The evolution of manufacturing is a classical expression of the industrial model that pivoted around the centralization of production. The large concentration of energy, machinery, and capital required to achieve mass production inevitably drove the evolution of manufacturing towards a centralized model. However, this has worked to create huge redundancies, due to duplication of resources, capabilities, and knowledge behind the walls of each of these centralized organizations.
The evolution of the centralized industrial model over the past century has resulted in many systems that interoperate poorly to create hugely fractured and complicated systems and processes; particularly when we look at it on the global level. Disruption will come not from bigger and better, but from coordination and integration. Integration on the local level – with, for example, personal fabrication – and coordination on the macro-level through digital platforms that achieve economies of scale in new ways and thus disrupt the existing model.
The manufacturing systems of tomorrow, will not be like the closed production units of yesterday that achieved economies of scale through centralizing and duplicating. What is demanded today is highly flexible, highly customized and resource-friendly production. Open networks that aggregate and coordinate distributed capabilities within loosely coupled manufacturing ecosystems.
As Russ Rasmus and Jeff McKinney note in their report manufacturing ecosystems – “We already see evidence of this movement today, especially in the rapid development/short-product life cycle consumer electronics and computing segments. It’s here that companies have boldly embraced hybrid ecosystems in which they heavily leverage third parties. These companies are at the forefront of a fundamental shift in the manufacturing industry—one that will redefine what it means to be a manufacturer a decade from now.”
Manufacturing has long since been marked by a divide between the small scale distributed unique production of handmade artisan and mass, centralized, standardized production; both with their benefits and limitations. But today the combination of digital manufacturing and digital platforms enable us to overcome the historical limitations of decentralized production. This is exemplified by 3D printing’s capacity to produce a product that is at once a unique and customized object – the quality of handmade artisan production – but at the same time its capacity to automate the standardized duplication of this product – the quality of mass production.
Distributed manufacturing expands the spectrum of production allowing for very small scale and for very large scale production through information networks that aggregate and coordinate. At the same time, decentralized production can be much more direct, using algorithms to enable peer-to-peer coordination and exchange. In a decentralized system the “complicatedness” of today’s manufacturing supply chains – that involve many intermediaries – is shifted to the information layer.
3D Hubs is one of the most mature examples of an operational distributed manufacturing network. 3D Hubs is the world’s largest network of manufacturing services. The platform offers 3D printing, injection molding, and CNC machining and operates a network of some 34,000 manufacturing partners in over 150 countries. As noted in the paper “Commons-based peer production and digital fabrication” there is a growing synergy between a globally accessible knowledge commons and local digital fabrication technologies, which are advancing and becoming more and more accessible.” The two create a powerful combination to restructure manufacturing networks towards a new model of designing globally and operating locally.
The manufacturing systems that we know today are based around production, a push model that pre-produces a mass of products and then pushes them out to end users in a somewhat linear fashion. Over the decade’s production processes have evolved to incorporate aspects of lean and just-in-time production to try and move towards a more flexible model that pulls resources into usage, when and where needed. However, distributed manufacturing takes this to whole new levels, enabling a huge reduction in the excesses of the existing mass push-model.
On-demand production already carries the potential of dramatically reducing resource waste by removing the need to predict demand and hold large inventories. It works to restructure the system shifting from a model that is based around the centralized means of production to one that is based around the end user; using data and a pull-model to much better integrate and align the whole supply chain. This radical simplification and dematerialization of a manufacturing network is exemplified by additive manufacturing where only what is needed is added instead, of for example, a typical aerospace production process where less than 10% of materials consume are actually part of the finished product.
As products become less objects of value in their own right and more the means for accessing information and experiences, creating and capturing value has moved from delivering physical objects to enabling access to the service they deliver, often as part of a broader network that works together to deliver an overall service process. The development of the Internet of Things is the key transformation that will really shift industry en mass into the world of service systems.
Jim Heppelmann of PTC notes “More and more companies are trying to transform their business model to be more service-oriented, in fact, the transformation is so great that in some cases the very notion of products and services is converging into a single relationship with your customer through which you provide services which are enabled by products”
Servitization is critical to moving away from the destructive misalignment of incentives between producers and consumers by shifting the burden for the goods maintenance to the manufacturer. Manufacturers moving to a services model are much better aligned with their customers’ needs and interests; they are a much better position to act in their best interests, leading ultimately too much more productive and sustainable customer relations. As the needs of the end-user change, the service provider can adapt or replace products to suit, creating a long-term service relationship with the clients, it also better incentivizes producers to innovate.
Servitization leads naturally to not just an alignment between producers and end-users but also with beneficial environmental outcomes. As all costs of materials, production, maintenance, and disposal are born by the producer it incentivizes them to focus just as much on production as on conservation, recycling, reuse and symbiosis along the whole lifecycle.
Just as the locus of manufacturing is shifting from “things” to the organization of systems, so to the manufacturing enterprise will shift from the production of physical products to being primarily about connectivity and orchestration as the production of things becomes increasingly commoditized through automation. This production may be centralized – within smart factories – or it may be distributed – with personal fabrication – either way, many aspects to the process of making will be automated and the challenge will shift to integration between disparate systems.
The future of the manufacturing organization is about platforms that integrate and coordinate – manufacturing platforms will form the basic organizational principle for production in the age of information, similar to the iconic role the linear factory production line played for making in the Industrial Age. Platforms provide connectivity for the integration of diverse components, as well as form an infrastructure of reusable tools and functions for developers to easily build applications on. They operate as two-sided markets for service providers and end users. The platform is a layer of data, logic, and connectivity with standardized protocols that connect into a diversity of physical technologies for production and exchange. It provides the governance for producers who create their offerings and consumers who use those offerings.
Moving to an open systems paradigm enables a platform model to a whole manufacturing ecosystem, where capabilities anywhere in the industry can be modularized, servitized and delivered on demand to any other system so that one set of capabilities can build upon another in synergistic ways. This is a paradigm shift in how we architect manufacturing systems, a ‘plug-and-play’ philosophy that considers the multi-sided ecosystem of technologies, service providers, platform providers, and manufacturing companies. It requires opens systems, open source code, the modularity of existing or in-development platforms and their integration through loosely coupled service-oriented architecture that can integrate legacy systems, overcoming technical and semantic barriers. On top of all of this has to be built a visualization layer that enables rapid deployment to application without need for the end user to manage software code.
Decentralized web technologies will be the key infrastructure enabling the formation of truly decentralized ecosystems of manufacturing. Blockchain technology can deliver system-wide visibility across supply chains enabling companies to meet the transparency, traceability, accountability and efficiency imperatives required for competitiveness going forward. Using blockchain in supply chains provides a unique infrastructure that gives companies the capacity to link physical goods to serial numbers and digital tags and record them on a shared platform.
With blockchain, each product can be registered with a unique ID, and each supply chain partner can update the status of the item as it travels from a raw material into its next stage. The transformational advantages delivered by having the ability to instantly inspect an uninterrupted chain of custody from raw materials to end of sale and even to recycling and re-use will have a revolutionary effect over time as it forms the substrate for a new form of networked and collaborative manufacturing system that shifts the incentives from competition within closed organizations to collaboration within large production networks. The blockchain is not just about data, traceability, and transparency it ultimately enables a transformation in organizational structures; how diverse entities coordinate and work together along the value chain.
The use of token economies can work to radically reshape the financing of manufacturing, once again pushing the locus of value and production from the individual producers to whole supply chains. Today, quite a lot of manufacturing relies upon the impulse of a bank or other related financial institution, who determine major changes, e.g. the launch of new projects or M&A. By tokenizing the exchange of value along a supply chain, blockchain networks can work to re-empower the producers within the system. Through token economics supply chains can become self-financing systems independent from the interests of external financiers.
The Sweetbridge network is one example of this, through their Liquidity Protocol, a small business owner can borrow money against assets they already own, removing the need for a traditional lender. The business owner assigns custody of their assets to the Sweetbridge network via a smart contract, and are issued Bridge Coins – which are reflective of the value of the assets pledged.
Genesis of Things is another manufacturing platform that uses blockchain to integrate along the supply chain; customers, designers, materials, production units, logistics, products. For example, they create a trusted encrypted platform where 3D print files that includes the print parameters are wrapped in a smart contract to become the business. The print files can be monetized on the global level at the same time the IP of that file will stay connected with the owners and with end-to-end encryption it is secure. This enables even smaller designers to post their designs and get micro-royalty payments for them over the blockchain. Their blockchain solution works as the underlying fabric which all the actors interact through; the customers who select an order product, the designers who would put their product on the blockchain, the material providers who provide the different types of materials for the 3d printing, logistics providers etc.
The future manufacturing system may well look something like LittleBits, a modular tool kit of electronic units that can be snapped together to form whole functional systems. Due to connectivity and complexity we need modules that can scale up and scale down in both capacity and functionality to meet demand. Inside the factory will evolve from a linear model to a more nonlinear form of production; as exemplified by matrix production. Instead of being placed in a linear fashion along the production line these “modules” can be arranged in virtually any number of ways in a grid layout.
Outside of the factory, this kind of asynchronous nonlinear production will be enabled by automated service networks that use smart contract technology to algorithmically coordinate diverse parties. The use of smart contracts will make it possible to integrate basic routine procedures and operations within a manufacturing network. For example, with smart contract technology in place, any buyer on the blockchain can find the contract, verify the manufacturer’s quality and reputation for on-time delivery and with the use of smart systems this discovery process can be automated. Unlike a paper contract, a smart contract can monitor inventory levels or automatically, dynamically negotiate prices, reducing costs and improving transaction speed.
To realize a more adaptive, flexible and dynamic manufacturing network will require the integration of data analytics on a multiplicity of different levels, from individual devices to whole networks of production and exchange. With the advent of the Internet of Things, the objects and things around us will start to collect data about their usage and use that to adjust and adapt how they operate. But this kind of adaptive capacity needs to operate at the whole supply network and industry level also, as a series of proprietary closed systems may create individual optimize plants but overall suboptimal outcomes for end users.
There is now an opportunity to rewrite the protocols that structure and coordinate manufacturing systems, to make them distributed and integrated, user-centered, dematerialized through servitization and circular design. Systems that are transparent, that are resilient through decentralization and are truly built for the end user. To achieve this sustainable form of manufacturing system will require a holistic perspective and approach, looking at all relevant factors, not simply factories and products, but also the context; the context of usage, the social and economic context, the environmental context, the full lifecycle, etc.