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Supply Chain Management: An International Journal Digital manufacturing-driven transformations of service supply chains
Supply Chain Management: An International Journal Digital manufacturing-driven transformations of service supply chains

Supply Chain Management: An International Journal

Digital manufacturing-driven transformations of service supply chains for complex products Jan Holmström Jouni Partanen

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Research note

Digital manufacturing-driven transformations of service supply chains for complex products

Jan Holmström

Department of Industrial Engineering and Management, Aalto University, Aalto, Finland, and

Jouni Partanen

Department of Mechanical Engineering, Aalto University, Aalto, Finland

Abstract Purpose – The purpose of this paper is to explore the forms that combinations of digital manufacturing, logistics and equipment use are likely to take and how these novel combinations may affect the relationship among logistics service providers (LSPs), users and manufacturers of equipment. Design/methodology/approach – Brian Arthur’s theory of combinatorial technological evolution is applied to examine possible digital manufacturing-driven transformations. The F-18 Super Hornet is used as an illustrative example of a service supply chain for a complex product. Findings – The introduction of digital manufacturing will likely result in hybrid solutions, combining conventional logistics, digital manufacturing and user operations. Direct benefits can be identified in the forms of life cycle extension and the increased availability of parts in challenging locations. Furthermore, there are also opportunities for both equipment manufacturers and LSPs to adopt new roles, thereby supporting the efficient and sustainable use of digital manufacturing. Research limitations/implications – The phenomenon of digital manufacturing-driven transformations of service supply chains for complex product does not yet fully exist in the real world, and its study requires cross-disciplinary collaboration. Thus, the implication for research is to use a design science approach for early-stage explorative research on the form and function of novel combinations. Practical implications – Digital manufacturing as a general-purpose technology gives LSPs an opportunity to consolidate demand from initial users and incrementally deploy capacity closer to new users. Reengineering the products that a manufacture currently uses is needed to increase the utilization of digital manufacturing. Originality/value – The authors outline a typology of digital manufacturing-driven transformations and identify propositions to be explored in further research and practice.

Keywords Information technology, Innovation, Manufacturing, Logistics

Paper type Research note

1. Introduction

Digital manufacturing technologies allow for the automatic production of objects from CAD design files without shape-defining tooling. Three-dimensional printing (or additive manufacturing) is the best-known digital manufacturing technology and has been adopted for a number of different purposes. Recent attention-grabbing applications include the distributed production of a simple gun (Greenberg, 2013) and the manufacture of a complete car body (Quick, 2010). More importantly, major industrial corporations have established dedicated research centers to support the innovation and widespread adoption of solutions based on such digital manufacturing technologies (GE, 2011).

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journal is available at www.emeraldinsight.com/1359-8546.htm Supply Chain Management: An International Journal 19/4 (2014

Supply Chain Management: An International Journal 19/4 (2014) 421–430 © Emerald Group Publishing Limited [ISSN 1359-8546] [DOI 10.1108/SCM-10-2013-0387]

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Much enthusiasm has been expressed over these developments, which have even been referred to as an “industrial revolution” (Economist, 2012; Anderson, 2012; de Jong and de Bruijn, 2013). The implications for logistics and supply chain management (SCM) are likely significant, but little attention has been devoted to the emerging issues in logistics research and practice thus far (Christopher and Holweg, 2011). From the logistics and SCM perspective, these developments have important implications for theory and practice that require new research (Tuck et al. , 2007). Digital manufacturing can be integrated into complex products, such as navy ships and isolated research stations (Peres and Noyes, 2006; NASA, 2013), which indicates a digital manufacturing-driven transformation of the role of logistics in particular problem contexts. The likely impact of digital manufacturing is not the substitution of physical distribution

Received 24 October 2013 Revised 8 November 2013

2 February 2014

3 March 2014

Accepted 4 March 2014

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Digital manufacturing-driven transformation

Jan Holmström and Jouni Partanen

and logistics but the innovative combination of digital manufacturing and conventional logistics (Holmström et al., 2010a), resulting in new types of service operations that are focused on value-in-use (Lusch et al. , 2010). We define these potentially innovative combinations as digital manufacturing- driven transformations of SCM. The concept of technology-driven transformations of SCM builds on Arthur’s (2000) theory of technological evolution through combination. We use Arthur’s evolutionary- technological theory because we are interested in how the design of solutions is transformed by the introduction of digital manufacturing. Thus, the focus is not the diffusion (Rogers, 1995) of digital manufacturing as an innovation in the supply chain, but it is instead the innovative forms that a combination of supply chain and digital manufacturing can take. Arthur defines innovation in terms of novel combinations of technologies. From the theoretical perspective adopted by Arthur, technologies include any solution and practice developed to fulfill specific human purposes, including logistics and SCM solutions and practices. By theorizing the technological aspect of SCM, Arthur’s (2000) evolutionary-technological theory complements the more commonly acknowledged economic and socio-economic perspectives in SCM research ( Halldorsson et al., 2007). Electronic retailing of physical goods is an ongoing example of a technology-driven transformation in the supply chain that has resulted in novel combinations of Internet technology and supply chain and logistics best practices (Kärkkäinen and Holmström, 2002). The transformation is driven by the introduction of the Internet for marketing and sales but relies on state-of-the-art sourcing, inventory management, warehouse management and last-mile distribution for profitability and cost advantages over brick-and-mortar retailing (Keil et al., 2001). As a new technology, digital manufacturing similarly offers opportunities for innovation through novel combinations with established logistics and SCM solutions. In service supply chains, the introduction of digital manufacturing is potentially transformative because it is a general-purpose technology for producing physical objects according to digital models for which the production cost is not determined by lot size (Christopher and Holweg, 2011). However, the transformations are also challenging. There are still technical obstacles to overcome, such as high cost and slow manufacturing speed (Wohlers, 2012), and the specific service supply chain contexts in which sufficient direct benefits can be attained to warrant initial investments (Hanseth and Lyytinen, 2010) remain to be discovered. For complex and high-value equipment, in this research note, we explore the forms that combinations of digital manufacturing, logistics and equipment use are likely to take and how these novel combinations may affect the relationship among logistics service providers (LSPs), users and manufacturers. A typology of the transformations driven by the introduction of digital manufacturing in the service supply chain is introduced. We highlight the opportunity for LSPs to adopt a new role in service supply chains through the innovative combination of generic digital manufacturing and conventional logistics services. We illustrate the concept of

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digital manufacturing-driven transformations for complex equipment in the service supply chain of the F-18 Super Hornet, one of the first examples of a product that has incorporated digital manufacturing technology for the production of a subsystem. To conclude, we highlight the contribution of our theoretical analysis to SCM research and the implications for SCM practice.

2. Combinatorial typology of digital manufacturing-driven transformations

The introduction of digital manufacturing is by no means the first technology to contribute to a transformation of logistics and SCM (Gligor and Holcomb, 2012). The Internet is a technology driving the transformation of retailing (Keil et al., 2001; Fernie et al., 2010; Williams, 2009) and is thus an example of a technology-driven supply chain transformation that is ongoing. Examples from the past can also be found. Electric motors were a technological driver of mechanization and mass production (David, 1990), and the use of computers for enterprise resource planning is a technological driver of increasingly capable global manufacturing networks

( Gunasekaran and Ngai, 2004). Table I summarizes the technological drivers, combinatorial innovations of new technology and supply chain solutions and resulting supply chain transformations of past and present technology-driven transformations. The current service supply chain for complex equipment combines equipment manufacturing, logistics and equipment use (Cohen et al., 2006). The introduction of digital manufacturing in this setting has the potential to transform the service supply chain through a number of transformative processes in which novel manufacturing technologies are combined with supply chain solutions to produce novel outcomes. A combinatorial typology of transformative processes integrating digital manufacturing, logistics and equipment use is developed in this study. The typology is structured to facilitate critical realist evaluation (Denyer et al., 2008; Henfridsson and Bystad, 2013), specifying the problem in context, the transformation and the outcomes. The problem in context is the introduction of digital manufacturing in the service supply chain of complex equipment, which leads to potentially novel combinations of technology and supply chain solutions. First-order transformation processes result from the combination of digital manufacturing and logistics and digital manufacturing and equipment use. Second-order transformations result from a further combination of transformed logistics and equipment use (Figure 1). The outcomes of the transformations are presented as testable propositions to be addressed by further research. The transformations and their proposed outcomes are introduced in the next two sections, which elaborate on both the first-order transformations of combining digital manufacturing with logistics and the use of complex equipment and the second-order transformations resulting from the further combination of logistics and the equipment in use. Testable propositions on the outcome of the transformation processes are summarized in Table II in the results chapter.

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Digital manufacturing-driven transformation

Jan Holmström and Jouni Partanen

Supply Chain Management: An International Journal

Volume 19 · Number 4 · 2014 · 421–430

Table I Past and present technology-driven transformations of supply chain management and logistics

Technological driver

Combinatorial innovation

Resulting supply chain transformation

Mechanization

Assembly and packaging lines combine mechanized material flows, standardized parts and manual assembly and inspection tasks (David, 1990)

Mass production reduces the role of local producers and increases the role of mass- marketing and distribution logistics, leading to a new combination of logistics and marketing. This new combination is supply chain management (Alvarado and Kotzab, 2001) Actors in the global manufacturing networks adopt specialized roles aligned with the product characteristics and distance to markets, thus reducing the total costs and increasing responsiveness (Gunasekaran and Ngai, 2004) Electronic retailing reduces the role of physical retail stores and distribution logistics, while increasing the importance of last mile distribution and supplier collaboration (Keil et al., 2001; Williams, 2009; Fernie et al., 2010) To be outlined in this paper

Computerization

Global supply networks combine mass production, efficient global logistics and responsive resource planning (Simchi-Levi et al., 1999)

Internet

Web-based marketing and sales combine with state-of- the-art logistics and supply chain management (Kärkkäinen and Holmström, 2002; Garcıa-Dastugue and Lambert, 2003)

Digital manufacturing

Only early research published (Tuck et al., 2007; Holmström et al., 2010a)

2.1 First-order digital manufacturing-driven transformations Next, we analyze the first-order combinatorial transformations of digital manufacturing and logistics and digital manufacturing and the equipment in use.

2.1.1 Digital manufacturing logistics: transformation through manufacturing postponement and technology deployment The development of digital manufacturing technology increasingly facilitates the economic manufacture of products in smaller batches and in relatively smaller facilities (Christopher and Holweg, 2011), thus allowing for manufacturing postponement and locating manufacturing closer to the points of use. Thus, we propose that the combination of manufacturing and logistics transforms the service supply chain through manufacturing postponement ( Pagh and Cooper, 1998; Yang et al., 2004) and the distributed deployment of digital manufacturing capacity ( Holmström et al., 2010a). With digital manufacturing, a parts supplier can postpone manufacturing to the assembly lines of an original equipment

Figure 1 Typology of digital manufacturing-driven transformations for service supply chains of complex equipment Digital
Figure 1 Typology of digital manufacturing-driven transformations for
service supply chains of complex equipment
Digital
Manufacturing
First-order combinatorial
transforma ons
Equipment
Logis cs
in
use
Second-order combinatorial
transforma ons

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manufacturer (OEM), and an OEM can locate the manufacture of spare parts close to service units and equipment users. Different parts can be produced in parallel

as long as there is sufficient space in the build envelope of the machine. A complete assembly can be built simultaneously on

a single machine, and the cost of production can be split

among multiple parts of the build envelope (Ruffo et al., 2007). The implication is that many suppliers can postpone and combine manufacturing to later stages of the delivery processes rather than perform these stages separately on the premises of different suppliers; such a combination would lead to simpler and shorter supply chains (Anderson, 2012, p. 137). Logistics costs, inventory holding, stock outs and material handling can be reduced by scheduling parts manufacturing when required (Ruffo et al., 2007). The likely outcome of such manufacturing postponement is a reduction in inventory throughout the supply chain and the simultaneous reduction of both obsolescence and part shortages. Such desirable outcomes are likely to encourage manufacturing postponement, especially for rare spare parts that are characterized by a high risk of obsolescence and high shortage costs. The critical transformation for the successful introduction of digital manufacturing in logistics is not manufacturing postponement but the deployment of digital manufacturing capacity in the supply chain. In a service supply chain, it is likely that initially only a small number of parts can be digitally manufactured because products have been designed for conventional manufacturing. The utilization of digital manufacturing capacity for parts production will therefore be low, which indicates that another potentially significant transformation process exists in addition to manufacturing postponement. The introduction of digital manufacturing in service SCM and successful manufacturing postponement hinges on capacity deployment and the reengineering of products for digital manufacturing (Holmström et al., 2010a), i.e. aligning product design with the supply chain (Khan et al.,

2012).

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Digital manufacturing-driven transformation

Jan Holmström and Jouni Partanen

Supply Chain Management: An International Journal

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Table II Testable propositions of digital manufacturing-driven transformations in complex equipment service supply chains

Combination

Transformation

Testable propositions on outcomes

Research approach

First-order combination

Digital manufacturing logistics

Manufacturing postponement

Digital manufacturing in combination

Single-domain logistics

(Pagh and Cooper, 1998)

with conventional logistics enable

Modeling and simulation

 

manufacturing postponement in service supply chains Digital manufacturing-driven postponement reduces inventory, obsolescence and parts shortage costs of the service supply chain Problem contexts can be found

Multidisciplinary Design

 

Technology deployment (Holmström et al.;2010a)

where distributed deployment of digital manufacturing capacity is beneficial Product reengineering procedures can be developed for shifting parts to digital manufacturing

science, cases

Digital manufacturing equipment in use

Procedures for the incremental

Multidisciplinary Design

 

Servitization (Vandermerwe and Rada, 1989)

redesign, refurbishment and improvement of the maintenance of equipment in use can be developed using digital manufacturing Digital manufacturing shifts operational focus from product types to unique product instances

science, cases

Digital infrastructure

Digital manufacturing can be

Multidisciplinary Design

evolution (Henfridsson and Bygstad, 2013)

incorporated into a wider digital infrastructure for standardized processes (design, production, sales and maintenance). Infrastructure evolution reduces the standardization of equipment and parts while increasing the standardization of processes

science, cases

Second-order combination

Logistics equipment in use

Demand consolidation (Cohen et al., 2006)

Trust-based security (Kagal et al., 2001)

As aggregators of demand, LSPs can bring digital manufacturing closer to locations of use LSPs need to take on a role as trusted handlers of physical parts and digital product models Upstream flows will increasingly involve digital product models, whereas downstream manufacturers will strive to retain conventional logistics-based solutions

Single-domain logistics Modeling and simulation

Multi-disciplinary Design science, case study

Currently, the number of parts and subsystems that have been digitally manufactured is very limited (Atzeni et al., 2010). Most equipment contains no such parts and subsystems. However, once complex equipment contains some such parts and subsystems, a transformation based on the deployment of digital manufacturing in the supply chain may be initiated. The transformation rests on the proposition that it is possible to develop procedures to systematically increase the number of components – for both new and old equipment – that are produced using digital manufacturing. The potential for the development of such procedures for rare parts is already

evident in the use of 3D scanning to create digital models for medical applications (Salmi et al., 2012). Digital replication procedures and 3D product models must be combined with the deployment of digital manufacturing in an incremental transformation process.

2.1.2 Digital manufacturing equipment in use: transformation through servitization and infrastructure evolution The introduction of digital manufacturing transforms the use of equipment through servitization and digital infrastructure evolution. Servitization is the process

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through which OEMs offer more focused combinations of goods, services, support, self-service and knowledge to equipment users ( Vandermerwe and Rada, 1989 ). An infrastructure is a structure on which something else runs or operates. In the evolution of successful digital infrastructures, different systems are adopted and combined in a way that supports innovation and more effective processes ( Henfridsson and Bystad, 2013 ). Digital manufacturing can be incorporated into a wider digital infrastructure for standardized processes. Just as today’s computers and computer networks are becoming part of a quiet, invisible and unobtrusive infrastructure (Norman, 1998), manufacturing, or the act of making a physical object, is becoming an integral part of a wider digital infrastructure. The digitalization of physical artifacts makes these artifacts addressable, communicable, sensible and traceable (Yoo et al. , 2010). With the installed base information consisting of digital product models and use information collected by users, service personnel and intelligent equipment that monitors its own use compose a potential infrastructure for more fact-based processes in design, sales and maintenance (Holmström et al. , 2010b). It is possible that digital infrastructure evolution will allow processes to be more standardized, though the products and services are becoming more customized. This ability to differentiate products according to customer requirements without sacrificing cost-efficiency is the basis for mass-customization (Pine,

1999).

The extension of the life cycle of the products in use through limited product development efforts is a conceivable path for the expansion of digital manufacturing. Likely products for initial application are those that were originally engineered to order and customized. For example, incremental weight reduction and performance improvement of mobile equipment would be possible through redesign for digital manufacturing. The introduction of digital manufacturing may thus enable equipment manufacturers to focus on the equipment being used by individual users and improve user operation in terms of value and performance (Lusch et al., 2010). The outcome of this servitization transformation, coupled with the digital infrastructure transformation, is that manufacturers focus more on unique product instances than on product types. A servitization transformation driven by digital manufacturing and access to digital infrastructure for monitoring performance may, for example, allow equipment manufacturers to overlap product design and improving the equipment in use (Reeves et al. , 2011), thus rendering a type of “product Darwinism” possible. Consecutive versions of equipment are increasingly adapted to the equipment’s purpose as equipment is redesigned, refurbished and monitored in use and its performance is systematically improved. Alternative solutions can be deployed in similar problem contexts, and the best solutions are selected and transferred incrementally to all users. Manufacturers would then be able to provide customers with a product that may actually become better rather than degrade over time (Anderson, 2012, p. 133).

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2.2 Second-order digital manufacturing-driven transformations The introduction of digital manufacturing also changes the relationship between logistics and equipment use in second-order combinatorial transformations. Next, we consider the form that these second-order transformations may take.

2.2.1 Logistics equipment in use: transformation through demand consolidation and trust-based security We identify two possible second-order combinatorial transformations from the introduction of digital manufacturing in the service supply chain of complex equipment. These transformations are the consolidation of demand (Cohen et al., 2006) and the trust-based security with regard to the distribution of physical parts and digital product models (Kagal et al., 2001). The consolidation of demand allows service providers to invest in and dynamically improve the utilization of assets, such as digital manufacturing, that are needed in service provision. Trust-based security allows for the delegation of responsibility, ensuring that parts and digital product models are used for legitimate purposes without endangering the safe use of equipment. The introduction of digital manufacturing is not likely to replace conventional logistics. Although it is conceivable that the digital manufacturing of spare parts is included as an integrated function of the equipment in use (Peres and Noyes, 2006), the digital manufacturing of parts is a slow process that takes hours to days, depending on the part size and precision requirements (Gibson et al., 2009 ; Kruth et al., 1998). Manufacturing also includes manual tasks such as parts cleaning, the examination of the raw materials and the testing of robustness and conformance to specifications requiring knowledgeable operators (Eyers and Dotchev, 2010). These inclusions indicate that even in situations in which there is an urgent need for parts, it is likely faster and more efficient to have an inventory of line replacement units on hand (i.e. a critical part or module that can be used immediately) and to consolidate digital manufacturing at dedicated support locations. Demand consolidation provides opportunities for LSPs in terms of supporting the users of many different equipment manufacturers by combining generic digital manufacturing and conventional logistics (ManRM, 2005). The consolidation of demand from a number of use locations enables an LSP to invest in digital manufacturing using deployment that is less risky than for equipment manufacturers and their parts suppliers. By working with a number of manufacturers, LSPs can potentially bring support locations incrementally closer to equipment in use as the application of digital manufacturing increases. Proactive innovation has been shown to positively affect the loyalty of LSPs’ customers (Wallenburg, 2009). However, LSPs’ ability to play this role depends on their ability to act as gatekeepers of product models and physical parts. The development of trust-based security is essential if LSPs are to play a significant role in a transformation driven by digital manufacturing. Because of the intellectual property value of digital product models and data collected by embedded systems, it is likely that equipment manufacturers want to control end-user access (Paar and Weimerskirch, 2007).

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Digital manufacturing-driven transformation

Jan Holmström and Jouni Partanen

Manufacturers may even want to restrict access to physical parts because the development of scanning and replication technology makes unauthorized and potentially hazardous copying increasingly easy (Raja and Fernandes, 2008). The development of trust-based solutions by LSPs would lead to a transformation in which upstream supply chains would increasingly handle digital product models, whereas distribution between support locations and locations of maintenance and use would be based on conventional logistics. Trust-based security signifies that instead of developing complex solutions to interact with a large number of users, OEMs can manage access by collaborating with third parties who act as trusted gatekeepers. An LSP is likely to share an interest in keeping digital product models secure and avoiding unauthorized copying with the OEM. End-users who engage in digital manufacturing do not share financial interest with an OEM in the controlled access and use of product models (Lan, 2009).

2.3 Testable propositions for further research on digital manufacturing-driven transformations The implications of introducing digital manufacturing is not yet fully recognized as being relevant for supply chain innovation (Ageron et al. , 2013). Thus, our research note is a contribution that notes issues to be investigated in a new stream of supply chain innovation research building on the theory of technological evolution through combination (Arthur, 2000). In Figure 2, we summarize the first- and second-order transformations that we identified for successfully using digital manufacturing technology in combination with logistics and complex equipment. Testable propositions for further research on the combinatorial transformations in the context of complex equipment are presented in Table II. The propositions suggest the type of outcomes that can be expected, though the first service supply chains combining digital manufacturing, conventional logistics and monitoring of equipment use are only now being introduced on a small scale. Many in the vanguard of this digitally driven industrial transformation are “makers” who use open-source software and hardware platforms (Anderson, 2012), while established manufacturers of proprietary designs (e.g. aeronautics manufacturers) are increasing their efforts to follow suit (de Jong and de Bruijn,

2013).

Figure 2 Digital manufacturing-driven transformations of service supply chains for complex equipment Digital
Figure 2 Digital manufacturing-driven transformations of service
supply chains for complex equipment
Digital
Manufacturing
Trust-based security
Equipment
Logis cs
in
Demand consolida on
use

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Some of the proposed outcomes of combinatorial transformations fall fully within the domain of logistics and SCM and can be studied using familiar methods. Manufacturing postponement and demand consolidation are single-domain logistics research topics and are thus suited to research using modeling and simulation methods (Harrison et al., 2007). However, other outcomes of the combinatorial transformations traverse established disciplines of SCM, product design, information systems and service engineering. Research on this type of exploratory and early-stage combinatorial transformation is well-suited to a design science approach elaborating both problems and possible solutions ( Holmström et al., 2009; Holmström and Romme, 2012). For example, an understanding of how technology deployment potentially changes the service supply chain is at a very early stage. Practice-oriented trial and error using digital manufacturing is of course needed, but such piloting also requires design-oriented research for developing solutions to shift spare parts to digital manufacturing. For insights into trust-based security, researchers can use a case-based approach to seek comparisons with industries in which the digitalization of manufacturing and delivery has already occurred (Voss et al., 2002).

3. Digital manufacturing-driven transformation in practice: the F-18 Super Hornet service supply chain

The F-18 Super Hornet is one of the first products for which a complete subsystem has been manufactured using digital production techniques. Although digital manufacturing has only been used for producing this subsystem, the Super Hornet provides a realistic setting for evaluating the potential for digital manufacturing-driven transformations in the context of the service supply chain of complex equipment.

3.1 First-order combinatorial transformations 3.1.1 Digital manufacturing logistics The air-cooling ducts of the F-18 Super Hornet fighter jet environmental control system are produced via selective laser sintering, an additive manufacturing technology ( Hopkinson et al. , 2006 ). Spare parts for the fighter plane’s air ducts could, in principle, be produced centrally in the manufacturing plant, in distribution centers or on airbases at the point of maintenance. However, the parts are large and slowly manufactured, whereas the user response time requirements for spare parts are high. Thus, regardless of where the parts are produced, line replacement units must be available at the point of maintenance. Manufacturing postponement eliminates the need for inventory to cover order fulfillment lead times by upstream echelons, but not the need for inventory to cover digital manufacturing lead time. Considering the current cost of deploying digital manufacturing, direct benefits of manufacturing postponement are absent unless applied in particularly challenging settings, such as aircraft carriers and isolated airbases (Peres and Noyes, 2006). Furthermore, because only one subsystem of the Super Hornet is produced using digital manufacturing, such a deployment is very costly. The location

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Digital manufacturing-driven transformation

Jan Holmström and Jouni Partanen

of manufacturing at each US Navy point of maintenance would require 20 machines, whereas only five would be required in scenarios in which manufacturing is located in the factory or within distribution centers (Khajavi et al. , 2014). Here, the Super Hornet example illustrates how product reengineering efforts are needed to increase the number of parts that justify the deployment of digital manufacturing in the service supply chain. In the case setting, the redesign of environmental control systems for other airplanes would facilitate the deployment of digital manufacturing closer to points of maintenance by aggregating demand for parts of different types of airplanes.

3.1.2 Digital manufacturing equipment in use The introduction of digital manufacturing in the Super Hornet service supply chain illustrates the potential of servitization by focusing on equipment in use. The F-18 fighter jet’s air ducts were not originally produced through digital manufacturing. Digital manufacturing was only introduced because the customer wanted to improve the performance of the fleet of airplanes already in use. The requirement was the addition of six new avionics systems, which limited the space available for the environmental control system air-cooling ducts. At the same time, the addition of new computer systems increased the need for cooling. Digital manufacturing was necessary for the design team to redesign the environmental control system of the existing equipment. Digital manufacturing facilitated the combination of different ducts into single parts for integrating the attachment mechanisms into the parts and reducing the overall number of parts (Hopkinson et al., 2006). Regarding the evolution of digital infrastructure, the improvement of equipment in use in the Super Hornet example is connected to the product type. Individual airplanes are not redesigned and refurbished based on performance tracking and condition. Digital manufacturing is not considered part of a wider digital infrastructure for performance-based design, logistics and maintenance of individual airplanes. However, in the defense sector, there is increasing pressure on equipment manufacturers to find new ways to improve performance and reduce cost throughout the life cycle of the equipment in use (Kim et al. , 2007), which

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may eventually make it more interesting to differentiate individuals of a fleet over time.

3.2 Second-order combinatorial transformation As indicated above, the capacity utilization of digital manufacturing dedicated to the production of spare parts for the environmental control system falls drastically as manufacturing is postponed until the point of maintenance. However, the low initial utilization is also an opportunity for generic capacity. In central locations, high-capacity utilization of digital manufacturing could be achieved in collaboration with one or a few equipment manufacturers. Because digital manufacturing is moving closer to the use locations, a single machine has sufficient capacity to support a higher number of equipment manufacturers. Figure 3 illustrates the opportunity to consolidate the demand of different manufacturers in the naval airbase setting. In the Super Hornet example, the organization of users is well-positioned to consolidate the demand for parts from many manufacturers. Thus, there is not a significant role for an LSP in consolidating demand. However, in settings where users’ equipment fleets are smaller and more dispersed, a third-party digital manufacturing provider would have an opportunity to consolidate many manufacturers’ demand for parts and be able to deploy digital manufacturing close to users. Regarding the possibility of trust-based security transformation, digital product models are not handled and shared openly in the Super Hornet setting.

4. Conclusions

Applying Arthur’s combinatorial theory of technological evolution, we have indicated how the introduction of digital manufacturing in the supply chain is likely to result in new combinations of existing practices, while also creating a need to develop further supporting solutions. On the one hand, the innovative combinations of digital manufacturing and supply chains will decrease supply chain complexity through simpler and more effective solutions. Instead of dealing with supply chain complexity (Bozarth et al. , 2009), manufacturers can use digital manufacturing as a means to simplify their supply

Figure 3 Network benefits of the consolidation of demand for digital manufacturing

Digital manufacturing in central locations in collaboration with one OEM

Digital manufacturing at point of maintenance in collaboration with many OEMs

Central loca on

Line replacement

Installed base

 

Line

unit

OEM

Point of

maintenance

replacement

Installed base

 

unit

OEM
OEM
OEM
OEM
OEM
OEM
OEM
OEM
OEM
OEM
OEM
OEM
OEM
OEM
OEM
OEM
OEM

Source: Holmström et al. (2010a)

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chains (Hoole, 2005) by producing parts closer to assembly lines and points of maintenance. On the other hand, it is

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procedures for reengineering products in use. Because the

de Jong, J. and de Bruijn, E. (2013), “Innovation lessons from

utilization of digital manufacturing is initially low when only

3-d printing”, MIT Sloan Management Review, Vol. 54

parts with special requirements are produced digitally, the willingness and ability of equipment manufacturers to re-engineer their products for digital manufacturing is pivotal.

No. 2, pp. 43-52. Denyer, D., Tranfield, D. and van Aken, J.E. (2008), “Developing design propositions through research

Thus, from the perspective of the equipment manufacturer,

synthesis”, Organization Studies, Vol. 29 No. 3,

the introduction of digital manufacturing is not initially a process reengineering challenge, but it is instead a product reengineering challenge to enable digital manufacturing- driven postponement and servitization. A practical implication of our analysis is that digital manufacturing is a potential infrastructure technology.

pp. 393-413. Economist (2012), “A third industrial revolution special report on manufacturing and innovation”, The Economist, 21 April. Eyers, D. and Dotchev, K. (2010), “Technology review for

However, as with all infrastructure, someone must build it.

mass customisation using rapid manufacturing”, Assembly

For an infrastructure to emerge incrementally requires that

Automation, Vol. 30 No. 1, pp. 39-46.

some party is able to bootstrap direct benefits from a limited

Fernie, J., Sparks, L. and McKinnon, A. (2010), “Retail

number of first users to attract an expanding network of new

users (Hanseth and Lyytinen, 2010). Our analysis indicates

Journal of Retail and Distribution Management, Vol. 38 Nos

that significant and direct benefits can be identified for manufacturers of complex and high-value equipment in particularly challenging settings. However, to create an

11/12, pp. 894-914. Garcıa-Dastugue, S. and Lambert, D. (2003), “Internet-enabled coordination in the supply chain”,

infrastructure, it is neither the manufacturer nor the end-user

Industrial Marketing Management, Vol. 32 No. 3,

but the LSP that is best positioned. Assuming that digital manufacturing will evolve as a general-purpose technology, LSPs have been given an opportunity to consolidate demand from initial adopters and incrementally deploy capacity closer

pp. 251-263. GE (2011), “GE Intensifies focus on additive manufacturing”, GE Press release, May 4th 2011,available at: http://

to users as new applications are introduced.

 

Additive-Manufacturing-306e.aspx (accessed 29 May

                   

2013).

                   

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Further reading

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complexity, Addison-Wesley, Reading, MA.

information systems research”, Information Systems

Corresponding author

Research, Vol. 21, No. 4, pp. 724-735.

Jan Holmström can be contacted at: jan.holmstrom@aalto.

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