Inventory management is very difficult in a spare parts warehouse. For example, if you are a car or truck manufacturer, your warehouse network needs to carry spare parts for a vehicle you might have stopped making decades ago. Further, your network of dealers and repair shops don’t want to wait for spare parts; industry standard is to provide them with next day delivery of requested parts.
What this means is that a spare parts warehouse might have to carry a number of slow-moving C items and incur their associated inventory carrying costs.
A spare parts warehouse can also end up storing tens, or even hundreds, of thousands of stock keeping units (SKUs). That means a large warehouse and high capital expenditures. A large warehouse means longer picking paths, which means higher labor costs. Finally, it is not unusual to distribute slow-moving parts in two steps: a national distribution center air freights the part to a regional warehouse that then ships it out to the dealer. This means high transportation costs.
But the spare parts warehouse is on the cusp of a revolution when it comes to managing slow-moving inventory. These DC’s are going to become manufacturers of C items.
ARC Advisory Group recently published a report by Dick Slansky titled, “3D Printing: Creating Physical Parts and Products from Virtual Models” (available to ARC clients only). Here are a few excerpts from the report:
While a bit misleading, the term “3D printing” refers to a manufacturing process in which three-dimensional computer-aided design (CAD) files are downloaded to a machine that creates multiple layers of material (paper, plastic, metal, etc.) that are then fused together to form a three-dimensional object representing an exact replica of the 3D virtual model.
From a technological perspective, 3D printing is an outgrowth of traditional 2D printing in which a layer of material (usually some form of ink) is applied. The layer is so thin there is no noticeable height. What 3D printing does is to greatly extend that height by applying multiple layers of materials, adding the third dimension and actually building the object. Software that takes a series of digital slices through a CAD model defines the layers. These digital slices can be put together using different techniques that involve a variety of technologies.
To produce auto parts, for example, “metallic powder can be spread onto a tray and then solidified by using a liquid binder or by sintering it with a laser or an electron beam.” A tailpipe, for example, can be made by adding layer after layer of stainless steel powder and then cooking it with an electron beam laser. The SKU would need to be lightly finished at the end of the manufacturing process.
“Today, 3D printers are mainly used by design engineers to build part prototypes,” Slansky writes in the report. “However, this is changing rather quickly as manufacturers look to use 3D printing to build production parts that will be used in larger assemblies, as well as direct products for the consumer.” Further, “as 3D printers have become more sophisticated, reliable, and capable of working with a broader range of materials and processes, the machines are increasingly being used to make actual production parts. Today, more than 20 percent of the output of 3D printers is for production parts rather than prototypes.”
From a spare parts perspective, one advantage of this process is that there is no long tooling set-up process, which would make it uneconomical to produce small lots and would require warehouses to store more parts than they really need. Also, when spare parts are made of expensive raw materials, such as titanium for an aerospace spare part, this form of manufacturing has the advantage of being “additive” — i.e., you don’t have to bore out and waste an expensive raw material.
Additive manufacturing represents a disruptive technology that will support a significant change in the way companies manage a network of spare parts warehouses. Eventually, it is a technology that might, as Slansky put it, “help usher in a new economic model for manufacturing in which mass customization and manufacture-to-order will prevail.” But in the nearer term, as the cost and reliability of additive manufacturing continues to improve, it is apt to transform warehousing first.