4 Ways Distributed Manufacturing Will Upend Your Business

Thomas Ohnemus

Distributed manufacturing will overturn business models for many companies that make products – and even for many that do not. It’s no wonder the approach was identified as a top-10 emerging “technology” by the World Economic Forum.

Traditional manufacturing brings together raw materials or components and assembles them in a large, centralized factory. The output is many identical products that are then shipped to distribution points.

Distributed manufacturing turns this model around. Raw materials and components remain decentralized. Final assembly occurs on a much more individualized basis, close to the customer, with products often shipped direct to the end consumer.

As the World Economic Forum points out, with distributed manufacturing much of the material in the supply chain is replaced with digital information. So a company like AtFAB, a U.S. maker of wood furniture, replaces the aggregation of wood materials in a single factory with the distribution of computerized numerical control (CNC) files to localized manufacturing sites.

But distributed manufacturing isn’t just an alternative way of making things. It involves a complete rethinking of what it means to be a manufacturer. And it has implications for other stakeholders in the supply chain, from suppliers to logistics service providers. In the next few years, look for these four transformations:

  1. 3D printing – The most obvious changes to come from distributed manufacturing involve production processes. And 3D printing will be integral to the new way of making things. While additive manufacturing may seem limited by the materials that can leverage the technology, innovative companies have developed a surprising number of applications. From footwear to foods, from aerospace parts to car chassis, from medical devices to tissues and organs, 3D printing is revolutionizing the way products are built.
  1. Supply chain – Up and down the supply chain, your partners and the roles they play will change substantially. First, you’ll source raw materials differently, or maybe not at all. Instead of aggregating materials at a central location, you’ll have them shipped to distributed locations. Or, you’ll provide digitized instructions to your downstream manufacturing partners, and they’ll do the sourcing themselves. Second, shipping will move closer to the customer. That has implications for you, but also for your logistics partners. Major shippers like UPS, FedEx, and DHL already operate logistics centers for large manufacturers. Instead of stocking physical products in these facilities, they’ll increasingly “store” inventory virtually and manufacture it on demand. In fact, their business may become less about shipping products and more about making them.
  1. Customer relationships – Distributed manufacturing requires a very different approach to how you develop and maintain relationships with customers. You’re no longer flooding the market with large quantities of a mass-produced product. Instead, you’re producing for something closer and closer to a market of one. And as you and your competitors achieve faster, better customization, you’ll raise the bar on customer expectations. As a consequence, you’ll need to capture and respond to customer desires more specifically than you have in the past. You’ll also need to interact with customers through a growing range of downstream partners – the localized manufacturers and logistics providers that are your direct link to the end consumer.
  1. Workforce – Workers will no longer be centralized in large facilities. Instead, they’ll operate at smaller, distributed sites. They’ll rely increasingly on electronic files and mobile apps. And they’ll require entirely new skill sets. That means recruiting, training and retaining a very different workforce. In the oil and gas industry, for instance, techniques similar to 3D printing are transforming the maintenance of drilling equipment. “[Workers] don’t have to have experience working with metal,” Doug Hamre, head of R&D for Apollo-Clad, told a reporter. “They need to be comfortable running a computer.”

Distributed manufacturing won’t be without its challenges. For one thing, not every product can be produced in a distributed model – which means you may need to adopt new approaches while maintaining old ones. And in the short term, you may struggle to manage distributed processes and partners.

But the advantages are substantial: less wasted manufacturing capacity, reduced transportation costs and environmental impact, lower barriers to entry into new markets, and the ability to get closer to customers. There are too many potential benefits for your competitors not to move forward with distributed manufacturing. That probably means you’ll have to move forward, too.

For more real-time supply chain strategies, read the research report by SAP “Digitizing the Extended Supply Chain: How to Survive and Thrive in Today’s Digital Economy” on real-time optimization of business processes.

Thomas Ohnemus

About Thomas Ohnemus

Thomas Ohnemus is the Vice President, Solution Marketing, Customer Value Office, at SAP. He is responsible for driving the go-to-market strategy, messaging, and demand generation. Thomas has over 25 years’ experience in business software solutions and his PLM expertise has awarded him key management positions in consulting, product management, service, and global marketing. He holds a master’s degree in engineering, and lives in Germany.