General Business Consultants, Inc. www.GenBusCon.com
MAKING "SYSTEMS"-USE and OPERATIONS MORE-PROFITABLE
For Distributors, WHOLESALERS, Manufacturers
PREPARE TO STOCK NON-STOCK PRODUCTS
Manufacturers’ stocking programs, which are a lot smaller than they used to be, could shrink even more as a result of a revolutionary new technology. If stocking programs shrink a lot, some distributors may want to stock some products that are not now stocked; yet other non-stock products could be received sooner. The new technology is termed "3-D printing", and it involves using a printer to cost-effectively manufacture small quantities of products. Some manufacturers that now have stocking programs could eventually stop producing some products for stocking, and instead print them only when one or more orders are received from distributors. But those products may not be printed as soon as orders are received, so lead times could increase, in which case distributors might have to stock some products rather than risk losing sales because of long lead times.
On the other hand, products that are not now in a manufacturer’s stocking program might be obtained sooner, because manufacturers who use 3-D printing could make the products sooner than at present. And, 3-D printing offers distributors the possibility of ordering products that are not made now because they are variations of standard products, and manufacturers simply won’t make the variations; not enough demand/volume.
Before looking closer at 3-D printing, lets take a look at the history of stocking programs and current manufacturing practices for products that manufacturers do not stock. Before the adoption of Just-In-Time (JIT) manufacturing principles, most manufacturers manufactured many of their products in advance of distributor orders, and stocked those products. JIT principles, best known for eliminating raw material inventories and work in process, also include ways to cost-effectively manufacture products in small quantities. Some manufacturers who adopted JIT for production, stopped producing slow moving products in advance of orders; they made them only when needed to fill orders. Their stocking programs shrank.
These days, the process for making a non-stocking product starts when purchase orders for them are sent by distributors to a manufacturer, and the data for those orders is
entered (or transmitted) into the manufacturer’s Manufacturing Resources Planning (MRP) system. Based upon the manufacturer’s policy about when to ship a particular non-stocking product to fill purchase orders, the MRP system determines when machines and material would be needed to start production. (Products made for a stocking program almost always have higher priority than non-stocking ones, but production planners can override the priority). The MRP system orders any needed materials, and when the availability dates of all needed materials becomes known, it schedules the set up of needed machines and the start of production. Actual production and shipment occurs quickly.
There are several reasons why production of a non-stocking product does not start immediately upon receipt of the first PO for it at manufacturers who do not utilize JIT production techniques. Production equipment, which is expensive to purchase, is designed for volume production, because it takes time and expensive labor to set up a machine, even in a JIT environment. The larger the volume the lower the unit cost (including a portion of the cost of equipment). Manufacturers wait for the volume. And manufacturers who do utilize JIT manufacturing would not necessarily stock the needed raw materials, so it could take a while to get them. Furthermore, no manufacturer, using JIT or not, changes its production schedule in a knee-jerk response to incoming POs for different products, stock or non-stocking. Production schedules often cover a multi-week period, so as POs arrive for unscheduled products, the backlog must reach a certain level before production of it is scheduled.
A 3-D printer makes a part or product by printing multiple, very thin layers on top of each other. The "toner" for a 3-D printer is either pellets of plastic or powdered metal. (The part or product must be heated so the pellets or power fuse into a solid object). A printer uses a CAD (Computer Aided Design) file as its input, and the file determines the dimensions of each layer, so a product can have tapered and or curved surfaces, and be made with openings (such as for fasteners or wire). An illustration of the ability to print intricate, close tolerance parts from metal is GE’s announcement that it will use 3-D printing to make fuel nozzles for jet engines. A controversial illustration of the ability to
cheaply print a part at home was the publicity surrounding the printing, by an amateur, of a pistol frame and grip (although the receiver and barrel are machined metal). 3-D printing can also be used to make jigs and fixtures.
Actual production ("contact") time is longer than with traditional production processes (e.g., extruding or stamping plastic or metal), but there is no set up time, so the overall time for a single unit can be only a few minutes. Think of it as production on demand. Printers can cost $500 to $5000 or more, which is nothing compared to stamping and extrusion presses. Many 3-D printers can be purchased for the price of one press, so by using multiple printers (all driven by the same CAD file), a manufacturer can produce several units in a few minutes. Plastic pellets are relatively inexpensive, but powered metal is more expensive than pieces of metal from which parts are stamped. But the overall cost of printing metal parts is much less than that of heating metal and extruding it through a die (to form the shape).
3-D printing is much more flexible than stamping or extruding. Changing a CAD file to reflect a design change takes only a few minutes, so production of a revised design can start within minutes of the design revision. For stamping or extruding, a new die-set or extrusion die must be made in-house or ordered out, and its manufacture could cost thousands of dollars, and take weeks. This flexibility means that distributors could order products that are not made now because they are "off spec" – not standard products. Another advantage of 3-D printing’s flexibility is that a manufacturer can slip small quantity runs into the production schedule, because there is no set up time; assuming the "toner" is available.
Right now, 3-D printing is being used much more often for making small prototypes than small production pieces, because of the cost of 3-D printers and the embryonic nature of the overall process. But as with any new technology, over time the cost of equipment will decrease, and movement along the learning curve will result in a more cost-effective process and the ability to print larger and more complex shapes. A study by IBM concluded that within 10 years 3-D printing will evolve to the point where it will cost 23% less to make a product, and that that cost-reduction would be achieved with production runs of only 10% of the size of current runs. Which implies that 3-D
printing could be used to cost-effectively make customer-specific, low-volume parts – such as parts that are now produced for stocking programs, but won’t be.
One concern about 3-D printed parts and products is whether they will be reliable in real world extreme conditions, such as weather, the heat of machinery and electrical current, and when used as moving parts.
3-D printing has the potential to bring the manufacture of some products back to the USA, because little labor would be needed, nor would expensive production equipment (which is often made abroad).
As a side note, distributors who feel threatened by Amazon Supply and Google Shopping for Suppliers could buy a CAD system and a few 3-D printers and print products – subject to patent rights and other legal constraints.
To Stock or Not To Stock Non-Stock
Try saying that fast. Even when 3-D printing is used for manufacturing products and parts, involved manufacturers will not necessarily stop producing for their stocking programs. They may simply use 3-D for cheaper, flexible, custom production. Keep looking for more information about the advancement of 3-D printing, especially information about manufacturers’ use of it.
For more than 30 years, Dick Friedman, the author, has helped distributors manage inventory more profitably, prevent costly warehouse mistakes while reducing warehouse costs, and acquire information and warehouse technology. He does Not sell any technology or systems, and is a Certified Management Consultant so he isobjective and unbiased. Dick has Bachelor of Engineering and MBA degrees, and can be reached at 847 256-1410 for a FREE consultation. Or visit www.GenBusCon.com for more information or to send e-mail.