This post is one in a continuing series of tech-based businesses that are coming, just a question of who will get there first. Large industrial (and to some extent smaller) manufacturers share a problem with their customers – the customer needs quick, affordable access to replacement parts but does not want to have to store those parts, sometimes for decades, to ensure ready access when the need arises for critical equipment.
For example, in a heavy industrial setting, such as a large energy producer, the customer whose facility is offline may lose as much as $1m per day waiting for a new part. To protect against that contingency, many choose to carry a large inventory of spare parts, for which the company incurs significant costs such as storage, maintenance, and even property taxes on the inventory assets.
In addition, expensive equipment retirement decisions are at times forced due to the lack of available replacement parts.
Just as their customers do not want to store 25+ years of spare parts, manufacturers need to either store the parts themselves or the tooling, molds and casting equipment and materials to fabricate the parts over time. In some cases, the casts have long since been lost or destroyed. The inventory on demand concept is designed to address these problems.
Proposed Resolution
Use manufacturers’ CAD/CAM drawings or scan their parts (using scanning/metrology equipment) and fabricate those parts as needed using a machine shop including, where appropriate, 3D printing.
Provide customers with replacement parts either
In other words, store some minimal level of inventory and fabricate to replace periodically as used, minimizing unused, carried inventory. The inventory on demand concept could also be called "just in time manufacturing."
Benefits of Inventory on Demand
General Benefits
Benefits to manufacturers
Benefits to Customers
Who would use this service?
Fundamentally, those companies who want to retire expensive tool and die equipment and
For example, in a heavy industrial setting, such as a large energy producer, the customer whose facility is offline may lose as much as $1m per day waiting for a new part. To protect against that contingency, many choose to carry a large inventory of spare parts, for which the company incurs significant costs such as storage, maintenance, and even property taxes on the inventory assets.
In addition, expensive equipment retirement decisions are at times forced due to the lack of available replacement parts.
Just as their customers do not want to store 25+ years of spare parts, manufacturers need to either store the parts themselves or the tooling, molds and casting equipment and materials to fabricate the parts over time. In some cases, the casts have long since been lost or destroyed. The inventory on demand concept is designed to address these problems.
Proposed Resolution
Use manufacturers’ CAD/CAM drawings or scan their parts (using scanning/metrology equipment) and fabricate those parts as needed using a machine shop including, where appropriate, 3D printing.
Provide customers with replacement parts either
- On demand as needed, when the customer is able to wait the production lead time, or
- Via on demand inventory replenishment
In other words, store some minimal level of inventory and fabricate to replace periodically as used, minimizing unused, carried inventory. The inventory on demand concept could also be called "just in time manufacturing."
Benefits of Inventory on Demand
General Benefits
- Significant cost reductions for both manufacturers and their customers
- Dramatically reduces amount of inventory that must be produced and then stored for a long period
- Decreases forecasting risk, manufacturer can only build what is really needed
- Moves the manufacturing process back to the U.S., eliminating transoceanic shipping costs
- Eliminates expedited shipping costs
- Environmentally sound inventory management process
Benefits to manufacturers
- Decreases inventory carrying costs and warehousing costs
- Can provide more options to customers for replacement parts
- Long term loyalty from customers who can always get the parts they need, even for long-retired products
- Reduce end of life limitations for manufacturer’s oldest equipment/products
Benefits to Customers
- Decreases inventory carrying costs, warehousing costs
- Decreased inventory/asset property tax liability for stored parts build and store only this inventory
- Customers can always get the parts they need, even for long-retired products
- May extend equipment useful life, delay new equipment purchases
- Speed up access to rare parts
Who would use this service?
Fundamentally, those companies who want to retire expensive tool and die equipment and
do not want to carry substantial inventory but whose customers still need parts from time to time would benefit from inventory on demand. Also, any manufacturer who wants to stay connected with their customers over the very long term (think Mack firetrucks) without the huge upfront investment with uncertain on-going demand.
So what kinds of companies might be interested in this type of inventory on demand supply chain approach? Boeing and other aircraft manufacturers – Boeing currently uses 3D printing for 20,000+ parts on its planes. The IOD service could address their retiring fleet needs (post-production parts). Boeing is currently in the 3D printing business but that might easily be a business they would like to outsource at some point (to have someone else take on the large ongoing costs of keeping up with the steady changes in 3D printing technology).
Who else? Car manufacturers for aftermarket parts and retired models. Since the aftermarket parts business is lucrative for them, any IOD supplier would need to work closely with them to address the parts of the market they don’t want for cost or other reasons. For example, the IOD supplier would make parts available perhaps where the customer otherwise cannot get the parts as they have been discontinued or the tooling destroyed.
Consumer products companies who want to outsource low-volume but high value parts supply. One natural example would be all of the dials, handles and similar parts for old (even antique) but otherwise reliable radios, stoves and other appliances. The manufacturer could handle the transaction itself or direct the customer to the IOD supplier who handles all aspects of the customer transaction.
As noted, the Inventory on Demand (IOD) supplier can either supply the manufacturer's customers directly or where the manufacturer does not want to be disintermediated, the IOD supplier can simply replenish the manufacturer's inventory as needed. This allows the initial manufacturer to focus on their core business while still providing long term value to its customers.
It should be noted that in order to be successful, the winning inventory on demand approach will require the IOD supplier to convince a manufacturer on at least three key fronts:
Timing of the Inventory on Demand concept
I have spoken with a number of industry participants, including machine shop owners, 3D printers, manufacturers and folks who focus on the after market industry. While they generally see this idea coming, most wouldn't expect to see it take hold sooner than a decade from now. I would suggest that this is a concept that we will see much sooner. I base that assessment on the following:
The general consensus is that initially the manufacturing work will be covered 90-95% by CNC and other traditional manufacturing techniques but that over time as additive manufacturing capabilities continue to improve, the mix will begin to skew much more toward AM.
The competitive landscape
This new production paradigm will no doubt grow slowly at first. It may require some significant education as part of the sales process by IOD suppliers, but over time the demonstrated capability of such providers linked with the savings opportunities for outsourcing manufacturers will make this an indispensable part of the production cycle. There are a large and growing number of prototyping companies in the market today (e.g., 3D Systems' Quickparts, PRGprototyping, Copasetic Inc., Protocam, Xcentric Mold and Engineering, RPS, Rapid Prototypes, etc.). There are fewer multi-process custom manufacturing expert companies (such as ProtoLabs, Xometry, formerly Nextline Manufacturing, and Stratasys Direct Manufacturing, which came out of the merger of Solid Concepts Inc., Harvest Technologies, and RedEye.
The Competitive Landscape
Xometry, (formerly Nextline Manufacturing) of Gaithersburg, Maryland
Xometry is one of the early and enthusiastic entrants into this space, perhaps with an initial focus on DOD projects. They appear to have a good team assembled, are venture-backed and are training folks on the 3D printing part of low volume manufacturing. Xometry works in 40 materials and uses selective laser sintering (nylon), polyjet (various polymers) and direct metal laser sintering (DMLS) technology as well as CNC machines and wire electrical discharge machining (EDM) to perform custom fabrication services. Their website has new additions each time I visit (which is promising!) and they are now advertising a range of solutions such as rapid prototyping, volume production, mechanical assemblies, aftermarket parts, and screw machining.
Proto Labs
Proto labs claims hundreds of CNC machines as part of its impressive manufacturing facilities and uses injection molding (metal and plastic), stereolithography, DMLS, SLS, and liquid silicone rubber molding to fabricate from 1-10 through 10,000 part runs. It's site boasts that “Proto Labs is the world’s fastest source for custom prototype and low- to mid-volume parts. With our Fineline, and FirstcutProtomold services, our speed and versatility lets you take your parts from the very early stages of prototyping all the way up to short-run production of 10,000+ parts — all with one technology-driven, quick-turn company.”
Stratasys Direct Manufacturing
It is not clear to me at this point whether Stratasys is actually working toward addressing the inventory on demand customer need described in this post. This is what they say on their site: "Stratasys Direct Manufacturing is a division of Stratasys, a global leader in 3D printing platforms. Stratasys Direct Manufacturing was formed when three leading additive manufacturing service companies were combined: Solid Concepts Inc., Harvest Technologies, and RedEye. Together, we have nine cutting edge manufacturing facilities scattered throughout the United States. With 700 employees, an impressive arsenal of additive manufacturing equipment, custom formulated materials, and ISO 9001, AS9100, as well as ITAR certifications, we have the resources and expertise to provide the solutions designers and engineers need to manufacture their products better, faster, and more affordably." Stratasys is perhaps less explicit in their marketing to this opportunity. That said, they certainly have many of the elements of a successful inventory on demand company.
Finally, over the next several years, there are likely to be a number of entrants to this important market. I have set out many of the players in the space today. I expect them to move this concept along reasonably quickly and it appears that they have the machines, the technology, the manufacturing expertise and apparently now the funding interest to move this out of the concept stage and toward full implementation. I expect the field to grow with additional entrants, most likely starting out by finding and addressing a specific need in one or more niche industries. I am interested in hearing what my readers think about the challenges and opportunity in this space.
Additional ideas for those who are really interested in this space:
Recipe for new entrants/Assembling the Pieces
Here is what initial entrants to the Inventory on Demand approach to the market will need to do. As I noted above, there are already a few companies in the space who are doing some of this early work.
So what kinds of companies might be interested in this type of inventory on demand supply chain approach? Boeing and other aircraft manufacturers – Boeing currently uses 3D printing for 20,000+ parts on its planes. The IOD service could address their retiring fleet needs (post-production parts). Boeing is currently in the 3D printing business but that might easily be a business they would like to outsource at some point (to have someone else take on the large ongoing costs of keeping up with the steady changes in 3D printing technology).
Who else? Car manufacturers for aftermarket parts and retired models. Since the aftermarket parts business is lucrative for them, any IOD supplier would need to work closely with them to address the parts of the market they don’t want for cost or other reasons. For example, the IOD supplier would make parts available perhaps where the customer otherwise cannot get the parts as they have been discontinued or the tooling destroyed.
Consumer products companies who want to outsource low-volume but high value parts supply. One natural example would be all of the dials, handles and similar parts for old (even antique) but otherwise reliable radios, stoves and other appliances. The manufacturer could handle the transaction itself or direct the customer to the IOD supplier who handles all aspects of the customer transaction.
As noted, the Inventory on Demand (IOD) supplier can either supply the manufacturer's customers directly or where the manufacturer does not want to be disintermediated, the IOD supplier can simply replenish the manufacturer's inventory as needed. This allows the initial manufacturer to focus on their core business while still providing long term value to its customers.
It should be noted that in order to be successful, the winning inventory on demand approach will require the IOD supplier to convince a manufacturer on at least three key fronts:
- It can timely supply parts that meet the manufacturer's specifications;
- It can do so at a competitive rate (but that rate may be higher than current mass production in light of cost savings associated with storage, property tax and forecasting risk); and
- The IOD supplier has the financial and long term prospects to be here to provide for the long term needs of the manufacturer's customers.
Timing of the Inventory on Demand concept
I have spoken with a number of industry participants, including machine shop owners, 3D printers, manufacturers and folks who focus on the after market industry. While they generally see this idea coming, most wouldn't expect to see it take hold sooner than a decade from now. I would suggest that this is a concept that we will see much sooner. I base that assessment on the following:
- There are at least three companies today who more or less explicitly have set themselves up to be early providers.
- There are a large number of machine shops available at attractive pricing, many of which are coming to realize that a combination of AM and traditional manufacturing techniques will be necessary to stay in business.
- The rate of innovation in metal 3D printing is rapidly accelerating which will allow a much broader range of products to be manufactured.
- The increase in prototyping work for example in the automobile racing world, is demonstrating the ability of custom machine shops (sometimes even using 3D printing as a part of the production process) to produce parts that have fit, function and finish that meets stringent customer requirements.
The general consensus is that initially the manufacturing work will be covered 90-95% by CNC and other traditional manufacturing techniques but that over time as additive manufacturing capabilities continue to improve, the mix will begin to skew much more toward AM.
The competitive landscape
This new production paradigm will no doubt grow slowly at first. It may require some significant education as part of the sales process by IOD suppliers, but over time the demonstrated capability of such providers linked with the savings opportunities for outsourcing manufacturers will make this an indispensable part of the production cycle. There are a large and growing number of prototyping companies in the market today (e.g., 3D Systems' Quickparts, PRGprototyping, Copasetic Inc., Protocam, Xcentric Mold and Engineering, RPS, Rapid Prototypes, etc.). There are fewer multi-process custom manufacturing expert companies (such as ProtoLabs, Xometry, formerly Nextline Manufacturing, and Stratasys Direct Manufacturing, which came out of the merger of Solid Concepts Inc., Harvest Technologies, and RedEye.
The Competitive Landscape
Xometry, (formerly Nextline Manufacturing) of Gaithersburg, Maryland
Xometry is one of the early and enthusiastic entrants into this space, perhaps with an initial focus on DOD projects. They appear to have a good team assembled, are venture-backed and are training folks on the 3D printing part of low volume manufacturing. Xometry works in 40 materials and uses selective laser sintering (nylon), polyjet (various polymers) and direct metal laser sintering (DMLS) technology as well as CNC machines and wire electrical discharge machining (EDM) to perform custom fabrication services. Their website has new additions each time I visit (which is promising!) and they are now advertising a range of solutions such as rapid prototyping, volume production, mechanical assemblies, aftermarket parts, and screw machining.
Proto Labs
Proto labs claims hundreds of CNC machines as part of its impressive manufacturing facilities and uses injection molding (metal and plastic), stereolithography, DMLS, SLS, and liquid silicone rubber molding to fabricate from 1-10 through 10,000 part runs. It's site boasts that “Proto Labs is the world’s fastest source for custom prototype and low- to mid-volume parts. With our Fineline, and FirstcutProtomold services, our speed and versatility lets you take your parts from the very early stages of prototyping all the way up to short-run production of 10,000+ parts — all with one technology-driven, quick-turn company.”
Stratasys Direct Manufacturing
It is not clear to me at this point whether Stratasys is actually working toward addressing the inventory on demand customer need described in this post. This is what they say on their site: "Stratasys Direct Manufacturing is a division of Stratasys, a global leader in 3D printing platforms. Stratasys Direct Manufacturing was formed when three leading additive manufacturing service companies were combined: Solid Concepts Inc., Harvest Technologies, and RedEye. Together, we have nine cutting edge manufacturing facilities scattered throughout the United States. With 700 employees, an impressive arsenal of additive manufacturing equipment, custom formulated materials, and ISO 9001, AS9100, as well as ITAR certifications, we have the resources and expertise to provide the solutions designers and engineers need to manufacture their products better, faster, and more affordably." Stratasys is perhaps less explicit in their marketing to this opportunity. That said, they certainly have many of the elements of a successful inventory on demand company.
Finally, over the next several years, there are likely to be a number of entrants to this important market. I have set out many of the players in the space today. I expect them to move this concept along reasonably quickly and it appears that they have the machines, the technology, the manufacturing expertise and apparently now the funding interest to move this out of the concept stage and toward full implementation. I expect the field to grow with additional entrants, most likely starting out by finding and addressing a specific need in one or more niche industries. I am interested in hearing what my readers think about the challenges and opportunity in this space.
Additional ideas for those who are really interested in this space:
Recipe for new entrants/Assembling the Pieces
Here is what initial entrants to the Inventory on Demand approach to the market will need to do. As I noted above, there are already a few companies in the space who are doing some of this early work.
- Need a machine shop capable of precision, high quality custom fabrication
- Identify initial minimum required CNC machines, lathes, presses, etc.
- Identify initial key 3D printing metal (and other materials) machine(s)
- Will need to conduct an initial and on-going analysis of buy vs. outsource/partner for the most expensive equipment
- The types of machines will likely depend on types of targeted customers and industries
- Consider partnering with a company with complementary manufacturing capabilities and/or acquire a smaller service bureau to target a new industry
- Identify other key custom manufacturing machines (such as injection molding machines, etc.)
- Need significant custom-fabrication expertise
- Identify the key skills sets, machine operators and technicians to develop a team of high quality craftsmen with an understanding of traditional manufacturing processes and the business requirement for this new blended approach
- Need scanning, metrology, and quality inspection capabilities and expertise to meet customer quality requirements. Certain customers may require that their parts be scanned or reverse engineered and CAD/CAM drawings be produced from existing parts, particularly where drawings no longer/never existed. Part of quality assurance process may require scanning, metrology or other similar tools
- Develop an intake, production and distribution process flow for the part manufacturing process
- Define methodology for taking in customer drawings, technical specs and requirements for price quotes
- Develop and standardize a method of digital archiving to support storage and on-demand fabrication
- Define the part production process in terms of timing, coordination of efforts within the shop, machine prioritization/scheduling
- Define the quality inspection process
- Define the customer communication, shipping and feedback/follow-up processes
- Develop a customer acquisition strategy
- Develop a working description of what types of parts work best in this concept (e.g.,– single material, color not important, hard to reproduce without original molds, etc.)
- Identify target industry(ies) and companies who currently use additive manufacturing (AM) for production and approach them to handle “post-production” or low-volume inventory requirements
- Identify manufacturers with very long-term, (i.e., often sits on shelf for 10+ years), high value, expensive to store equipment