Rapid manufacturing and its impact on supply chain management
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Rapid manufacturing and its impact on supply chain management Document Transcript

  • 1. Logistics Research Network Annual Conference, September 9-10, 2004, Dublin, Ireland Rapid manufacturing and its impact on supply chain management Manfred Walter, Jan Holmström and Hannu Yrjölä, Helsinki University of Technology Abstract Suppliers of spare parts suffer from high inventory and distribution costs in many industries. Original Equipment Manufacturers (OEMs) have attempted to reduce these supply chain costs by cutting production lead-times, batch constraints and delivery lead-times. The emphasis in supply chain management has been towards increased inventory turnover. Today, rapid manufacturing technologies – the ability to produce parts on demand without the need for tooling and setup – has the potential to become the basis for new solutions in supply chain management. This paper presents new supply chain solutions made possible by both the centralised and decentralised applications of rapid manufacturing. A decision-support model is outlined to help supply chain managers better capture emergent business opportunities arising from rapid manufacturing technology. The logistical problems of the spare parts business in the aircraft industry are used as an example due to the high technical and logistical requirements involved. The applications and benefits of rapid manufacturing technologies in the supply chain for aircraft spare parts are presented. Keywords: rapid manufacturing, supply chain management, OEM spare parts Introduction The most difficult problem in supply chain management is the need to present an ever more valuable service to the customers, while at the same time cutting the delivery and production costs of the supplier (Christopher, 1992). Companies adopting new supply chain management solutions that increase value added to the customers at lower a cost, will quickly be able to improve their competitive advantage. Today, rapid manufacturing technologies –the ability to produce parts on demand without tooling and setup – has the potential to become the basis for exactly such new solutions in supply chain management. The aim of this paper is to highlight the impacts of rapid manufacturing methods on supply chain management in the spare parts business and present new business solution examples using rapid manufacturing. The aircraft spare parts supply chain is used as an illustrative example because of its current high costs and performance requirements. The starting point of the study was a literature review on rapid manufacturing and supply chain management. The objective of the supply chain management part of the study was to find supply chains where both manufacturing and distribution is very challenging. Based on the literature review the aircraft spare parts supply chain was chosen for closer analysis, and the review was extended to key problem issues within the aircraft spare parts supply chain. The rapid manufacturing part of the review analyses both current and future applications. Examples of business model innovations based on new developments in production technologies were sought. In the review of the aircraft spare parts business the focus was also the challenges and problems related to supply chain management. The results of the review and constructions were verified via expert interviews. Rapid manufacturing experts reviewed the technical feasibility of the suggested solution for rapid manufacturing in the aircraft spare parts business. The verification of the suggested business model was done together with industrial experts from the aircraft maintenance business. The first section of the paper presents the challenges and problems in the aircraft maintenance and spare parts business. The second section introduces the benefits and technical properties of rapid prototyping and rapid manufacturing technologies. In the third section, the potential
  • 2. Logistics Research Network Annual Conference, September 9-10, 2004, Dublin, Ireland benefits of rapid manufacturing solutions for the aircraft spare parts business and its impact on the supply chain are presented. The final section reviews the steps that management needs to consider when introducing rapid manufacturing in the supply chain of a spare parts business. Challenges and problems of supply chain management in the aircraft industry Before moving on to discussing what the new rapid manufacturing technology is and what the potential new supply chain solutions are, let us first look at the challenges OEM (Original Equipment Manufacturer) companies are facing today. The spare parts supply chain in the aircraft industry is used as an example because of the importance of both fast repairs and maintenance servicing in the business. "Nothing is more expensive than an airliner on the ground." This is the motto that maintenance experts follow in international air traffic in order to achieve higher and higher levels of efficiency. An aircraft in a hangar does only one thing: it costs money. Costs are not solely represented by the hangar fee but also by the even greater expenditure on spares as well as the costs incurred as a result of opportunity. This is the economic summing-up of what an aircraft could perform if it were to do what it had been built to do, which is fly, carry passengers and earn money (Burgner, 2000). A fast repair and maintenance service is essential to keep the planes in the air, and this requires good availability of spare parts. But it is nearly impossible for an airline to have all the necessary parts in their own warehouse. This is evident when one considers that big commercial airplanes built by Boeing or Airbus are each made up of 4 million parts (Frook, 1998). As an illustration of the high supply chain cost it is worth considering how the Material Support Centre of Airbus Industrie in Hamburg-Fuhlsbüttel is expanding its warehouse capacity to 36,000m². An analysis of spare part orders reveals that most parts are only infrequently needed (Reith, 2001). Thus, a lot of infrequently sold parts have to be stored for a very long time, which generates high inventory holding and logistics costs. For aerospace OEMs it is also expensive to produce and store spare parts to cover the whole life cycle of their products. As life cycles are very long and the number of airplanes in service declines, there is a risk that the OEM will never be able to sell all the parts it has warehoused for years. On the other hand, it takes too much time and costs too much to produce the required parts on demand using conventional production technologies. Customer Monitor Responsive Order a use service replacement Spare parts Customer Material Install Distribution Warehousing production warehouse forecasting and repair Supplier Figure 1: The demand-supply chain for aircraft spare parts To understand the role of logistics operations in the spare parts business, we need to analyze the relationship between supply and demand more closely. The conventional business model in the spare parts business is illustrated in figure 1. The figure shows the supply chain of the OEM and the demand chain of the airline. The supply chain is a familiar concept. Significantly less familiar is the concept of the customer's demand chain. The demand chain is the process that transfers demand from markets to suppliers. An example is a demand chain for spare parts that consists of monitoring use (find out if there is a service requirement), responsive service (react to the monitoring results), and making the order for the spare parts.
  • 3. Logistics Research Network Annual Conference, September 9-10, 2004, Dublin, Ireland The demand chain links to the supply chain and consists of material forecasting (what and how much to produce), spare parts production, warehousing and the distribution of the spare parts. Together, these two chains form the demand-supply chain (Holmström et al., 2000; Shankar, 2001). A safety stock of standard replacement parts is stored in the airline's garage. Depending on what parts are needed the aircraft-mechanic gets the spares from the in-house warehouse or instructs the purchasing department to order the required parts. In the supplier's warehouse ordered parts are picked and packed to fulfill the customer orders. Parts that need to be replaced at regular intervals according to a maintenance plan can be ordered in advance for exactly the date when the service is scheduled. However, it is not always possible to order well in advance. Fast service is often required for many parts. To fulfill a 24 hour delivery service, the parts need to be distributed from the OEM's warehouse using an overnight delivery service. The OEM has to keep inventory of the whole range of parts in its warehouse to support a fast delivery service. To keep the stock of slow moving parts as small as possible central warehousing is used, but that requires more effort in meeting delivery dead-lines. To provide the required service level the supplier has to estimate the future demand for parts. A good forecast enables the OEM to guarantee the availability of parts over the product model's lifecycle and also enables the OEM to produce parts in economical batches. If the slow moving parts are produced in very small batches to keep down the capital tied up in inventory, this is very expensive in conventional production technology. To reduce the constraints of production technology big aerospace companies have for years made efforts to cut supply chain costs by moving from high cost mass production to lower cost lean production (Michaels, 1999). Another current problem, as commonly expressed among aerospace OEMs, is that they are frustrated in their efforts to balance the material forecasting and related requirements of their customers with those of their suppliers (Wakeman et al., 2001). The supply chain is simply too slow and demand too unpredictable for any balancing effort to succeed. Attempts to solve this problem through e-commerce initiatives have encountered problems with unreliable inventory information (Logistechsinc, 2001). Another serious problem is that for many slow moving spare parts the inventory holding and logistics costs are out of proportion in relation to the manufacturing cost. To avoid excessively high prices for slow moving parts the manufacturers subsidize high inventory holding and logistics costs with profits from fast moving parts. This has lead to a situation where airlines and specialized service companies invest in capacity to repair and restore expensive parts. To the OEM the possibility of airlines and specialized service companies starting to manufacture fast moving parts themselves is a potential threat. If this becomes an economically feasible alternative, the OEM will have to find new solutions for reorganizing its supply chain for slow moving parts and to cut costs and serve the market with more competitive prices. Total benefits of rapid manufacturing Rapid Manufacturing is the utilization of sophisticated manufacturing methods to produce physical goods. These sophisticated manufacturing methods are the same methods that have been used since 1988 to produce prototypes (Rapid Prototyping). Rapid Prototyping (RP) refers to the physical modelling of a design using a special class of machine technology. Rapid Prototyping systems quickly produce models and prototype parts from 3D Computer-Aided Design (CAD) data, Computer Tomography (CT) and Magnetic Resonance Imaging (MRI) scan data, and data created from 3D digitizing systems. Using an additive approach to building shapes, Rapid Prototyping systems join, for example liquid, powder, wax, polymer or sheet materials to form physical objects. Layer by layer Rapid Prototyping systems fabricate plastics, wood, ceramic, and metal parts using thin horizontal
  • 4. Logistics Research Network Annual Conference, September 9-10, 2004, Dublin, Ireland cross sections from the computer model. Some argue that the term freeform fabrication (FFF) more accurately describes this class of technology, particularly as its applications expand beyond fast prototyping (Wohlers, 2002, p.10). Rapid Prototyping is in its early stages and has yet to develop into a manufacturing method. With early successes produced by pioneering companies, more applications will surface in the coming years. There are limitations in speed, materials, accuracy, and labour that create barriers to the commercial success of Rapid Manufacturing (RM). Yet, as organizations demonstrate successful applications, more effort will be put into the development of Rapid Manufacturing, and many of these barriers will be overcome (Wohlers, 2002; p.31). Currently there are not many applications for Rapid Manufacturing in use. The motivation for using Rapid Manufacturing in the majority of cases is because a need exists need to use the special technological capabilities of the method to make parts that would be otherwise excessively expensive or impossible to produce using traditional manufacturing methods. The special technological capabilities of rapid manufacturing are (Hänninen, 2001, p.27; Wohlers 2002, p.52; Wohlers and Grimm, 2002a): • No tooling required; fully functional metal components directly from 3D CAD file • No CNC path required • Good material properties • Net-shape process • Possibility to quickly change product design • Suitable for nano-scale products • Possibility of producing several non- identical components in a single job • Nearly limitless shapes possible (e.g. zig-zag shaped cooling channels) One of the first commercial users of Rapid Manufacturing is the aerospace industry, where performance requirements often impose stringent quality demands. Rigorous testing and certification is necessary before it is possible to use materials and processes for the manufacture of aerospace components. Boeing Rockedyne's in Canoga Park, California, has successfully used Rapid Manufacturing technology to manufacture hundreds of parts for the international Space Station and the space shuttle fleet (Wohlers, 2002; p.31). The company also uses Rapid Manufacturing to manufacture parts for the F-18 fighter jet. Other current applications are, for example final production parts for Jordan Honda (replacement panels, cooling ducts, and electrical boxes), highly complex ceramic filters and parts with complicated channels for the chemical industry Tool-making has benefits ranging from the short time needed for production and the wide range of shapes that are possible, such as freeform surfaces. This field of application is called Rapid Tooling (RT). Tooling for injection moulding is the most common application area of DMLS (Direct Metal Laser Sintering); today it is used as a standard and reliable tooling method for functional prototyping and short run series production (Hänninen, 2001, p.24). However, with latest materials durable metal moulds that produce up to 100,000 injection moulded plastic parts are possible (Rapid Manufacturing Technologies, 2001). The most lucrative field of application for Rapid Manufacturing is currently found in the medical industry, mostly in producing customized hearing aids. Many of the major manufacturers of hearing aids are in the early stages of using Rapid Manufacturing to mass customize their products in high volumes. Some of these companies produce more than 1,000 in-the-ear hearing aids per day, each being unique in its shape and size. A silicone rubber impression of the ear channel is digitized with an optical scanner, an electronic product model is produced and used for the rapid production of the hearing aid shell (Wohlers and Grimm, 2002a). For small plastic parts the oldest Rapid Manufacturing technology, stereo lithography, can already compete with injection moulding. A cost analysis performed by DeMont University and Delphi Automotive Systems showed that Rapid Manufacturing is competitive because of the high throughput and low material cost incurred in producing small parts using stereo lithography. For large size parts injection moulding is still more cost efficient. (Hopkinson and
  • 5. Logistics Research Network Annual Conference, September 9-10, 2004, Dublin, Ireland Dickens, 2001). The relationship between the costs per part and the weight or volume of the parts is shown by in figure 2. The production costs for a part produced using Rapid Manufacturing depends primarily on the part volume. This is both because of the high raw material price compared to conventional materials and the process of building up the part layer by layer, where each layer takes a specific amount of time. To improve the utilization of the available Rapid Manufacturing capacity it is possible to produce several non-identical components in a single job (of course with the proviso that they are made of the same material). In conventional production methods the manufacturing costs are higher the more complicated the shape is to produce, and the shorter the production run is. Also, material costs do not typically count for much in relation to the set-up for the production run and the shape of the part. With rapid manufacturing the shape of the part and the length of the production run do not count, rather it is the size of the part that is the primary cost driver. 100 90 80 70 Costs per part [%] 60 50 40 30 20 10 0 0 1/4 1/2 3/4 1 Scale of the parts Figure 2: The primary cost driver for Rapid Manufacturing is the size of the part, not the length of the production run as is the case in conventional mass production The costs per part can estimated using the formula: Price per part = (scale of the part)3 + set up costs if the surface utilization is assumed to be constant. (Note that this formula is an illustration used to show the key cost-driver when it is assumed that the part is the same shape, but only different in scale) The relationship between costs per part and the size of the part in figure 2 demonstrate why rapid manufacturing is much more interesting for small parts. For example, producing four small parts means that each part costs only 25% of what a bigger size part of exactly the same shape would cost. If a part uses only 75% of the area in the build envelope of the machine you can produce several parts up to the same height without any additional costs. Note once again that it is not necessary to produce a number of identical parts in the build envelope, instead all the individual parts for an assembly in one production session can be produced. As a consequence, small size parts and assemblies can be produced relatively cheaply using Rapid Manufacturing. As an example of a Rapid Manufacturing machine, one could look at the technical data in a Vanguard Selective Laser Sintering machine for plastic and metal parts. The parts are
  • 6. Logistics Research Network Annual Conference, September 9-10, 2004, Dublin, Ireland produced from a 3D model of the part to be produced. The US price for this "3D-printer" is about 320k$. The maximum build envelope is 370 x 320 x 435 mm and can produce, for example a 144 x 323 x 267 mm complex drill in seven hours. If more drills can be fitted into the same envelope, a lot of drills can be produced in the same time as long as the height does not change (3D Systems, 2001). Rapid manufacturing solutions for the spare parts supply in the aircraft industry The aircraft spare parts industry is interesting because of its $32 billion market in the US alone. Companies able to provide benefits to the customer by offering a better and more efficient service have the opportunity to build a substantial business through their service innovations (Logistechsinc, 2001). Benchmark studies show that many airlines today hold up to 20 per cent excess inventory (Wakeman et al, 2001). In many cases, much of this excess inventory is for slow moving parts. The annual cost of holding inventory is equal to the organization’s cost of capital multiplied by the value of the surplus parts. This cost quickly adds up to millions of dollars for a large airline. Furthermore, some of this inventory will likely become obsolete or face shelf-life limitations, leading to an eventual write-off of the investment in spare parts inventory. To reduce the need for airlines to keep inventory large aircraft companies have made determined efforts to cut lead-time and delivery costs (Michaels, 1999). But with conventional production technologies the possibilities are limited. An emerging opportunity for improving the supply chain performance is to use Rapid Manufacturing technologies. Why produce and store products a company may never need or need in the distant future? Make on demand using Rapid Manufacturing is a solution that needs to be explored. The price per part is independent of the production batch and the parts can be produced both in a centralized location and at the place of consumption. Instead of delivering the part via the post or a courier service the product model could be distributed via a data line and made at the point of use when it is needed. No CNC path or tooling and no long machine set-ups would be required in this ideal scenario. Even though Rapid Manufacturing cannot yet compete with traditional mass production for high volume parts, the situation may already be different for low volume production parts that are not needed very often and where inventory holding and logistics costs are high in relation to production costs. But because Rapid Manufacturing technologies are still being developed and the application of the method requires significant effort it is important for companies to identify a good business case before proceeding. If parts produced with Rapid Manufacturing fulfill the technical requirements, logistic analysis of the parts spectrum is the basis for further consideration. It is worth considering at this stage an example situation from the aircraft spare parts supply chain: Airbus in Hamburg- Fuhlsbüttel has more than a 120.000 part numbers of which 80% is used only a few times a year. However, all the parts need to be 100% available all the time. With an increasing number of produced aircraft models the problem of slow moving parts affecting the provision of a reliable service will become more urgent in the future. One approach to keeping down the range of needed parts is to build various models of planes using a modular design principle, i.e. use the same part in several models. However, this policy does not reduce the need to optimize logistics. The first challenge for the aircraft OEM is to develop a service strategy to efficiently manage the large number of part numbers. Because there is a limit to what customers can be charged for spare parts, the inventory costs have to be continuously kept down while avoiding cutting the level of service that the customer requires. Centralized RM to replace inventory holding Keeping a centralized warehouse on each continent is an effective first step towards a solution that Airbus has in fact already taken. This reduces the need to keep safety stocks and
  • 7. Logistics Research Network Annual Conference, September 9-10, 2004, Dublin, Ireland increases inventory turnover. However, while centralizing solves the inventory management problem to a degree, with a very large number of parts the inventory management of slow moving parts is still a formidable challenge. To illustrate the problem we can use the Pareto, or 20/80 rule (Christopher, 1992), to see how a large number of items drive up inventory management costs and undermines the development of a more cost-effective service strategy. Using the rule we can see that a limited number of fast moving items – usually around 20 % of the items - make up 80% of sales and profits and only a small fraction of inventory management costs. These are the fast moving A- parts. The rest are the B- and C- parts that drive high inventory management costs while not contributing to the profitability of the business (B-parts are the 50% of the products that make up 15% of the sales. C-parts contribute with 5% of sales but make up 30% of the items in inventory). However, the perspective provided by the Pareto analysis helps us see a potential solution. What if it were found that a number of the slow moving B- and C- parts fulfil the necessary technical requirements for being produced using Rapid Manufacturing? If this were the case it would be possible to replace keeping a part in inventory with producing it on demand. In other words, the solution would be to replace inventory in the centralized warehouse with Rapid Manufacturing capacity in connection with the centralized spare parts centre. What is the potential benefit of replacing inventory holding with rapid manufacturing capacity in the centralized spare parts centre? Currently the slow moving B- and C- parts drive up inventory holding and logistics costs that need to be subsidized with profits from fast moving parts. Introducing Rapid Manufacturing would cut the high inventory holding and logistics costs of the slow moving parts, and reduce the need to subsidize the high costs of B- and C-parts with profits from fast moving parts. This would also reduce the vulnerability of the OEM's business to airlines investing in Rapid Manufacturing capacity on their own. Centralized warehousing combined with centralized Rapid Manufacturing for the slow moving B- and C- parts keeps inventory low while at the same time keeping investments in rapid manufacturing capacity well utilized. Operating stand-alone machines in a number of different locations is inefficient because the required qualified personnel can not be employed very effectively. As more parts are found where inventory holding can be replaced with Rapid Manufacturing, and the demand for these parts exceeds the capacity of a single RM machine, one skilled technician can still operate multiple machines. As a result, a multiple machine environment such as this will have a lower percentage of labour to total cost (Wohlers and Grimm, 2002b). Decentralized RM to replace inventory holding and conventional distribution Above it was seen that centralization is an effective strategy for keeping both stock levels down and RM capacity utilization high. The next issue to consider is when would it make sense to distribute RM resources? With centralized warehousing and spare part production the problems of delivery time and cost remain. If it is necessary to provide service at a remote location in a short time the only solution currently available is to keep decentralized inventory at the location. This solution is both expensive and does not guarantee that the right parts are always available. In considering an alternative solution using Rapid Manufacturing, could physical distribution be replaced with distributed Rapid Manufacturing capacity? Even if Rapid Manufacturing capacity becomes cheaper in the future, there is still the problem of how to get high enough demand in each location to support a decentralized RM machine environment. When would it make sense to have Rapid Manufacturing capacity close to the point of use? If it is possible to identify enough individual components that could be produced with Rapid Manufacturing, this could provide the required total demand. For Rapid Manufacturing the demand for single spare parts is not the critical factor – rather the is key that the total demand for all suitable spare parts in each location is sufficient to operate at capacity in the distributed machines environment. For mass production, conventional production methods are still much cheaper than Rapid
  • 8. Logistics Research Network Annual Conference, September 9-10, 2004, Dublin, Ireland Manufacturing. Many types of parts still do not qualify for being produced on demand due to the current high material and production capacity costs of Rapid Manufacturing. For such parts - e.g. bolts and nuts produced using traditional mass production methods - it makes sense for them to be stored decentralised and close to the point of use. With Rapid Manufacturing close to the point of use the costs of warehousing and delivery is eliminated. The problem of expensive and difficult delivery to remote locations disappears. The US Military is in the process of evaluating the opportunities for the distributed production of spare parts near to the point of combat. The objective is to find solutions for producing spare parts in a large number of locations using mobile RM machines in times of conflict. Mobile Rapid Manufacturing presents many more problems than distributed stationary production facilities, because the current machines are not constructed for use in a mobile environment. Atmospheric differences, calibration difficulties, and needed energy supplies pose problems for mobile RM (Anon., 2002). Centralized Rapid Manufacturing on demand to replace central warehousing will probably be the first application of the new manufacturing technologies. The primary business benefit is in the reduction of the different parts that need to be stored. Tapping the full potential of Rapid Manufacturing technologies with distributed manufacturing can change the supply chain structure significantly, as illustrated in figure 3. In the restructuring, the centralized warehouse could be replaced by a central data repository. This supply chain structure would also help companies to prevent the use of intellectual property in the production of unauthorized copies of their designs. Indeed many OEM companies engaged in developing electronic product models have also initiated projects to protect their models against unauthorized use. Spare parts on demand: Distributed Airlines production on demand OEM short time of supply Figure 3: Producing spare parts on demand locally With a Rapid Manufacturing approach not only is stock reduced, but persistent problems in conventional production systems and the inaccuracy of forecasts for single items can also be
  • 9. Logistics Research Network Annual Conference, September 9-10, 2004, Dublin, Ireland addressed. It seems that no matter how sophisticated the forecasting techniques employed, the volatility of markets ensures that the forecast will be wrong. Whilst many forecasting errors are the result of inappropriate forecasting methodology the root cause of these problems is that forecast error increases as lead-time increases (Christopher, 2002). In a Rapid Manufacturing environment part specific forecasts are not needed. Instead of this we have to balance demand for Rapid Manufacturing capacity in a network with both centralized and distributed production services. Managerial implications The high cost of rapid manufacturing capacity and the limited part range means that a business model based on Rapid Manufacturing is not yet feasible. To start the development OEMs need to first combine inventory and Rapid Manufacturing based supply chain solutions in their business model. When addressing inventory and rapid manufacturing capacity deployment the challenge for OEMs is to establish locations that optimize the order-to-delivery cycle time for a given customer base. In establishing these locations, the business cases where the rapid manufacturing deployment costs are less than the existing distribution network designs based on centralized inventory must be identified. The practical challenge is how the business model for this hybrid network design concept is engineered, implemented, and operated. OEMs must consider investments in facilities, the staffing requirements of these activities, and the potential life-cycle ownership revenues of the given customer base (Wakeman et al, 2001). To avoid missing the opportunity for new business, while on the other hand avoiding expensive premature investments, supply chain executives have to be careful in making decisions about the application of rapid manufacturing. Due to the difficulties inherent in this decision making process two conclusions can be drawn. First, because so many different aspects affect the decision process a systematic step by step procedure to distinguish between suitable and non- suitable applications is needed. Secondly, because RM technologies are still in development, but could perhaps quite rapidly provide interesting opportunities in a particular industry or situation, the steps need to be repeated periodically. A step-by-step and periodic review process is outlined in figure 4. The objective of the decision process is to identify which parts Rapid Manufacturing can be used for and when it makes sense from a supply chain perspective. The seven key steps are: analysis of technical feasibility, business benefit, production cost, supply chain cost, followed by decision based on total cost trade-offs on implementation (or decision to reconsider later). The steps are illustrated based on the situation for aircraft engine service and maintenance.
  • 10. Logistics Research Network Annual Conference, September 9-10, 2004, Dublin, Ireland 1. Technical analysis 2. Business Technical & benefit financial progress 3. Production costs analysis 4. Capacity costs analysis Part no suitable? yes Use of rapid manufacturing Figure 4: Procedure to assess feasibility of introducing Rapid Manufacturing Technical feasibility analysis: Firstly, it is necessary to analyze the range of parts to identify suitable parts for Rapid Manufacturing. Practical and technical limitations such as maximum construction volume and required material properties have to be taken into consideration. For aircraft engines a typical airline, where the engine maintenance operation is in-house, purchases and manages inventory for 100% of the high value engine parts that can be produced within the build envelope of current RM equipment. The main technical issue for using RM for these engine parts is material properties and surface treatment processes. Business benefit analysis: In the second step it is necessary to ask what the potential benefit for the business could be. For an airline the benefit of RM for engine parts would be substantial if it could reduce the up to three month lead-time for some critical parts. This would reduce the risk of aircraft being grounded due to missing engine parts. Today the situation can sometimes be dealt with by taking parts from other aircraft being serviced, but missing engine parts still mean aircraft staying on the ground. Production costs analysis: In the third step it becomes necessary to find out via a manufacturing cost analysis how much it would cost to produce technically qualified parts using Rapid Manufacturing methods. Supply chain impact analysis: The fourth step is to identify inventory holding and logistics costs
  • 11. Logistics Research Network Annual Conference, September 9-10, 2004, Dublin, Ireland for the parts spectrum. For high turn-over parts it will probably be too expensive to use Rapid Manufacturing for some time to come. Material and machine hour costs are still high in RM compared to mass production, but for parts with high inventory holding and logistics costs they may be low enough to warrant action. The decision step for the feasibility of Rapid Manufacturing follows on logically from the results of the first four steps. For large sized parts it is assumed that mass production and warehousing will still be a better solution, because Rapid Manufacturing becomes less competitive as the size of the part increases. The production costs are approximately proportional to the part volume. However, for smaller parts the Rapid Manufacturing approach may be competitive. The potential may be attractive, especially if it is possible to use any of the special features of Rapid Manufacturing such as producing several non-identical components (e.g. one complete assembly) in a single job. Currently the pricing policy of engine manufacturers indicates that the cost for spare parts for engines that are approaching the end of the model life-cycle increases quickly. From an airline point of view an annual increase of 5 per cent doubles the cost of spare parts for a 15 year old engine model, and triples the cost for a 23 year old engine model. This make RM-based supply chains an interesting option for spare-parts once engines are no longer mass-produced. However, the introduction of new manufacturing technology is a slow process. In medical applications the introduction has been slowed down by the need to certify manufacturing process and the reluctance of insurers to cover new types of treatments. In the aircraft engine maintenance business the situation is similar. Authorities require airlines to certify any in-house repair and manufacturing operations. Typically, new technologies are expensive in the beginning and the features and costs change rapidly. Because of the rate of change, the steps have to be redone periodically. As the potential of rapid manufacturing technologies increases over time more active monitoring becomes necessary. The aircraft industry is only one example of the possible applications of rapid manufacturing. It was used as an illustrative example because it has a big market for spare parts, and is pioneering in the use of RM. Other industries with similar characteristics can also potentially benefit from Rapid Manufacturing. OEM:s that produce expensive equipment in small volumes and where the equipment is in use for a long period of time are examples of such industries. Because RM is a versatile technology developments in different industries can also support each other. A specialist in RM could very well provide both aircraft engine spare-parts and spare parts for generator turbines, paper machines and other advanced mechanical equipment. For OEM:s, the reduced need for physical inventory would open up the window for re-organizing the delivery of parts, and focusing efforts on developing new value offerings for customers, such as the assured availability of equipment or assured output. References • 3D systems (2001), "The future of Rapid Manufacturing: Vanguard & Vanguard HS SLS system", 3D@work magazine, Dec 2001, pp.6-7 http://www.3dsystems.com/index_nav.asp?nav=newsevents&content=newsevents/3da tworkMag/index.asp datasheet: http://www.3dsystems.com/index_nav.asp?nav=products&subnav=slssystems&sub2n av=vanguard&content=products/slssystems/vanguard/international_vangruard.asp • Anon. (2001), "Rapid Manufacturing Technologies", Advanced Materials & Processes, May 2001, Vol. 159 Issue 5, p32 http://ehostvgw4.epnet.com/ehost.asp?key=204.179.122.140_8000_- 2113871777&site=ehost&return=n • Anon. (2002), Role of MPH: "The Rapid Prototyping and Rapid Manufacturing in the Mobile Parts Hospital Program" http://www.mobilepartshospital.com/docs/mph_project.shtml
  • 12. Logistics Research Network Annual Conference, September 9-10, 2004, Dublin, Ireland • Burgner,N. (2000), "How Safe is Save", Flug-Revue, Apr 2000, p.6 http://www.flug-revue.rotor.com/FRHeft/FRH0004/FR0004e.htm. • Christopher, M. (1992), Logistics and supply chain management, Pitmann publishing, London, UK • Frook, J. (1998), "Boeing's Big Intranet Bet", Internet week, Nov 6, 1998 http://www.internetwk.com/news1198/news110698-8.htm • Holmström, J; Hoover, E; Louhiluoto, P; Vasara, A. (2000), "The other end of the supply chain", The McKinsey Quarterly, 2000, No 1, pp.63-71 • Hopkinson, N; Dickens,P: (2001), "Rapid prototyping for direct manufacture", Rapid Prototyping Journal, Vol 7 No 4, pp. 197-202 • Hänninen, J. (2001), "DMLS moves from rapid tooling to rapid prototyping", Metal Powder Report, Vol 56, Issue 9, pp.24-29 http://www.sciencedirect.com • Logistechsinc (2001), "E-Commerce and the Aerospace Supply Chain" (2001) Logistechsinc homepage, http://www.logistechsinc.com/article_archives/e-comm.htm • Michaels, L.M.J. (1999), Case study "The making of a lean aerospace supply chain", Supply Chain Management, Vol 3 No 3, 1999, pp.135-144 http://ninetta.emeraldinsight.com/vl=1131023/cl=59/nw=1/rpsv/cgi- bin/linker?ini=emerald&reqidx=/cw/mcb/13598546/v4n3/s3/p135 • Reith, R. (2001),"Ersatzteile – weltweite Lieferung", Hamburger Abendblatt, 16.06.2001 http://www.abendblatt.de/contents/ha/root/specials/hamburg/flughafen/a-zuliefer6.htm • Shankar, V. (2001), "Integrated demand and supply chain management", Supply chain management review, September/October 2001, pp.76-81 Wakeman, A.O; Whitten, M; Bales, R. (2001), "How is your supply chain…. Beyond economical repair?" www.ryder.com/pdf/wp_aerospace.pdf • Wohlers, T. (2002), "Wohlers Report 2002", Wohlers Associates, Fort Collins • Wohlers, T and Grimm, T. (2002a), "RP: The possibilities are endless", Time Compression Magazine, Feb 2002, http://www.wohlersassociates.com/Feb02TCT.htm • Wohlers, T and Grimm, T. (2002b), "The real Cost of RP", Time Compression Magazine, March/April 2002, http://www.wohlersassociates.com/MarApr02TCT.htm