Supply Chain Complexity: Additive manufacturing in the post-COVID-19 era

“Relocation of production affords companies the chance to rethink their production methods.”

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Dr Jennifer Johns, Reader in International Business, School of Management, University of Bristol & Academic Advisor to GTMA and Reshoring UK, on the opportunity for additive manufacturing in supply chain.

Globalisation has created an interconnected global economy. Underpinning this are supply chains, facilitating the movement of goods in increasingly complex ways. Until relatively recently, the vital importance of supply chains has tended to be overlooked, certainly in relation to the general public’s understanding of how supply chains support economic activities. Now the combined impacts of COVID-19 and BREXIT are forcing a closer examination of supply chains as they change, are disrupted or even permanently ruptured.

The contemporary complexity of supply chains is well understood within the manufacturing sector. Over decades, advances in communication and transportation technologies have allowed supply chains to become more geographically extensive, and firms have been able to use a wide array of sophisticated logistics, tracking and monitoring technologies to manage their supply chains. Combined with changing combinations of in-house production, inter-firm trading and outsourcing (within or beyond national boundaries), supply chains have become highly sophisticated to meet the demands of manufacturers and their customers.

However, there are many pressures on industry that threaten to reshape supply chains in numerous ways, typically encouraging a reduction in complexity. For the last three decades, where attention has been focused on supply chains it has done so as part of the sustainability agenda. This agenda covers environmental (i.e. food miles, peak oil) and supply chain ethics (i.e. human rights abuses) concerns. Environmental concerns pressure supply chains to shorten as demand for more locally produced goods (particularly food) increases and producers seek to reduce their carbon footprint. Ethical concerns, typically concentrated on the working conditions in factories (including subcontractors), has increased requirements on firms to monitor and inspect suppliers and be aware of lower tier suppliers. This has been driven by companies’ own corporate social responsibility strategies and more recently as a consequence of the Modern Slavery Act. One could logically expect to see a reduction in supplier numbers to facilitate closer monitoring and inspection, but this has not emerged as an observable trend.

Despite substantial pressure, we have not seen either a reduction of the length of supply chains or in supplier numbers. Indeed, complexity continues to increase as the economic (profit-maximisation) imperatives driving sourcing decisions prevail. Until recently that is. The impact of COVID-19 and, to a lesser degree, political changes (Trump’s US trade policies and BREXIT) are having more long-lasting and transformational impacts on supply chains. Since March 2020, they have been battered by external forces, resulting in disruption and, in some cases, permanent rupture. The impacts are multiple and include the temporary closure of factories in China, national lockdowns, workforce vulnerabilities and shortages, and the costs and logistics of complying with COVID-19 guidance.

We can see three broad trends in the reconfiguration of supply chains that seek to address the vulnerabilities of geographically extensive supply chains (particularly those between advanced economies and the Far East). First, that of reshoring, the process of manufacturing returning ‘home’ to advanced economies from lost cost locations. Interest in reshoring is partly politically motivated (the futile aim of national self-sufficiency) and partly driven by industry concerns around quality and supply chain risk. Beyond a handful of well-publicised multinational firms relocating some manufacturing, data on reshoring levels shows it to be relatively small in scale but increasing – and likely accelerating since March 2020. Reshoring presents an opportunity for additive manufacturing (AM) as the relocation of production affords companies the chance to rethink their production methods. Evidence currently suggests that little reshoring is on a like-for-like basis and if firms relocate production to their home (advanced) economy it is likely they will be adopting more advanced production methods. Here, the ability of AM to produce complex parts (that combine a number of previously separately manufactured components) will reduce supplier numbers and facilitate the relocation of production.

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Second, the relocalisation of production, often bringing production much closer to the consumer. This satisfies many sustainability demands, reduces supply chain disruption and increases speed to customer. Distributed manufacturing is often assumed to include advanced manufacturing methods, across the whole spectrum of desktop to industrial AM machines and post-production technologies. Here, the unique capabilities of AM mean the technologies are able to offer much more highly localised solutions than traditional manufacturing methods.

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The current COVID-19 crisis is having an immediate effect on the organisation of supply chains with the adoption of a compromise solution, that of dual sourcing. In times of supply uncertainty this strategy supplements existing (often geographically extensive) supply chains with more localised supply options. Often the local suppliers are the backup option in the event of established supply chain failure. This dual sourcing strategy thus increases supply chain complexity rather than reducing it, adding to the resourcing and management of supply. Again, this opens up potential spaces for AM to exploit, particularly with regard to removing the need for time consuming and costly re-tooling. The flexibility of AM may prove to be attractive to companies needing additional supply, which begins dialogue with firms that may not (yet) be convinced of the advantages of AM, potentially leading to the local AM firm outcompeting the low-cost supplier.

At present the situation regarding the reconfiguration of supply chains is an uncertain one, especially as we enter the post-BREXIT period. A number of different processes are operating that will impact on where and how we manufacture, but not all are moving in the same direction (technologically or geographically). We can expect a general trend towards a degree of relocalisation of production and reshoring, but this will be sectorally and geographically uneven.

As history has shown us, supply chains are increasingly complex, but the weight of the impacts of COVID-19 and BREXIT may force a change. It is a challenging time, but there are some clear opportunities for AM to begin to really demonstrate and showcase the capabilities of the technology, helping to deliver meaningful progress in the reorganisation of manufacturing in the post-COVID-19 era.

More from Dr Jennifer Johns:

Watch: AM’s Role in Supply Chain Resilience | TCT Conference @ Formnext

Read: Insights on Additive Manufacturing: Value, Volume and Reshoring