0.7 21st century technology, digital displacement, and the role of  (Page 6/17)

The advent of additive manufacturing has far-reaching implications that may drastically change manufacturing and trade, as well as missions into space. Significantly in September 2014, the U.S. Aeronautics and Space Administration (NASA) sent a 3D printer to the International Space Station. The printer will be used to provide real-time replacement parts at the station, enhancing safety as well as efficiency.

Digital manufacturing enables firms to produce on the 3D printer what it formerly had to order from a local or foreign supplier. The vast inventory yards of large oil companies, such as those of ARAMCO, in Saudi Arabia stretch over dozens of hectares. This will be an unusual scene by 2025.

3D printing has implications for inventory management and transport costs.

1. Inventory Management
   Holding inventory is expensive. Companies may no longer need to go to the expense of holding large inventories of certain types of goods, materials and spare parts.
2. Transport Costs
   Today, transparent costs are a large percent of total costs of goods sold: goods are shipped by planes, trains, boat and mail. In additive manufacturing transport costs will be merely those of sending the specification electronically from the originator to a recipient firm’s 3D printer and the costs of materials to a recipient firm. This will surely result in a huge drop in the cost of transporting certain types of goods (not all).

Implications for sustainable growth

The implications for sustainable growth (see Chapter___) are fairly obvious. Additive manufacturing will help:

• Conserve energy
• Reduce waste
• Reduce pressure on reserves of scarce non-renewable resources over time.

Implications for economics of scale

Economic students learn all about economies of scale in introductory Microeconomics course. Prior to 2014, if one needed a single wrench for changing tires, the manufacturer would first have had to make a mold, and then pour in the metal. To do this for one wrench would be outrageously expensive. But if the firm produces hundreds of thousands of these wrenches, it can pull down the costs with economics of scale.

But, with the 3D printer, even one item can be very cheap once the firm has a fully developed 3D printing process. To order a customized hip implant (one of a kind) one merely tweaks the software for hip implants generally and sends it along. It matters little whether one or 1001 of the implants are made. The cost may be low but will not decline much with numbers produced.

The implications for international trade could be very significant. Some traditional manufacturing firms in many countries large and small will go out of business. But the big question for emerging nations is:

How will countries with low wage cost be able to compete in trade when additive manufacturing is widespread? How could developed countries still use high import tariffs to protect local industry in such a world? Could trade sanctions such as those recently directed at Iran in 2014 work at all in such a world?