3D opportunity for the future: Industry participants speak out Deloitte Review Issue 17

A new frontier

In November 1805, Meriwether Lewis and William Clark completed a perilous 3,700-mile expedition from St. Louis to the Pacific coast of the United States, ending near what is now Astoria, Oregon. When word reached the East Coast of this successful journey, many immediately saw life-changing opportunity out West. Those willing to make the trek aimed to take advantage of fur trading, bountiful farming lands, or discovering gold. Over the next half century, hundreds of thousands traveled a variety of paths across the continent, with varying degrees of success, in pursuit of the opportunities this new frontier promised.

Over 200 years later, many see a similar once-in-a-generation opportunity in advanced manufacturing technologies. Specifically, additive manufacturing (AM), also known as 3D printing, has garnered widespread interest as a key component of the future of manufacturing. AM is a technique that builds objects layer by layer using a variety of materials that include polymers, metals, and composites.¹ A diverse set of industries—including aerospace and defense, automotive, medical devices, consumer products, and retail—have already felt the technology’s impact, though thus far much of AM’s 30-year history has been focused on prototyping and tooling.² These early applications, and the promise of more to come, have fueled business leaders’ excitement about applying AM technologies to achieve new levels of innovation, performance, and growth.

Just as word quickly spread about life out West, leading to a rush of curiosity and capital, business demand for AM is rising rapidly: Analysts estimated AM’s overall market size to be $3.1 billion in 2013, with an annualized growth rate of 35 percent.³ The increase in AM’s popularity, along with popular fascination with 3D printing, has sparked a demand for education. Deloitte’s massive open online course (MOOC) “3D opportunity: The course on additive manufacturing for business leaders,” which attracted more than 10,000 participants across two sessions in July and October 2014, sought to address this need.⁴

Mapping out the journey ahead

As part of the MOOC, one assignment invited participants to answer the question “What would I like to see AM create next?” More than 600 students responded, agreeing overwhelmingly that AM will impact their businesses in the next five years and, more helpfully, explaining how. Although many industry analysts have speculated on the many ways in which AM could be put to use, we have seen no data presented offering a demand-side argument about where AM should be put to use.

This article dissects these responses and organizes them into a framework that helps provide business leaders with a map to navigate the AM landscape. We describe where stakeholders desire to see AM applied in a variety of industries, how they perceive it affecting their businesses, and what the expected outcomes are for pursuing each path.

The four paths

AM is a technology innovation that breaks existing performance trade-offs in two fundamental ways: First, it can reduce the capital required to achieve economies of scale; second, it increases flexibility and reduces the capital required to achieve scope.

Capital vs. scale: AM has the potential to reduce the capital required to reach minimum efficient scale for production, thus lowering the barriers to entry to manufacturing for a given location.

Capital vs. scope: The flexibility of AM facilitates an increase in the variety of products that a unit of capital can produce, reducing the costs associated with production changeovers and customization and/or the overall amount of capital required.

Changing the capital vs. scale relationship may reconfigure supply chains; changing the capital vs. scope relationship would likely affect product designs. These impacts present companies with choices on how to deploy AM across their businesses.

The four tactical paths that companies can take are outlined in figure 1.

Path I: Companies explore AM technologies to improve value delivery for current products within existing supply chains.

Path II: Companies take advantage of scale economics AM offers as a potential enabler of supply chain transformation.

Path III: Companies take advantage of the scope economics offered by AM technologies to achieve new levels of performance or innovation.

Path IV: Companies alter both supply chains and products in the pursuit of new business models.

A picture of industry interest in AM

MOOC participants responded to the question “What would I like to see AM create next?” with a variety of unique and ambitious applications. Figure 2 shows respondents’ diverse industry affiliations, backgrounds that no doubt inspired their different AM aspirations.

Taking into account participants’ backgrounds and motivations, a picture emerges of where industry stakeholders desire to see AM grow within the marketplace. Approximately half of the participants claimed at least some personal experience with AM, well beyond what we would expect in the general population of managers. This experience, combined with the technical and strategic grounding that the MOOC itself offers, suggests that our response-based data are based on above-average insight. Considering AM’s industry growth, gaining a sense of where our participants hope to see AM applied clearly delineates a highway on the technology road map. As Lewis and Clark learned two centuries ago, a smooth, unobstructed avenue may be frustratingly elusive, but even an indirect route can get you where you’re trying to go.

Uncovering response patterns

To maximize MOOC participants’ freedom to express their views, researchers collected the data in text form. When dealing with free-form text, one idea can take on a near-infinite variety of forms. Therefore, analysts use text-mining methodologies to detect key concepts and patterns, utilizing algorithms that detect patterns in words and phrases mentioned together with a higher rate of correlation than expected in everyday usage of the relevant terms. For example, text-mining algorithms recognize the high rate of responses that correlate the phrases “3D printing” and “additive manufacturing” to the words “protein,” “nutritional,” and “pizza.” From this information, it is clear that a significant number of participants see food as a noteworthy application of AM. Another example involves the phrases “medical devices,” “hip replacement,” “knee replacement,” and “prosthetic limb”; text-mining these phrases guides the analyst in identifying medical applications as a relevant category.

Beyond applications such as food and medical purposes, the algorithms identify attribute patterns. An example includes the terms “cost-effective” and “lower costs,” which make evident that a substantial portion of responses identify a cost-savings attribute as relevant to what they would like to see AM create.

Finally, having identified applications and attribute patterns, researchers create rules to position each response into one of the four paths in Deloitte’s AM framework. An example is if a comment mentions both supply chain improvements such as "faster delivery" and product innovations such as “mass customization,” then it follows that the respondent is conveying a path IV purpose.

The applications and attributes of AM

MOOC participants’ desired AM applications do not, as might be expected, closely track their industry affiliations, implying that many view potential applications from both business and consumer perspectives. For instance, a majority of respondents highlighted medical technology applications, though only 5.6 percent of participants are affiliated with the life sciences and health care industries. Figure 3 represents the top 10 applications MOOC participants would like to see from AM.

As figure 3 shows, respondents indicated the most interest in applying AM to medical technology, which makes sense, since medical applications currently account for the largest segment of AM-related revenue, at 16.4 percent.⁵ While much of the medical technology application centers on medical devices, many respondents showed interest in leveraging AM to produce organs and prosthetics. Our interpretation of the data suggests that industry stakeholders possess a strong appetite to push the technology along a path of greater sophistication—not to mention one that is attention grabbing.

Three of the top 10 desired applications relate to consumer products, including apparel and fashion, toys and games, and smart technology and electronics. Incorporating AM into the manufacture of consumer products can potentially enhance the products in several ways, including increased geometric complexity, decreased system complexity, increased customization, and enhanced performance.⁶

Uncovering motivations

As important as identifying the applications where stakeholders wish to see AM applied is understanding their motivations for using the technology. For the cost and effort of implementing any technology—particularly one still in an early stage of development—businesses must accurately gauge the anticipated payoff. MOOC respondents identified three primary motivators: increased customization, cost savings, and speed and process efficiency gains. Figure 4 breaks down the attributes identified for each of the 10 most popular applications; for 8 of the 10 applications, respondents demonstrated a statistically significant preference for one of the three motivating attributes relative to the population.⁷

Driven by customization

As figure 4 shows, a group of three industry applications—artistic purposes, apparel and fashion, and medical technology—appear particularly desirable for AM customization of products. For all three, more than half of participants identified customization as their motivating attribute for implementing AM. One MOOC respondent stated:

One of the advantages of AM lies in its ability to provide customization that traditional manufacturing cannot provide. I have been a long-distance runner for about four years. One of the most desired customizations one needs is the perfect-fitting shoe that matches exactly my stride and feet dimensions. However, on a trip to a specialty running store, you will find that shoppers spend up to two hours figuring out the right fit. This is where I think a technology such as AM can be exciting, as it provides the ultimate customization. One can envision that the shoes can be custom-fit and custom-designed for the runner.

The popularity of AM for replacement parts

Ninety respondents, 14.9 percent of the sample, referenced the application of AM to create replacement parts on demand. Figure 5 shows a chart breaking down which industry applications were most popular for this purpose. When specified, replacement-part AM applications in automotive as well as aerospace and defense were most commonly called out.

Sample response:

I'd like to see major supply chains leverage this manufacturing method to produce high-quality parts in limited quantity, as needed, near the customer—I'm thinking mechanical parts that break infrequently, so spare replacements sit in storage for long durations and are a management problem to track and keep properly stored.

Driven by speed and efficiency

For two applications—automotive, and culinary and nutrition—a significantly larger number of respondents identified speed and efficiency as the primary motivation to implement AM technologies. Those looking for increased speed in the automotive industry are following a path that the US military is blazing. For example, the military has experimented with implementing AM to deliver on-demand surgical kits to remote sites where availability and logistics challenge the existing supply chain.⁸ In an automotive application, many see value in the ability to fabricate spare parts on the spot. For example:

I can see using additive manufacturing technology in the area of automotive repair. Instead of having to rely on parts suppliers to actually deliver the needed parts in real life (requiring storage and transport), it would be useful to have additive manufacturing capabilities in workshops (garages) where they can be made as they are needed.

While participants value speed and efficiency for these industry applications above others, they value customization equally. Instead, to achieve greater speed and efficiency gains and customization, they appear to be willing to sacrifice cost savings—a potentially important insight for market entrants.

Driven by cost savings

Three applications—aerospace and defense, energy and environment, and toys and games—show a strong desire to see AM applied to effect cost savings. This group represents a 20.7 percent increase over the next highest application, building and construction, motivated by cost savings. One respondent saw a specific application for AM in aerospace and defense:

I would like to see the A&D industry—more specifically the global MRO [maintenance, repair, and operations] space—utilize AM to eliminate slow-moving or aged inventory of parts associated with old or aging products/fleets. AM programs should catalog those parts and, when needed (JIT), print what is required and send to the field. This would save so much money in working capital! It will change the global landscape.

The variety of applications and corresponding motivations illustrate that stakeholders who foresee AM impacting their business do not envision the technology working in a one-size-fits-all fashion. For business managers, these potential avenues may be difficult to consider without a guiding framework.

Translating industry demands into the four paths

After identifying applications and attributes, our text analytics algorithms grouped responses into one of the four paths of Deloitte’s AM framework.⁹ There are several advantages to this process:

• It reduces complexity from 120 potential outcomes to 4.¹⁰
• It provides a framework to understand the value from varying combinations of choices and goals.¹¹
• It identifies the strategic objective pursued.
• It assigns a driver of value to each application (improved profit, reduced risk, or reduced time).

To help interpret the framework, figure 6 provides a heat map identifying the path to which participant responses best align for each of 10 industry applications. Participants generally demonstrated little interest in leveraging AM for path I (stasis) purposes. Beyond this, however, parsing responses demands close attention, since the variation of responses for the other paths was inconsistent across industry applications. Path II (supply chain evolution) was the most popular among those citing automotive applications, while respondents saw the greatest benefit within path III (product evolution) for six applications: apparel and fashion, energy and environment, toys and games, artistic purposes, aerospace and defense, and culinary and nutrition. Path IV’s (business model evolution) high level of sophistication proved the most appropriate for medical technology, building and construction, and smart technology and electronics.

Path I: Stasis—looking to march beyond

On path I, organizations aim to use AM to improve value delivery for current products and supply chains. This path proved the lowest-ranked option for all but three applications: building and construction, aerospace and defense, and artistic purposes. A MOOC respondent revealed:

I would like to design and make architectural models using modern 3D designs and manufacturing. These models are often one-offs, and additive manufacturing seems perfect for this process, which is normally labor-intensive. Large time and cost savings are expected.

Uses such as this suggest that path I does offer significant value; stakeholders pushing to move beyond this path may be looking to move forward in sophistication rather than remain on a stasis path that many have already mastered.

Path II: Supply chain evolution

Organizations pursuing path II are taking advantage of scale economics that AM offers as a potential enabler of supply chain transformation. The automotive industry has a large number of stakeholders that perceive AM’s disruptive value: Suppliers often deal with the complexity of managing spare parts that can remain unused for long periods and in some cases become obsolete.¹² Through the deployment of AM technologies, on-demand manufacturing can pair with conventional manufacturing to decrease inventory levels and minimize warehouse space.¹³ One participant said:

I would love to see the automotive industry disrupt its own logistics supply chain of service parts and accessories, allowing the dealer or the end customer to be able to produce OEM-quality product. It [AM] can definitely begin with nonfunctional items like grills or protective moldings and advance to spoilers, body kits, etc. The industry can cut out tremendous inventory, stocking, and supply chain coordination expense.

Evidence suggests that 20 percent of auto part sales are considered discretionary and therefore subject to inconsistent demand patterns; leveraging AM in this capacity could greatly improve part availability.¹⁴ Producers of industrial equipment are pursuing similar strategies.

Evolving the supply chain through AM in this manner can reduce minimum efficient scale in production locations, alter traditional supply chains, and lower working capital requirements.¹⁵ Redefining supply chains by impacting the “long tail” inventory can improve performance by decreasing cost, risk, and time.

Path III: Product evolution—AM’s most popular pursuit

Companies that adopt path III look to improve product performance without necessarily rethinking supply chains; stakeholders see an opportunity to provide consumers with levels of customization unavailable with traditional manufacturing technologies.

One stakeholder explains his perspective relative to sporting goods:

What I want to see created using AM is not an object by itself but a range of top sporting gear like skateboards, snowboards, and tennis racquets—gear able to deliver the same or better quality than what we have today. I chose that because I think it is a wide niche and could enable us to create a great diversity of models for different purposes and tastes.

For energy and the environment, many stakeholders are excited about the potential to create customizable products that will empower users to leverage natural resources that best suit their respective needs. One stakeholder explained, “I would like to see a fully developed and tested open-source, 3D-printable wind-power generator with customization options for size and power.” Developments are already taking form for this purpose in do-it-yourself 3D printing communities.¹⁶

A common incentive for pursuing path III is AM’s potential to produce designs and dimensions of products that are difficult to create using traditional manufacturing techniques. A participant describes an application for digital cameras:

I would like to see the application of additive manufacturing in making high-end DSLR cameras. DSLR cameras generally are of fully plastic make with small metal inserts in between. I think additive manufacturing may lead to better precision and quality in DSLR camera bodies and may also lower the costs if the technology is adopted on a larger scale.

Stakeholders who pursue path III will look to improve product functionality as well as create entirely new products. Pursuing this path can offer significant opportunities to grow revenue in existing and new market segments through product innovations.¹⁷

Path IV: Combined supply chain and product evolution—the most ambitious applications

The fourth path sees companies altering both supply chains and products in the pursuit of new business models. The three applications in path IV in which MOOC participants expressed the most interest are medical technology, building and construction, and smart technology and electronics. Over half of participants citing medical technology envisioned an application that followed path IV. Building and construction followed, at 39 percent. Those who envisioned AM technologies applied in a path IV context hope to see entirely new business models within the field. Many responses, such as the following example, visualized a world where organs are created through AM:

My objects of desire are replacement parts for human organs, including heart and brain. I chose it because of its complexity and utility, and yet it's not beyond the realm of imaginable for AM. That is because AM is similar to nature—kidneys are not made by machining a work piece. All living tissue is grown additively.

While examples such as this are the most eye-catching illustrations of AM’s potential impact on people’s daily lives, bioprinting of human tissue becomes increasingly realistic in the long term. Organovo Corporation has successfully mimicked human organs’ form and function in the company’s fabricated living tissue.¹⁸

AM is already driving the evolution of a number of business models. For example, the bathroom fixture maker Symmons Industries altered its supply chain and empowered customers to influence the design process of doorknobs and cabinet handles to provide custom-made products for the market.¹⁹ An ambitious stakeholder in building and construction would like to see the same level of flexibility offered within the design and construction of housing:

Imagine the day when you will decide to build your house, and no workers will be needed! You will be able to design and build your house by yourself! This day seems to be closer than we think, as several companies and people from the US, China, and Netherlands are already trying to make this a reality through large 3D printers.

Practitioners aspiring to follow path IV see similar opportunities: AM promises a combination of capabilities that include mass customizations, manufacturing at point of use/sale, supply chain disintermediation, and customer empowerment.

Challenges to widespread adoption

Companies that pursue paths II, III, and IV face significant barriers, and, given MOOC participants’ enthusiasm and ambitions to go beyond path I, it is important to anticipate obstacles. The most common factors that challenge adoption include:

• Increased regulation: Controversial applications of AM have increased the regulatory scrutiny of AM-created products; observers most commonly cite the manufacturing of firearms.²⁰ Regarding medical technology, the regulatory process to approve new devices is notably long (often many years).²¹
• Technology shortcomings: Currently the printable materials available are fairly limiting; manufacturers need a broader set of materials that provide better performance.²²
• Cost-competitiveness: In many instances, especially for large items, traditional manufacturing techniques are more cost-competitive.²³
• Talent shortage: With AM’s popularity rising, the labor force demand is rapidly outpacing the supply of talent with relevant skill sets.²⁴ In addition, with AM being a less mature technology, most training occurs on the job site rather than through formal education.²⁵
• Production speed: Compared with traditional production methods, AM technologies can present issues in the speed of component production (depending how one measures time).²⁶
• Intellectual property concerns: AM products may not only impact but disrupt numerous industries reliant on patent-based parts and processes.²⁷ The automotive aftermarket parts sector, toy, IT, and consumer product industries could sustain up to $15 billion in AM-related intellectual property theft in 2016.²⁸

When managing their AM investment, stakeholders should take into account these adoption challenges when comparing the strategic opportunities of the available relevant paths.

Understanding your path

AM technologies can provide value by either significantly reducing the minimum efficient scale or expanding the scope economies—or, perhaps, both. Framing AM’s impact in this manner helps eliminate much of the complexity. With a better sense of where industry stakeholders desire to see AM applied, business leaders can view investment opportunities through four tactical paths.

Path I is a low-opportunity-cost point of entry, and a logical starting place. Acknowledging that most MOOC respondents expressed little interest in this stasis path, many companies may nevertheless find value there and later see path I as a stepping stone to further AM engagement. First, many stakeholders acknowledged a relatively low level of experience with AM technologies, and path I is an excellent opportunity for companies to develop experience integrating AM with current operations and supply chains.²⁹ Second, this path carries comparatively low risk: It requires little change yet can still positively impact the speed and profitability of a company’s current business model.

For those ready to move beyond path I and focus on gaining competitive supply chain advantages, path II shows a way forward. These stakeholders are looking to reduce the minimum efficient scale to manufacture their products. Companies that depend upon the manufacturing of replacement parts may be most interested in the performance gains that path II promises. In particular, automotive stakeholders may appreciate AM’s flexibility in inventory management of low-usage spare parts and efficient accessibility to items. Achieving this type of supply chain flexibility may improve growth opportunities at lower levels of risk.

Path III, pursuing product innovation using AM technologies, represents the direction in which a majority of our MOOC participants wish to go, seeing AM significantly increasing scope economies in six of the industry applications. Stakeholders look to AM to provide new levels of customization and more sophisticated product functions. The innovation enabled by AM can empower these stakeholders to reach customers in new ways, such as developing customized sporting gear for niche customers. Innovations such as this can create products that trigger new growth cycles.

Those pursuing path IV, looking to redefine operational or business models through AM, are disrupting supply chains and innovating products (a combination of paths II and III). Stakeholders from the medical technology industry are focused on seeing AM efforts produce these types of disruptive industry changes. With aspirations of creating human tissue, those seeking this path expect to raise health care standards and aspire to actually change the world.

The next steps

Additive manufacturing is experiencing tremendous growth, and as the industry moves beyond prototyping, many managers understandably are struggling to envision how to apply AM within their business. The data from the MOOC may help managers understand where stakeholders want and expect to see AM investments made, and navigate the benefits these avenues of choice provide. When assessing these steps, managers may find that the opportunity to achieve these desired outcomes varies with each business case. Some possible next steps include:

1. Review the MOOC findings above to determine whether your industry has high interest in applying AM technologies. Consider participating in future MOOC offerings to develop a shared understanding of its content.³⁰
2. Assess which desired attributes would be most beneficial to your industry, and take into account competitor strategies. Also consider if other industry motivations could be applied to your business.
3. Determine the best-aligned path and identify the key enabling AM capabilities.
4. Identify the challenges and opportunities associated with AM in the context of your business.

Through aggregating insights of those impacted by AM, both as managers and consumers, we may observe where stakeholders want to see AM applied, how they wish to benefit from the technology, and a framework that guides the paths chosen in pursuit of this new frontier.