Pardon the Disruption: Feeding An On-demand Culture with Digital Manufacturing
Looking for leaders in disruptive technology? Just pull out your smartphone—there’s a good chance your screens are peppered with apps of companies that have transformed how everyday products and services are consumed. How people shop. How they move from spot to spot. How they watch and listen to media. How they digest news, and how they communicate with one another.
Billion-dollar company—no, make that trillion-dollar company—Amazon has built an online marketplace that can deliver physical products to your doorstep in 1 hour by drones. Drones! It’s an online shopping environment but still captures the instant gratification of buying, and holding in your hands, tangible items like brick-and-mortars offer. Other companies and shops can either adapt to market demand to remain competitive, join forces with Amazon, or risk becoming irrelevant. Sears, which owns Kmart, recently filed bankruptcy and announced closure of nearly 150 stores by year’s end while it restructures. And within 5 years, analysts claim that a quarter of traditional shopping malls in the U.S. could be shuttered, according to Credit Suisse.
Then there’s Lyft and Uber. With a few taps of your app, you can locate a vehicle, get real-time pricing, order a ride, and track it. In its wake are traditional taxi cab companies left to either keep pace with technology, or go the way of the horse and buggy.
How about physical media? Even though there has been a bit of a renaissance in vinyl record sales, CDs and DVDs have given way to digital streaming services. Music nerds and films buffs and binge-watchers want albums and movies and shows at their fingertips, whether that be on their couch, a road trip, a flight across the country. Spotify and Netflix and Hulu anticipated this need, and again, long-standing giants of the music, film, and television industries are left to recalibrate their approach to a modern culture of media consumption.
And like it or not, we live in a perpetual media cycle of news and status updates that range from the latest activities of world leaders to what your uncle had for brunch. We have access to more immediate information and data (more on that later) than ever before as we watch things unfold online.
The point? Consumers, customers, people, rightfully want—and expect—instant access to products and services, and the companies that have digitalized traditional business models are the ones that are winning the race. They are letting technology serve as a catalyst for innovation, and, more dramatically stated, are changing the ways of life.
For us at Protolabs, the business lesson learned from these examples is to never get comfortable; be restless in your pursuit to push your company, and your industry, to greater technological heights. Our Chief Technology Officer, Rich Baker, tells us to “think like a startup!” and he’s exactly right. Speed, innovation, the willingness to test new things, building a team who is energized around the company they are working for—these are all things that should never be abandoned no matter how large your company gets.
When you look at the manufacturing industry, it has traditionally been dominated by hardware, manual processes, and 2D prints. Software programming, automation, and analytics have changed that. Manufacturers that don’t harness this technology will struggle to compete. It’s a cold, hard fact. Those that do, will reap the benefits of accelerated processes, production efficiencies, improved quality control, and access to data that, in turn, will help them better cater to the needs of customers. It’s liberation by way of digitalization. And it’s what we are doing at Protolabs.
Now technology is a term that gets thrown around quite a bit, so what exactly do we mean by that, and how does it apply to manufacturing? To answer that I like to reference a McKinsey & PwC study that points to digitalization and data as drivers of the next major upheaval in manufacturing. In that study, four key drivers are noted:
- Digital-to-physical transfer: acceleration of ideation to physical product
- Big data: deriving data from “everywhere”
- Advanced analytics: finding patterns to drive customer value
- Human-machine interfaces: augmented reality to inform workforces
These are not executive-level buzzwords used to build false hope around a fourth industrial revolution. They are realized practices that are happening today in manufacturing. Here’s an example. For the last 20 years, Protolabs has only played in the 3D CAD realm. Part files are uploaded and interactive quotes are sent back within hours. Those quotes include design for manufacturability feedback to improve part quality. To do this, we’ve written millions of lines of code that lets us automate the non-recurring engineering (NRE) involved in the front end of manufacturing before production begins. Manufacturing processes are accelerated. Development time is saved. Cost is reduced.
Let’s talk about data next. Like I said earlier, manufacturing as an industry has been traditionally slower to adopt new technologies. So one might expect data to seem like a four-letter word in some corners of the manufacturing world. But at Protolabs, data and the analysis of that digital information is essential, and is what truly helps differentiate us from other manufacturers. We often reference our digital thread—the information stream that flows from CAD model to interconnected manufacturing machines to shipping, and the quality systems that oversee that stream to provide traceability and transparency throughout. The digital thread ties everything together.
The byproduct of this is data, and lots of it, which can be analyzed. We not only leverage this advanced analytics to improve our manufacturing processes, but also to integrate machine learning around buying patterns and behavior to create processes that improve our customer experiences.
Alas, we can’t claim to have fully solved the digital puzzle as concepts like augmented reality are still in their infancy, but the revolution underway in manufacturing is certainly promising. At Protolabs, for example, we have begun using augmented reality to help rapidly train welders in our new sheet metal facility.
The combined efforts of industrial digitalization equate to what has been dubbed Manufacturing 4.0. Now an engineer or product designer or company CEO may be thinking, what’s the endgame of Manufacturing 4.0? I like to think it’s a means to help companies address some large-scale trends that are disrupting traditional growth models.
This is where we start to come full circle.
Like I discussed earlier, customers want on-demand products and services tailored to their needs, and those companies—from sectors ranging from consumer products to medical devices to automated vehicles—that want to thrive in this environment need to cater to those needs. So how do companies do that? By shortening product life cycles, through personalization and mass customization, by building in marketplace agility beyond launch with a high-mix, low-volume product ratio, and by staying close to customers. How do companies achieve that? Digital manufacturing of on-demand parts.
Shortened Life Cycles
The first macro trend is the unavoidable fact that product life cycles are shrinking. In parallel, new product introductions (NPIs) are growing. These two are intrinsically tied together. With near instant access to market feedback, design and engineering teams can respond to what the market is telling them. More so, they can have physical products of design iterations in their hands in a few days, and subsequently, reintroduce product updates to the market fast. And it’s not just small modifications to existing products, it’s entirely new products being developed and launched to market fast. Iteration breeds innovation, and an on-demand supply chain feeds that. Oh, and there’s another benefit: you start beating your competitors to market over and over and over again. Always fun.
Mass Customization vs. Mass Production
People want customized, personalized experiences but to do that your company has to be agile, and its suppliers need to be equally as agile. I’ll use medical and health care development as an example. Customization in orthopedics, spine, and patient-specific devices aligned to individual conditions are creating new market opportunities and bettering patient outcomes at the same time. Have a son or daughter with crooked teeth? Your orthodontist will be right back while she or he 3D prints a made-to-order teeth aligner. And hearing aid tech can now be molded to the custom shape of your ear to improve in-ear comfort. We saw the second industrial revolution defined by mass production, but we’ll see mass customization as a driver of the fourth revolution.
Responsive Supply Chain
The third industry trend centers around safeguarding your supply chain after you’ve launched a product. One way to do that is with a high-mix, low-volume product ratio. If market demand decreases for one product line, you’re left with minimal overhead costs with the added bonus of not having to warehouse millions of SKUs in the first place. On the other spectrum of market volatility, if demand spikes for a product, a responsive supply chain with low-volume capabilities can quickly run more parts to satisfy demand. It’s like you have virtual inventory of parts that can help dramatically shrink overall supply chain risk and costs.
A final concept that I want to touch on is the idea of localization—physical proximity to the companies and consumers you serve. Let’s revisit Amazon again. The Seattle-based retailer has not only expanded its distribution centers to cities around the country so it can rapidly deliver products to doorsteps, but it has opened Amazon Go shops in Seattle and Chicago. These are physical stores where with its app you can, as Amazon describes it, “enter the store, take the products you want, and go! No lines, no checkout.” Digitalization meets localization. With manufacturing, proximity has been a staple for decades. Local shops serve local companies. Protolabs has taken the idea of localization and applied it at a global scale. We have manufacturing plants in the U.S., across Europe, and Japan. Stateside, we have facilities in the Midwest and on the east coast, and honestly, I can’t rule out a west coast presence down the road. To live and play in an on-demand culture, proximity certainly helps.
What does it all mean? For companies and manufacturer alike, the challenge of course is to consistently grow revenue each year. To do that, you can’t ignore the market trends, and you can’t ignore the technology that is going to help you address those market trends so new revenue streams can be unlocked.
The market opportunity in every corner of the industrial sector still exists—whether you're developing cutting-edge medtech or version updates on ever-evolving electronic devices. To capture this, companies and the manufacturers that partner with them must challenge themselves to disrupt antiquated business models by digitalizing their processes. Amazon did that. And so did Lyft. And Netflix. And Spotify. Because as products and services become increasingly on demand, it’s those that can keep up that will survive.
Vicki Holt has been President and Chief Executive Officer at Protolabs since 2014. As CEO, Holt is responsible for determining Protolabs’ strategy, articulating priorities, and managing continued growth. Her leadership, strategic planning, and operational and international experience provide valuable insights to Protolabs’ board of directors and the National Association of Manufacturers, which she sits on as a board member. Holt is also a regular contributor to Huffington Post, Forbes, and Tech Crunch.