As Supply Chains are Disrupted, On-Demand Local Manufacturing Takes Off

If we could name the single most significant economic trend of the 20th century, it would probably be globalization. For many corporations, globalization meant sourcing everything from overseas suppliers, mostly located in Asia.

In 2010, the late Andy Grove, former Intel CEO, wrote in Businessweek: “American companies discovered that they could have their manufacturing and even their engineering done more cheaply overseas. When they did so, margins improved. Management was happy, and so were stockholders. Growth continued, even more profitably. But the job machine began sputtering.”

Grove mentioned a friend who had joined a large VC firm as a partner: “His responsibility was to make sure that all the startups they funded had a ‘China strategy,’ meaning a plan to move what jobs they could to China. He was going around with an oil can, applying drops to the guillotine in case it was stuck.”

In the past decade, the previous trend of globalization has reversed. Not only do corporations and governments see globalization as a threat to long-term productivity and resilience, they also see it as unsustainable and an environmental disaster.

However, after so many years of exporting manufacturing and engineering to other countries, it is much more challenging to move it back to shore. Additionally, many products, especially high-end electronics and semiconductors, can be manufactured only in highly specialized facilities.

Current market conditions are disrupting established supply chains

This year, as current conditions forced many manufacturing facilities to close for several weeks and many others changed their production for much-needed health-related supplies, the existing supply chains for many commercial components and products were critically affected.

The situation has forced many vendors and organizations to look elsewhere, to secure the supply of parts they need to build their products, and to locate new manufacturers closer to their customers to continue to deliver.

Automation and technology are bringing manufacturing back home.

Fueled by new technologies such as the internet of things and edge computing, a fresh wave of local manufacturing has emerged in the past few years. Advances in robotics and factory automation have enabled local factories to compete with traditional production overseas.

The Fourth Industrial Revolution, commonly known as Industry 4.0, is taking off in many parts of the world, especially Europe. As automation is now being used in modern manufacturing, the need for cheap, unskilled labor diminishes, reducing cost.

3D printing and, in general, Industry 4.0 put the basis of transformation on how today we understand manufacturing, logistics, and distribution.

New machine-learning (ML) and edge-computing algorithms help manufacturers perform automatic product inspections faster than humans, and predictive maintenance drastically reduces downtime, as machines are serviced and repaired before they fail.

Sustainability improves and 3D printing enables customization

Probably the most significant benefit of moving manufacture closer to markets is improved sustainability. Local manufacturing drastically reduces the need for long-haul logistics. The products are made where and when needed, billions of gallons of fuel are not used, and millions of tons of CO₂ are not released into the atmosphere.

Additionally, 3D printers consume almost precisely the amount of raw materials needed for the final product, drastically reducing waste. And new models can use much more sustainable materials such as carbon fiber and polyamides, resulting in more durable and less polluting. 3D printing also allows making products that have better performance in terms of weight, which are more efficient, a critical advantage for sectors such as automotive and appliance manufacturing. The electric car industry is one of the industries that adopts 3D printing faster than others because weight is crucial for autonomy.

Furthermore, selective laser sintering (SLS) printers such as HP’s line of Fusion Jet machines allow faster prototyping and, for production runs up to 100,000 units, are more sustainable and less expensive to use than traditional injection molding processes.

As automation and new on-demand manufacturing become widely available, new possibilities are emerging. An example is product customization. Many local manufacturers are now offering real-time customization of products. Customers can order bespoke versions of many different products such as clothing, shoes, appliances, vehicles, and more without having to wait weeks or months to receive their purchases.

These new trends in manufacturing pose previously uncharted challenges for the existing supply chain stakeholders. Every new technology opens the door to new players, and the existing ones that do not adapt will have a difficult time surviving in the new economy.

“An age of disruption, as the current one, requires a rethinking of the core differentiation,” said Henrik von Scheel, lead author of the German government’s Industry 4.0 initiative. “Differentiation is what you do, every day, through repeatable activities to serve your customers better than the competition. Each successive disruption erodes old industry borders and creates opportunities. The Fourth Industrial Revolution brings the fusion of the digital, the physical, and the virtual world and is the most significant structural change of the past 250 years.”

Rita Gunther McGrath, Columbia Business School professor and author of “The End of Competitive Advantage,” recently wrote about the disruption of manufacturing: “All too often, business leaders of incumbent companies spend way too much money on digital transformation efforts that fail to take the new economic and business models of digital disruptors into account. Automating old business models is nothing more than that — it doesn’t do a thing to help your company benefit from the disruptive price/performance ratios that digital tools can foster.”

Last year, Ramón Pastor, vice president and general manager, 3D Printing, HP, argued in an interview with IoT Times: “There are some estimations that up to half of the fuel — in this case, fossil fuel — consumed in the world is used to transport products from where they’re produced to where they’re consumed. In this sense, the combination of Industry 4.0, digital manufacturing, and 3D printing enables us to change this paradigm and go to distributed manufacturing, which is basically [that] you manufacture what you need, at the moment that you need, next to where the demand is.”

While the trend to local and on-demand manufacturing started several years ago, it is clear that this year’s unusual market circumstances are accelerating it. If corporations and OEMs can make this challenge an opportunity, local economies can benefit from new, advanced factories, and sustainable manufacturing can grow much faster.

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