3-D printing has been around for decades but is now poised to disrupt the future of manufacturing. Also known as “additive manufacturing,” 3-D printing refers to the process of creating an object from data sources by layering materials according to programmed commands. With two of the world’s largest industrial giants, GE and Siemens, now incorporating additive manufacturing into their mass production operations, we could be approaching a technological tipping point.
To understand the stakes, consider how 3-D printing could reshape Southeast Asia. The Association of Southeast Asian Nations (ASEAN), home to 600 million people, is the third largest labor force in the world and, as of 2016, the seventh largest economy. ASEAN is planning to achieve economic success through cross-border cooperation and the good old wisdom of economic theories that bank on manufacturing as a means to prop up huge low-skill populations and provide them with a better future.
A key pillar of this strategy is the ASEAN Economic Community (AEC). Launched in 2015, the AEC aspires to establish a single production base. It encourages complementation across the region based on the competitive advantages of each ASEAN country, à la Adam Smith’s division of labor theory. In the coming years, 3-D printing could test that fundamental premise.
At the center of this potential disruption is a looming challenge to existing production methods. Based on our current understanding of the manufacturing sector, segmentation for discrete products can be classified by the level of skill and degree of customization required for the production process, as illustrated in the 2x2 matrix below:
In essence, this implies that products requiring a higher degree of customization demand a higher level of skill. Products in this segment, such as supercomputers, are also known as tailor-made products. Due to their special and unique specifications, they are classified under the high-mix and low-volume category. As a result, the price for products in this segment is higher and enjoys a premium in profit margin.
Conversely, products that fall under the low degree of customization and low-skill level quadrant, like cups or glasses frames, are known as mass produced. Products created through mass production are generally categorized as low-mix and high-volume. Therefore, mass produced products are normally priced without a premium for competitive reasons.
3-D printing is unique in its ability to create objects of almost any shape or geometry, produced from digital model data or another electronic data source. For this reason, 3-D printing seems to fit neatly into the high-mix and low-volume combination. In that sense, 3-D printing could potentially remove or displace the production process in the tailor-made quadrant. Over time, the mass production quadrant could also be displaced by 3-D printing.
As 3-D printing adoption expands, manufacturers could significantly reduce today’s production chains. What requires a series of production stages today could be cut down to a designer at one end, and the printer or “manufacturer” at the other. The middle players would most likely become suppliers of raw materials or “ink.” These changes could enable consumers to receive the products directly from the manufacturer.
This could transform the global supply chain from economies of scale to an economy of one, two or few. On one hand, high-mix-low-volume production is under siege by the existing 3-D technology. On the other hand, it is only a matter of time before the mass production segment (low-mix and high-volume) will be disrupted due to the investment decisions made by today’s companies.
Ultimately, 3-D printing has the potential to disrupt the division of labor in today’s manufacturing sector, putting great stress on regional and global economic arrangements. Against this backdrop, ASEAN and other economic organizations would be wise to identify areas for growth and employment outside of the manufacturing sector and diversify their economies.
Dr. Christopher Hang-Kwang Lim is a Senior Fellow at Nanyang Technological University in Singapore.