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Why Production could return to where it started, near the End-User

Shoe re-pair, the new economic reality? (photo: Peter de Ruijter)

In a liberalized, networked and westernized society we have witnessed an increasing trend of concentration of manufacturing and assembly facilities in pursuit of global economies of scale. In particular this has been a move of manufacturing towards China. In the near future some factors have the potential to reverse this trend, dispersing these production facilities, pendulum style, back to where the product end-user is located.

In The Economist of april 21-27th 2012 a special report featured the ‘third industrial revolution’, identifying the digitization of manufacturing processes as a key driver of a new relocation wave of manufacturing facilities. Ongoing automation and, more recently, the development of 3D printing technology (or additive manufacturing) are making tooling labor increasingly redundant. With the Apple iPad as an example, the report shows that tooling labor now no longer is a significant cost factor in total product cost.

With advancing production technology and the ‘squeeze-out’ of production labor, production of customized products will increasingly become as cost efficient as a mass-produced product. The report argues that customized production requires relative proximity to the end-user in order to ensure acceptable delivery times, and flexibility to respond to changing customer demands. Labor skills will increasingly need to be focused on enabling customized production and efficient time-to-market processes in order to ensure business success.

This article argues that, while 3D printing is a very promising new technology, it will need to be embedded in a service-based economic framework for success. Resource scarcity both on the materials as well as on the energy side are shaping up to be powerful factors in pushing manufacturing in the same direction, back to the end-user. A service-based economy is focused on closing materials loops and on meeting customer needs with a minimum of resource usage (both materials and energy).

In the past 2 decades or so cheap energy has enabled a western globalizing economy based on material consumption. Globalization has laid down the conditions for rapid economic development of countries on virtually every continent. All are striving (rightly so, I might add) to create better living conditions and economic prospects for their citizens. At the same time many researches have already quite unequivocally proven that our globe does not possess the resources to have all world citizens ‘consume’ at the level of say a European citizen, let alone a US citizen. It is physically not possible, period.

One of the strategies that governments and businesses are increasingly considering is to decouple demand for raw materials from economic growth, by finally and drastically transforming our linear production processes (resulting in mind boggling amounts of ‘waste’) into cyclical production processes. Products and materials are re-used, re-tooled and recycled over and over again.

In a circular economy, using secondary (recycled) over primary (raw) materials in production processes relieves the demand for primary materials and saves a whole lot of ecological damage to our natural environment. And, guess where these secondary (recycled) materials are located? Correct, with the end-user.

Taking the circular economy one step further is to decouple resource demand (for raw, recycled materials and energy) from economic growth, by developing a service-based economy. A service-based economy no longer measures welfare, wealth and identity in terms of the level of material consumption. Central is a focus on selling a service that meets a need, instead of selling a product.

An example is delivering clean air in buildings, instead of delivering an HVAC system, with all its consequent resource impacts. Smart design is critical in accomplishing business models where focus moves away from moving as many material products as possible towards meeting as many needs a possible, with a minimum of resource usage.

Building a service-based economy will require fundamental changes on many levels, social, technical, economical, cultural and political. A service-based economy, with a focus on design for needs, closed material loops and reduced resource usage would require new types of enterprises, new ownership models, new labor skill sets, new knowledge on materials, design, product life cycle, supply chain, and so on.

Implementing ‘green’ fiscal policy is an example of how the political arena can stimulate a shift from material product sales towards meeting needs, by taxing (raw or recycled) materials usage, in favor of reducing fiscal burden on labor cost. This will stimulate new economic activities to form, focused on re-using, re-tooling and recycling.

The potential of 3D printing technology to fit into and support the development of a service-based economic model is enormous. It facilitates closeness to the end-user, a characteristic important in the transition towards design for needs, closing material loops and reducing resource usage. Utilizing technology merely to churn out the customized ‘numbers’ will not only fail to provide solutions for the resource issues our global networked society desperately needs, it is an under utilization of the potential of technology in the transition to a sustainable society.



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