3D Printing, Value Chain and Lawyers

Quick Read: 3D Printing as a technology can can have revolutionary implications on all the 3 key stages of a value chain –  Manufacturing, Distribution and Retail. And not to forget lawyers!

Let’s Start With Manufacturing

Today Lego finds itself going to war with the 3D Printing technology. Why?

Because, what has happened over the last decade to music, newsprint, film and photography now seems to be threatining the world of shapes and objects. As this Washinton Post says..

Soon hobbyists…. will be able to craft their own (lego) bricks, thanks to 3D printers that make fabricating those plastic parts as convenient as going to Toys R Us. With such technology, entire structures can now be reverse-engineered, reduced into a pile of components and snapped together in minutes. 

Lego’s sophisticated molding process that currently enables it to produce 55 billion Lego pieces a year is probably not under an immediate threat from the 3D printers. But once the technical challenges like being able to meet the established tolerance levels for finish, texture and fit of various materials and being able to operate at scale are solved, which –  many experts believe is just a matter of time – Lego might be at a major  risk.

lego_ironman(Lego Ironman, Source)

So the recent remarks from Lego’s CFO John Goodwin who said “3-D printing is a fascinating development and certainly opens up a lot of new avenues” gain significance as a first ever major acknowledgment by Lego about the impending storm.

This has even led to some analysts predicting that the future for Lego could be as an Intellectual Property publisher of the digital models of their blocks, not unlike the modern record company which doesn’t actually create physical tracks anymore but just owns the IP rights of their music.

Moving Over To Distribution

Distribution (and inventory management) are known to be Amazon‘s expertise. But faster shipping can come at a price. For e.g, in Q1 2013, Amazon’s shipping costs were 4.7 percent of revenue (source). So it has reportedly been testing the grounds for newer, cheaper and faster delivery methods like drones.

But here is – what could potentially be – the billion dollar question. 

What if the whole value chain starting from maintaining inventories of raw materials, industrial scale manufacturing, packaging, palletising, shipping, bulk breaking, transporting, warehousing to distributing were to become redundant? What if we manufacture goods just in time near the final destination?  

As this article says, that’s where 3D printing comes in –  by producing goods in exactly the ordered configuration precisely when they’re needed, 3D printing is ideal for filling gaps in the supply chain (which reduces uncertainty), keeping inventory low more generally (which saves companies money on shelving) and reducing waste (which occurs when the goods aren’t sold).

Called as Just In Time manufacturing, UPS has already started to venture into this business model in a small but significant way. And the initial results are reported to be more than encouraging.

3D Printer UPS Store(3D Printer at a UPS Store, Source)

So when the largest shipment/logistics company in the world begins such seemingly ‘odd’ experiment around On demand 3D printing, it can only indicate one thing.

Even the distribution behemoths are swearing by the mantra – if you can’t beat them join them. 

And Finally Speaking Of Retail

This year’s SXSW – the annual music, film, and interactive festival being held in Austin as we speak now (from March 7 – 11) has been generating a good amount of buzz.

Oreo‘s Trending Vending Machine is an example.

Envisaged by Mondelez as a fun experiment with Twitter, the concept is a mash up between the vending machine experience and social media based real time marketing. Named, Trending Vending Machine, it has been offering the SXSW attendees Oreos with 3D printed flavours picked from trending tweets and delivered to the attendees in 2 minutes (source). This marketing effort includes the hashtag #eatthetweet.

While this certainly makes for a pretty good engagement driving initiative by Mondelez where the world of social media hashtags meets cookie cutter biscuits – literally, the underlying story here could be that of the emergent possibilities of 3D printing in the retail sector where:

  • Inventories for the retailer are non-existent and limitless at the same time!
  • Shopper engagement becomes the norm, in fact the key enabler for the whole set up
  • And finally personalisation becomes a category code, and not just a fancy differentiation strategy

In fact, going by this logic, 3 D printers could even upend the very concept of retail sector as we know it today!

After all, why would anyone even bother to walk down an aisle when all they need to do is perhaps just download a design, chose a nearest 3D printer and click PRINT?

Or shall we call it MAKE?

Some food for thought on a related note: Thanks to 3D Printing, professions like Intellectual Property and Law can be in good demand for a long long time to come!

(Featured Image: 3D Printed edible Lollies at CES 2014, Source)

Interesting Times Ahead: Of Robots, Supply Chains & Economies

In its upcoming January cover story titled ‘Better than humans’, the Wired magazine provides a compelling sneak peek into the future of our workplace / economy / and our lives where robots or industrial scale automations replace 7 in every 10 of our current jobs.

Robots

Image Source: Wired (Photo: Peter Yang)

One of the most insightful observations in this article is by a MIT professor Rodney Brooks the designer of Baxter – a new class of industrial robots designed to work alongside humans. He says:

Right now we think of manufacturing as happening in China. But as manufacturing costs sink because of robots, the costs of transportation become a far greater factor than the cost of production. Nearby will be cheap. So we’ll get this network of locally franchised factories, where most things will be made within 5 miles of where they are needed.

The first thing that occurs to me is that soon enough Apple Inc., could finally do away with that painful euphemism of “Designed by Apple in California, Assembled in China” for a simple “Made in U.S.A” on its packs. Phew!

But it is only the tip of the ice berg. Some tectonic shifts seem to be underway at industrial scale – literally.

recent story on The Economist about Foxconn: The Taiwanese-Chinese contract manufacturer that notably makes most of the iProducts, Kindles, PlayStations, Wii Consoles and Xbox etc, hints at those very shifts that are rumored to be already underway.

It is well known that besides Product Design, one of Apple’s key strengths is its Supply Chain. In fact with each iteration it does on its product lines (for e.g., the iPhone versions 2,3,3s,4,4s,5..) when there is only so much it can innovate through product design and specs, the obvious place where it would seek recourse would be its processes and supply chain –  cut costs and drive margins. In other words, for every new iterative product version that Apple brings to market there is immense pressure on the company to optimize the basics ofits value chain. Now that’s when things start get interesting.

Tim Cook

Tim Cook at a Foxconn Factory in China (Image Source: HuffingtonPost)

As the largest contract manufacturer in the world, Foxconn gets nearly 45% of its revenue from Apple, so if it has to keep growing and sustaining its lead position, it simply cannot risk alienating its biggest customer. So where do Apple and Foxconn focus their energies upon now? Arguably, one of the biggest innovations that Apple is intently working on is NOT necessarily some uber sexy orgasm inducing tech interface. Rather it is the less glamorous gears and guts of its value chain –  these are innovations in:

  • Manufacturing Costs: Foxconn’s Chairman Terry Guo vowed to build 1 million robots and has hinted that the firm is just a year away from the big breakthrough – robotics that work at scale on commercial lines.
  • Transportation Costs: The article also acknowledges that there have been rumors about Foxconn planning to open a factory in the US.

Just come to think of the impact that these two changes in industrial production and transportation would have on Apple Inc, Foxconn in the short term as also on the economies of US and China in the long term.

Don’t miss the full Economist article (and don’t get misled by its title that seems to focus on Foxconn’s workers’ issues). The big picture is clear. It signals a dramatic yet a silent shift currently underway in the biggest manufacturing hubs around the world. A shift that can soon challenge the conception of developing markets as manufacturing hubs. A shift that can have a dramatic impact on assembly line jobs at the low end of the value chain. A shift that can eventually impact the very nature of economies around the world.

Interesting times. These are indeed.

High time then – the developing economies ought to seek more sustainable ‘business models’. Else let’s just say that things can only get even more interesting.