Of the few remaining business truisms, one is unshakable: Vast manufacturing scale conveys vast advantages. The accepted wisdom is that bigger runs support more cutting-edge equipment, processes and materials, thrusting up towering barriers to entry for would-be competitors.
But those walls are tumbling, and pipsqueak companies will be the winners. Digital-manufacturing-as-a-service (DMaaS) now delivers big manufacturing advantages regardless of customer size. The freshly leveled playing field is great news for upstart and small businesses no longer priced out by the costs of equipping, maintaining, operating, staffing and upgrading complex production lines.
DMaaS is only here because of digital manufacturing — an integrated, software-based approach that connects data across traditionally siloed functions. Every manufacturing stage, from initial design through final inspection, is overseen by a single system that effectively “manufactures” parts virtually before a single run begins.
Product, process, plant and resource information can be associated, viewed and changed simultaneously. A single CAD file traverses the entire manufacturing sequence, creating a cohesive digital thread between design, engineering and production — while ensuring airtight quality control. Customers pay only for the services they actually use, at prices that are a sliver of the vast sums swallowed by dedicated facilities.
A Different Digital Divide
Thankfully for big manufacturing, DMaaS also dangles the opportunity to pursue markets that once were too tiny or specialized to be economically viable. Outsourcing production obliterates the need for large capital investments, ranging from tooling costs to entire factories, which sharply alter the profit calculus. Businesses can pursue smaller and smaller market opportunities at lower and lower risk.
Evolution is giving rise to a new industry model with two parallel tracks: digital manufacturing and product innovation. Manufacturing requirements continue to inform creative product design and vice-versa. Yet the two disciplines increasingly are taking shape as distinct, specialized industries.
Chip Off The New Block
Sound like déjà vu? It should. The semiconductor industry began with fully integrated manufacturers designing their own chips and running high-cost production facilities. But costs for equipping factories and manufacturing chips were monumental, and chips were fabricated on large silicon wafers that could hold many designs at once. As a result, academic researchers and small companies that needed only a few chips found themselves stuck with the bill for entire, mostly unused wafers.
In 1981, frustrated researchers at the University of Southern at California’s Information Sciences Institute (ISI), an internet co-creator, began pooling chip orders for third-party production. The fabrication-less, or fabless, foundry industry was born. Brokers began shopping multiple customers’ orders to capital-intensive factories, which took off in tandem with demand. Electronics design and manufacturing, while both research and development (R&D) intensive, exploded with vastly different cultures and business models.
Separate, Equal, Transformative
Tech’s runaway success may spring directly from that separation. Leading technology companies have been able to focus on their core competencies precisely because they didn’t have to worry about the nuts and bolts of producing chips.
It’s hard to imagine a chip manufacturer, no matter how innovative, dreaming up the wildly popular iPhone. Conversely, chip manufacturing facilities have become so costly to build and operate that owners must grasp every nuance. In the chip industry, fabless work fabulously.
As the CTO of a digital manufacturing company, here are some relevant lessons for DMaaS I’ve learned that you should be aware of:
Lesson 1: Understand the balance between costs, control and risk: In-house manufacturing may lower production costs and increase control if initial investments can be recouped fast enough. But equipment purchases, demanding learning curves and continual upgrades may outweigh projected savings. Contract manufacturing actually may boost control and lessen risk, meanwhile, because staff are intimately familiar with materials properties, equipment and processes.
Lesson 2: Know your supplier: Digital manufacturing is far more complex than traditional order-make-deliver methods. Look for a track record in the specific technology you’re pursuing, not just DMaaS overall. For instance, 3D printing (aka additive manufacturing) demands deep production expertise to generate consistent, high-caliber parts. Other key factors include minimums, capacity, QA procedures, turnaround times and cost.
Service brokers offer the cost advantage of shopping among multiple, smaller providers. But quality, consistency, capacity, turnaround and new tariffs on Chinese imports may be issues. Service bureaus deliver a wide range of technologies and deeper services for more assured results but likely at a higher cost.
Lesson 3: Make use of available tools and expertise: In fabless, foundries may utilize known intellectual property (IP) blocks — validated processes and structures that can confidently produce the desired performance. In contract manufacturing, providers may offer software to accelerate design processes and mitigate risks. In 3D printing, manufacturers should provide analysis and feedback on design, prototyping, support structures and build preparation.
Lesson 4: Mind your (I)Ps & Qs: Data and IP risks can’t be overestimated. Formulas, source code and other IP can be prime theft targets, and design information in CAD files can be harder to protect than structured data. Implementing best practices, including encrypted transmission uploading and rigorous user authentication, is critical. Your team also needs to understand its options thoroughly but not ask questions that unnecessarily disclose proprietary information. I’ll return to data and IP security in more detail in a future column.
DMaaS stands poised to transform manufacturing much as fabless transformed chip production. Manufacturers, now is the time to explore. Watching is great for parades but rarely for revolutions.