We wrote before on the many supply chain headaches that can be alleviated with additive manufacturing (AM), but while we are all for taking the next step into AM, we should remind ourselves that there are risks and uncertainties attached to these benefits that can keep top management — and even the CEO — up at night.
A Magical Solution?
Virtual or digital inventory can sometimes seem like a magical solution. It means holding digital files in inventory instead of physical products, and producing them on demand, once an order is placed, usually with additive manufacturing. This cuts many costs. The expense of creating initial physical inventory is eliminated almost entirely, while the costs of maintaining the inventory (including rebalancing, logistics, shipping, and overheads) are greatly reduced. Moreover, obsolescence and write-offs become a thing of the past. (below Carbon’s 3D printed spare parts for Ford, up top Daimler Buses spare parts additively manufactured by EOS – Photo by Tobias Hase).
Beyond these obvious benefits, there is the advantage of carrying multiple parts without additional costs per part. Consider the case of an equipment manufacturer that has more than one million different spare parts in its catalog. It can’t possibly hold them all in physical inventory, so customers usually wait approximately four weeks for a spare part. During that time, the machines lie idle, or the customer holds some inventory internally. One such customer explained that, on average, out of six production lines running at its facility, at least one is idle and waiting for a spare part at any given time. The combination of AM and virtual inventory can significantly shorten this wait time. That’s a need most customers face regularly, and they would likely be willing to pay a premium for such a service. All this bundled up with increased customer happiness and loyalty can go along way for a company’s reputation and bottom line. So why isn’t everyone using virtual inventory and reaping the rewards? As mentioned above and in some of our previous posts, there are problems and pitfalls that need to be confronted.
The Bigger Picture
First of all, not all parts are suitable for additive manufacturing. Some specialty materials, such as glass are still problematic or extremely costly to produce in this manner. Machine manufacturers and material scientists are continually working on expanding the scope of AM capabilities, so the current level of production, estimated at 5 to 15 percent of parts, will continue to grow. Second, additive-manufacturing workflows must integrate with existing supply chains and other ecosystem players in order to become seamless and automatic, rather than forcing procurement managers to figure out which parts are kept in virtual inventory and must be treated differently. This is critical for smooth customer adoption (below 3D printed spare part – Whirlpool and Spare Parts 3D).
These technical challenges will be resolved naturally. Unfortunately, there are more inherent problems. Virtual inventory is light and easy, but that’s also its vulnerability. In the case of unauthorized acquisition of a physical part, the loss of revenue per part hurts. But in the case of an unauthorized acquisition of the digital manufacturing instructions of a part, you have a much bigger problem — one that will keep the CEO up at night. There are several reasons for this. The first is that the digital file holds the company’s intellectual property, something you can’t get from the physical part so easily. This is a major asset, and its leakage can genuinely affect the company’s value. More so, with the unprotected digital file, the perpetrator can manufacture as many parts as it wants, causing the company a significant financial loss. This possibility is always on the radar of the CEO and CFO. Finally, if the perpetrator cuts any corners, and produces inferior parts with the company’s name, these parts could find their way into the market, compromising the brand’s image and integrity. This is the worst possible scenario, with the potential to affect the top line, bottom line, and company valuation. A perfect storm, you could say.
Looking at these issues collectively, it’s no wonder that some companies are hesitant about integrating additive manufacturing in production and virtual inventory. But the benefits are so enticing — so what to do?
Ensuring the CEO Sleeps Peacefully
The answer is surprisingly simple but requires forethought. There are current solutions available that enable the protection of your digital assets, enforce consistent manufacturing, track each item produced, and limit production quantities to the authorized amounts. From Day One, companies incorporating AM into their operations need to put into place platforms and solutions that will allow them to move to production without disrupting existing policies and procedures — and without exposing their organizations to unnecessary and potentially debilitating risk.
A carefully conducted research and analysis of the available solutions will enable a company to be better informed and ultimately select the best solution for the organization. Choose wisely, and you should be able to achieve your goal with minimal disruption and no extra installations or devices while adhering to supply-chain and I.T. policies and procedures.
This post is adapted from an article published on Supply Chain Brain.