Perspectives

Additive manufacturing

Issues and opportunities for private companies

By Jim Joyce, specialist leader, Deloitte Consulting LLP, and Mark Cotteleer, research director, Deloitte Services LP

Privately held companies will have to confront a number of challenges if they wish to succeed as innovators in the 3D printing world.

Overview

Additive manufacturing (AM) is getting a boost these days as key industry patents expire, throwing open the market to new players in 3D printing, which allows products to be formed by machines that print materials in successive layers. After decades of research undertaken to place 3D objects into the hands of consumers, experimentation is yielding growing numbers of AM-produced goods that are reshaping businesses across the spectrum. 

Today and for the foreseeable future, the biggest opportunity for companies is in the market for 3D-produced aftermarket parts. Original equipment manufacturers (OEMs) that take advantage of 3D printing options will likely play an increasingly important role in the product supply chain, helping their customers address supply pain points through solutions that range from metal engine components for passenger cars to everyday household goods. 

Privately held companies will have to confront a number of challenges if they wish to succeed as innovators in the 3D printing world. If they fail to address them and stick to traditional manufacturing methods instead, they risk losing their competitive advantage while those that understand the economics and the mechanics of AM edge ahead.

Today and for the foreseeable future, the biggest opportunity for companies is in the market for 3D-produced aftermarket parts. 

Issues

Despite a raft of news headlines that have accompanied the wave of consumer-oriented 3D printers in recent years, privately held manufacturers haven’t exactly scrambled to become AM suppliers. In our most recent, comprehensive appraisal of technology trends in the mid-market segment, fewer than 50 respondents in a survey of 500 executives said they were executing plans based on AM technology.1

When it comes to understanding the stakes involved, though, far more executives see the writing on the wall.  Forty-four percent of respondents in the same survey said they agree or strongly agree that 3D printing will have an impact on their companies. A few factors help explain the disharmony between recognition of the business opportunity in AM and the relative inaction among closely held companies. 

Smaller, privately run companies by nature seek competitive advantages against their larger public rivals by identifying openings in the market where they can secure an edge. Speed to market is one area where smaller competitors have historically had an inherent advantage. 

Presumably, a private manufacturer with such a timing advantage could stand to expand on their lead by adding a 3D printing capability.

The reality is quite different, however. Across a number of industries, economics and talent are among the challenges keeping middle market firms from widespread adoption of AM.

In some industries, advances in 3D printing technologies have not been sufficient to be seamlessly integrated into the supply chain. In in the automotive parts industry, a market that amounts to a huge opportunity for AM applications, lower-tier suppliers play a key role in satisfying maintenance requirements for car manufacturers. But, to date, they have been unable to successfully deploy high-speed AM capable of keeping up with global production that reached 86 million automobiles in 2013 alone. Instead, 3D printing has been more successful in niche applications, particularly among hobbyists looking for replacement parts that are no longer available. Entertainer Jay Leno, known for his comedy as well as his collection more than 200 cars and motorcycles, relies on an industrial-strength 3D printer to generate parts to keep the vehicles in his collection running.2

Gaps in talent amount to another significant hurdle, as educational institutions aren’t churning out enough graduates with knowledge of AM technologies and capabilities. Universities across the country are striving to fix this by offering AM development programs with laboratory 3D printing research in disciplines as diverse as engineering and art.3 Students in these programs are getting exposed to coursework meant to replicate the manufacturing site, participating in assignments ranging from CAD preparation to the fabrication and testing of 3D-printed objects. While these program are gaining traction, they haven’t been around long enough to fill skills gaps across the manufacturing sector. 

Finally, those privately held companies that haven’t cracked the business case for employing 3D printing will likely have to double their efforts to catch up. A parts manufacturer that hasn’t begun to use 3D printing in design and prototyping – two foundational AM skills – is probably a decade behind peers that have already started cultivating such capabilities.

Fewer than 50 respondents in a survey of 500 executives said they were executing plans based on additive manufacturing technology.

Opportunities

Nearly every big manufacturer of industrial products we encounter in our practice is trying to figure out how to deploy 3D printing within the supply chain. While smaller, privately run manufacturers don’t enjoy the same scale and scope, many of them recognize that AM may enable them to level the competitive playing field with larger, better capitalized players – or wind up supplying them. In our recent survey of technology trends affecting the middle market, respondents said the primary impact AM would have on their organization would be through accelerating product development.4

The $200 billion aftermarket automotive parts industry is a key area to watch in 2015 as a host of smaller suppliers are working to deploy 3D printing in their businesses. They are being lured by the automakers themselves, who see much promise in a technology that enables them to be both flexible and efficient.5 Ford Motor Co., for example, has laid out the cost savings it can derive from point-of-use, 3D manufacturing in select applications. Through traditional manufacturing, an engineer would create a computer model of an engine manifold and wait about four months for a $500,000 prototype. With 3D printing, multiple iterations of the same component takes four days and cost $3,000. The manifold and brake rotors for the Explorer SUV are among the AM innovations Ford is perfecting as 3D printing is starting to make inroads into auto manufacturing.6

The opportunities aren’t confined to the auto industry. Privately run companies that can harness AM to provide replacement parts for housewares, appliances and other domestic products may find success as 3D manufacturers if they can adjust their business models accordingly. We’ve all lost a knob, enclosure or button on a household product that a manufacturer will replace at a premium, if the part is available at all. The privately held company that can position itself as a designer and provider of such components – making them available on demand – will be in a better position differentiate themselves in the marketplace and build consumer loyalty around their products.

While cost savings make for good headlines, the real opportunity for middle market manufacturers is finding ways to scale high-value objects by getting 3D printers and know-how into more households.

Forty-four percent of respondents in the same survey said they agree or strongly agree that 3D printing will have an impact on their companies.

Questions to consider for 2015

Despite the business possibilities in 3D printing, many companies still lack a comprehensive awareness and strategy for dealing with the major changes that are coming as a result of AM. The trip has commenced, and middle market firms need to identify ways to join a significant movement that’s already in progress. Like preparation for any journey, there are a couple of questions that privately run businesses should be asking:

  • Does our industry stand to benefit from 3D printing or be disrupted by it?
  • Do we have an AM strategy? If so, how does it compare with our key competitors’ plans? If not, do we have a roadmap in place to catch up?
  • Do we fully understand the diversity, capability, advantages and disadvantages of the various technologies that fall under AM?

1 Technology in the mid-market: Perspectives and priorities, Deloitte, 2014, http://www2.deloitte.com/us/en/pages/deloitte-growth-enterprise-services/articles/technology-in-the-mid-market-report-2014.html.

2 John Koten, “Who says Jay Leno isn’t cutting edge?,” Wall Street Journal, June 10, 2013 2013, http://www.wsj.com/articles/SB10001424127887324866904578517090180869864?autologin=y.

3 From Mark Cotteleer presentation: “Views on Curriculum and Training,” November 20, 2014.

4 Deloitte, Technology in the mid-market, 2014.

5 On the road: U.S. automotive parts industry annual assessment, Department of Commerce International Trade Administration, 2011, http://www.trade.gov/mas/manufacturing/oaai/build/groups/public/%40tg_oaai/documents/webcontent/tg_oaai_003660.pdf.

6 Ford Motor Company press release, Dec. 12, 2013, https://media.ford.com/content/fordmedia/fna/us/en/news/2013/12/12/ford_s-3d-printed-auto-parts-save-millions--boost-quality.html.

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