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Jan. 20, 2019, 9:59 a.m. EST

How old-school manufacturers can reinvent themselves and beat back the software giants

Game-changer of 3-D printing and additive technology will equalize Silicon Valley and the resurgent Rust Belt

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By Richard D’Aveni

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Additive manufacturing’s flexibility will create all sorts of savings and opportunities, because a 3-D printer can switch easily from one product to another. This is already happening at Jabil /zigman2/quotes/203847835/composite JBL +3.54% , a $22 billion Florida-based contract manufacturer that uses printers in factories so its supply chain software platform optimizes production as well.

In the past, if a new product became unexpectedly popular, Jabil would have to spend weeks and perhaps millions of dollars setting up a new production line or retooling an existing line. With 3-D printers, the company can switch over production in a few hours or days, just by uploading the new product’s design specifications.

While 3-D printers aren’t all-purpose — a metals printer can’t suddenly switch to plastics — they have far more range than traditional assembly lines. They’re also more automated, which adds to the flexibility, though it may also exacerbated worries about technological unemployment.

Even here, the software giants could catch up, probably by acquiring an additive manufacturer and investing heavily in the software.

A more decisive victory can be achieved by the second additive advantage: pan-industrialism.

The pan-industrial advantage

Most factories traditionally produced for only a single industry. If demand fell, machines went idle. But with additive technology, Jabil, for example, can make goods for several industries at the same site. Likewise, GE’s multidivisional plant in Pune, India, combines 3-D printers and conventional production equipment. It can make parts for gas turbines, jet engines, and locomotives. If demand for electric power falls but that for airplanes takes off, the 3-D printers can boost production of the aviation parts.

To capture these benefits across industries, manufacturers need sophisticated software platforms like Jabil’s to coordinate and optimize all the operational decisions. Once those platforms are in place, their flexible factories will operate close to capacity — a key to profitability in manufacturing. They’ll achieve operational synergies that conglomerates could never get.

GE is probably going to take a break now from this multi-industry developments as it focuses on restructuring, but Siemens /zigman2/quotes/200873563/delayed DE:SIE 0.00%   /zigman2/quotes/205905025/delayed XE:SIE -0.57%   /zigman2/quotes/204584405/composite SIEGY +2.29% , United Technologies, Sumitomo Corp. /zigman2/quotes/209745829/delayed JP:8053 -1.46% and other big manufacturers are investing in these platforms.


Houghton Mifflin Harcourt

As these synergies spread, we’ll have a whole new ballgame in manufacturing. Wide-ranging diversification will go from being a Wall Street no-no to a competitive edge. The more industries you have (within the limits of your additive technology), the greater your synergies. Because everything is connected and optimized with an industrial platform, companies can handle operational complexity that would overwhelm old-fashioned conglomerates.

These highly diversified companies, or what I call “pan-industrials,” will bring both heft and digital sophistication to battle. They’ll invite suppliers and distributors to connect to the platform, and eventually other companies in their broad ecosystem. The larger pan-industrials will host burgeoning marketplaces, far beyond their own immediate production needs.

Unlike current manufacturing companies, these pan-industrials will have the size and networks to prevail against the software giants muscling into their businesses.

Software may still end up eating the world. But if they play their cards right, manufacturers will hold the fork.

Richard D’Aveni is the Bakala Professor of Strategy at Dartmouth College’s Tuck School of Business, and author of “The Pan-Industrial Revolution: How New Manufacturing Titans Will Transform the World.” Follow him on Twitter @rdaveni.

/zigman2/quotes/203847835/composite
US : U.S.: NYSE
$ 30.98
+1.06 +3.54%
Volume: 1.29M
June 1, 2020 4:00p
P/E Ratio
36.38
Dividend Yield
1.03%
Market Cap
$4.51 billion
Rev. per Employee
$119,508
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/zigman2/quotes/200873563/delayed
DE : Germany: Frankfurt
97.80
0.00 0.00%
Volume: 0.00
May 29, 2020 8:58p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
N/A
Rev. per Employee
€219,884
loading...
/zigman2/quotes/205905025/delayed
XE : Germany: Xetra
98.53
-0.56 -0.57%
Volume: 3.76M
May 29, 2020 6:30p
P/E Ratio
19.75
Dividend Yield
3.96%
Market Cap
€80.08 billion
Rev. per Employee
€219,884
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/zigman2/quotes/204584405/composite
US : U.S.: OTC
$ 56.26
+1.26 +2.29%
Volume: 226,414
June 1, 2020 3:59p
P/E Ratio
15.65
Dividend Yield
2.77%
Market Cap
$89.40 billion
Rev. per Employee
$259,582
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/zigman2/quotes/209745829/delayed
JP : Japan: Tokyo
¥ 1,279.00
-19.00 -1.46%
Volume: 3.45M
June 1, 2020 3:00p
P/E Ratio
9.33
Dividend Yield
5.47%
Market Cap
¥1621.57 billion
Rev. per Employee
¥70.97M
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