive manufacturing, or at least an advantage worth looking at. Number two, multiple assembly steps. If I can design the product to produce with less labor, I have an advantage for additive manufacturing. Number three, significant amounts of material scrap. If I'm machining away and scrapping out material, I have an opportunity perhaps to do better with additive manufacturing. Number four, significant amounts of tooling. We've talked about this before. If I can eliminate the fixed cost of production, I drive down minimum efficient scale. I push out production closer to demand and the supply chain benefits. Number five, remote customer locations. Think of the field surgical setting. If I can get to the customer with the product they need at the time they need it with lower lead time, potentially everybody benefits. And lastly, components that are critical for uptime, especially where they're remote. Once again, if I can print on demand without incurring a long lead time and perhaps reducing costs, then those critical uptime processes spend less time down for repair and or changeover.