The revolution brewing in electronics is unprecedented -- even for an industry that is used to being upended. The rules that defined a century of innovation, design, and production are about to be rewritten. And modern manufacturing will be swept away.
Few companies grasp the coming upheaval. Perhaps because 3D printing, an innovation that can come across as a curiosity, is propelling this disruption. Yet, these printers, which churn out objects by laying thin layer after thin layer of metal, plastics or other materials on top of each other, won't tip the scale alone.
It's their collision with two other disruptive technologies -- intelligent robotics and open source electronics -- that will bring an end to the era of big and complex global supply chains. Together, they're going to usher in the digitalization of manufacturing, by creating flexible, fast, local supply chains underpinned by software.
The IBM Institute of Business Value recently conducted an in-depth, quantitative research that shows just how dramatically this new approach will drive down production costs, reduce barriers to entering a market, and shift global trade flows over the next decade. The study, The New Software-Defined Supply Chain found that:
- Within 10 years, the cost of churning out products using these new technologies will be 23 percent cheaper than today's traditional manufacturing approach. For example, by 2022, making hearing aids by using 3D printers and open source electronics would cost 65 percent as compared with current prices.
- The minimum volume of production needed to enter a market will drop by 90 percent. Which means that existing manufacturers could face a flood of new competitors setting up in small niche markets.
- The design cycle will speed up dramatically. Companies will use open source electronics to iterate and experiment more quickly with prototypes and 3D printing. They will then decide on the appropriate design, bypassing the need to build standardized parts, create dedicated molds, or design every piece in house.
- 3D printing and robotic assembly will upend far-flung manufacturing operations, undercutting the need for large supplier networks and extended supply chains. By 2022, the ideal manufacturing location will be local or regional.
The challenge is that manufacturing leaders aren't ready for the disruption they face. Some 70 percent of the supply chain leaders we talked to admitted that they had little or no preparation for this new software driven supply chain. The picture is bleaker when it came to their plans for the rest of the decade, which included more of the same old manufacturing investments.
If leading companies hope to stay on top in this new era, they'll need to embrace radical change and master new skills.
Because customers now dictate product design and retailing, companies will need to adjust their offerings more quickly and learn to do runs of smaller, more personalized batches of products. Rapid production will alter the competitive landscape, which means companies will have to re-evaluate the optimal scale of production and reconsider whether they should have a stronger local presence. Supply chains will become simpler, more flexible and localized so organizations will need to reassess where their competitive advantage lies, whether tech innovation or close ties with customers.
What does this future look like in practical terms? Consider where one consumer goods company that churns out products in the millions of units is headed. By aggressively adopting robotics, the company slashed European manufacturing costs to levels approaching China's. Now, the business is prepping for an era when it will produce thousands of units of a product instead of millions, and how it will need to restructure its supply chain, product design and distribution.
The traditional manufacturing system has a powerful grip because it was successful. But it was tailored to a different time, one of mass markets, top-down design, and supply chains built on low-cost labor. Three innovations -- 3D printing, robotics, and open source electronics -- are breaking that mold of manufacturing. They're ushering in a new era based on customization, on demand manufacturing, and regional, even local manufacturing. It's a revolution in the making.
Check out the video below to see how IBM used 3D printing to manufacture data-driven souvenirs at Wimbledon last summer: