Additive Manufacturing: Adding up to a Disruption for UPS
Additive Manufacturing is disrupting the shipping industry’s supply chain by cannibalizing a large part of its storage and shipping business as companies begin to print their parts in-house. UPS is doing its best to respond but can it differentiate itself from its competitors and more importantly from its customers?
3D printing is an additive process that builds a printed object layer by layer using a digital file as a blueprint. Typically regarded as a new process, 3D printing was first introduced in the early-80’s but only began to gain traction in the late 2000’s as the original patents expired and the technology was more widely replicated . As additive manufacturing gained accessibility and popularity, more companies have started adopting it to produce their parts quickly and at a lower cost, specifically when they require customization. As companies begin to manufacture more parts in-house with 3D printing, companies that have traditionally provided storage and shipping for these parts within the more traditional supply chain struggle to maintain their place .
United Parcel Service (UPS) has traditionally gotten a large part of its revenue from storing and shipping parts for manufacturers. With more companies manufacturing in-house, the market for storage and shipping, specifically smaller parts, is shrinking with the potential for that step in the supply chain being completely eliminated. UPS faced a similar threat with the rise of the internet; not anticipating the impact and taking a significant hit on their document delivery business . UPS is taking a more proactive approach to the challenge that 3D printing presents, hoping to prevent another portion of their business getting cannibalized with the introduction of new technologies.
UPS’s current strategy is to welcome the challenge 3D printing presents and re-define its place in the supply chain by embracing the new technology and launching its own 3D printing services. UPS’s additive manufacturing service began in 2014 by targeting its home market and allowing customers to upload images and have the products printed and shipped to their homes or businesses. As of May 2016 their offering was expanded to include industrial-strength 3D printing. This combined with the development of a partnership with SAP allowed UPS to present itself as an end-to-end supply chain solution .
UPS’s industrial 3D printing services include mostly automated printing factories that allow for orders to be shipped as early as the same day . As of the end of 2016 this service has expanded to parts of Asia and Europe with a short-term strategy to expand its 3D printing coupled with quick delivery of the products internationally. Longer term, UPS plans to develop 3D printing capabilities to determine ways to make parts cheaper, faster and with various materials in order to expand to more industries and products such as electronics with smart phones .
However, what UPS as failed to do is differentiate itself from its competitors in 3D printing and customers who continue to expand their in-house 3D printing capabilities. UPS’s customers represent their biggest competition since most 3D printing companies do not have the delivery network and therefore delivery speed offered by UPS. However, as 3D printing expands and with UPS’s continued success, more shipping and storage companies will begin to enter the market, introducing more threatening competition. Instead of focusing entirely on international expansion, I believe UPS’s resources would better be used to capitalize on its existing competitive advantage by continuing its innovation in the speed of the additive manufacturing process as well as expansion into new geographical markets. This allows UPS to maintain its competitive advantage over other shipping companies that may enter the market. Longer term, UPS should mainly focus on advancing 3D printing technology to include various materials in the same run. As well, a focus should be placed on scaling to larger parts, expecting the industry to move that way now that most companies are comfortable with using the technology for smaller components.
The only certainty when looking at the future of the shipping business is that they must be prepared to adapt as new technologies are introduced and new competition enters the space. However, many questions are still associated with the changes, 3D printing being just one technology transforming UPS and other shipping companies’ business. When looking in the context of 3D printing, I wonder what extra services shipping companies can offer their customers that will justify the extra cost associated with outsourcing 3D printing? This is especially prevalent as as it becomes easier to bring the technology in-house. In the same context, is it in UPS’ best interest to invest in 3D printing technology advancements or develop a partnership, keeping it separate from their core business?
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Student comments on Additive Manufacturing: Adding up to a Disruption for UPS
I have spent the last 4+ years leading activities within Boeing around Industrial uses for Additive Manufacturing, and examining its impacts from design engineering, supply chain, manufacturing & operations perspective. Based on Boeing’s and other comparable industrial firms, there is little that UPS would offer beyond its world class logistics surfaces that would be of benefit to a manufacturing organization. I disagree with the notions that UPS should invest in improving 3-D printing technology, by increasing the size of parts or numbers of materials that it can produce in a single build. In order to get to achieve the improvements in technology UPS would have to invest in creating or specifying the build of new machines, this work should be left to 3-D printing equipment manufacturers. I think they should adopt the technology once a clear leader in the technology area emerges amongst their customers. In essence, I am saying they should follow not lead.
I agree that UPS should be worried about 3-D printing, because people will be able to ship the design data for their parts to a point of use location and have the parts 3-D printed, circumventing UPS. If UPS wants to compete in the space it would need to take on the same tasks as a full service additive manufacturing bureau, which has responsibility for sourcing material, providing design & engineering support, and the multitude of post 3-D printing manufacturing processes. (as most parts are not suitable for use immediately after printing)
This is a really interesting article about a topic I have not considered despite years of using 3D printers in house as well as outsourcing 3D print jobs. I think that you are right that in house 3D printers will cannibalize some shipping business, but I think the extent to which this is the case may be overstated. I believe that 3D printed parts are differentiated from their large scale production, injection molded equivalents by the size of the orders and the speed of delivery. For the vast majority of use cases, 3D printed parts are for prototyping and need very quick delivery or creation on a rapid development cycle, so they would not cannibalize the storage portion of UPS sales. Furthermore, most of these 3D printed prototype parts are followed by an injection molded or other mass production manufacturing equivalent in real use, so UPS is not significantly damaged.
Secondly, there is already a lot of competition in outsourcing 3D printing via services such as protolabs.com. These services are much better known than UPS, and there is not much UPS can do to differentiate itself from these existing services. UPS (or Fedex, USPS) still needs to support the generally quick shipping for these outsourced 3D printed parts, so outsourced 3D printing does not damage the business in any way. UPS could look into a partnership here, but I am not sure what added value they are providing by bringing this technology in house.
Finally, I believe a good portion of shipping business lost to the 3D printed parts created in house may be offset by the shipping of raw materials for the 3D print jobs – including the filament and support trays that each individual job needs. The support materials are actually relatively significant is volume/ weight compared to the end product produced by each print job.
Berit, I loved your article and the issues you raised because I had no idea that UPS was invested in this technology, and had especially not thought of 3D printing as a threat to their business model. I also appreciate the last question you asked – as we learned in finance, it doesn’t always make sense for companies to invest in new projects, especially if they have nothing to do with their current business model. That then leads to the next question – how directly related are these two businesses actually? Should UPS be doing this diversification for us or as investors should we seek it out on our own? That conclusion from finance was actually frustrating to me because, as UPS, what do you do? Hope that enough traditional business will persist to carry the business into the future? Expect that 3D printing will never get to the scale as true, tangible goods? While this issue is specific to UPS, the questions it brings up, and what to do in the face of even just a little bit of disruption, are hard to answer.