Editor’s Note: Richard D’Aveni is the Bakala Professor of Strategy at the Tuck School of Business at Dartmouth College. He is the author of several books, including “The Pan-Industrial Revolution: How New Manufacturing Titans Will Transform the World.” The opinions expressed in this commentary are solely those of the author. View more opinions on CNN.
While tariffs and trade wars from the White House may threaten our jobs, peace and prosperity, technology innovations from American business could save us. Just as new technology in energy production and extraction have reduced our dependence on the Middle East, a technology innovation of a very different sort – 3D printing – is already poised to reduce our dependence on Asian factories.
3D printing is a process whereby a specialized printer repeatedly deposits thin layers of material to form a product in three dimensions. These printers can make almost any kind of shape by simply adjusting the software file for the specific product. And in recent years, 3D printing has become cost-competitive with conventional manufacturing for many kinds of products.
Suppose you’re a US company with a hot new product under development. In the past, you probably would have built a big new factory in Asia to make the product, or worked with a contract manufacturer there, along with specialist suppliers around the world.
Now, thanks to 3D printing, many companies can circumvent all the risks of a global supply chain by making most or all of their product in single smaller plants in almost any major market. Distribution costs and currency risks are reduced, and companies are insulated from trade battles. The only tariffs to pay would be on materials for the 3D printing process that need to be imported.
Of course, 3D printing isn’t practical for every industry, at least in the near future, but it is likely to spread to most of the manufacturing economy.
Over time, this localized production is likely to pay dividends not just in circumvented tariffs, but also in greater responsiveness to customers. That’s because each small factory would have a sales force that continually sends messages about the local market’s responses to the product.
With conventional manufacturing, companies can’t adjust a product until the next scheduled upgrade, because it’s expensive to redo assembly lines. But with flexible 3D printers, they can often adjust a product simply by rewriting some of the software file for that particular product.
These “additive factories” can respond to local consumer preferences much faster than their conventional counterparts with long supply chains. That responsiveness could become a major competitive advantage, which could drive the localization of manufacturing ever further. There would be fewer and fewer industries that have to worry about trade wars. Countries will still inflict tariffs and other barriers on agriculture and other commodities, but the danger to the world economy will be far less.
This distributed manufacturing will also be better for economic development. The current global trading system assumes that countries become wealthy by specializing according to comparative advantage. But most of the poor countries that have followed this approach, including many countries in Africa and South America, have had disappointing records on growth. By contrast, East Asian countries that erected trade barriers and built competitive companies in a range of industries have prospered. By shifting to 3D printing, many of these underindustrialized countries could jumpstart their manufacturing efforts and boost their technological capabilities.
Success in one industry can quickly spread to other industries. Suppose a company starts making household appliances. If it succeeds, it can readily expand to adjacent metal industries, such as lawn equipment, bicycles, or eventually even cars. Printers for one industry can be shifted to supplying another industry, as General Electric is starting to show with its multi-divisional plant in Chakan, India. If demand for one product falls while another takes off, the factory can shift most of its printers to create that product – again, without relying on complex supply chains. Industry lines will blur.
Jabil Circuit, one of the largest contract manufacturers in the world, is already using 3D printers to optimize its far-flung supply chains. For each product, it is preparing digital 3D printing files that can be easily sent from one factory to another. So if tariffs suddenly change, they can quickly shift production from a factory, say, in Asia to one in California, or vice versa. Likewise, Adidas is using 3D printing at its new Speedfactory in Germany to shorten its supply chains and bring production back from Asia. Siemens recently launched its Additive Manufacturing Network, partly to better localize manufacturing.
In order for factories to handle products from multiple industries, companies need sophisticated software platforms to manage the resulting complexity. GE, Jabil, SAP, and other advanced manufacturers are building these platforms and making them available to interested customers.
This pan-industrial approach would enable countries to rapidly diversify their economies. It doesn’t matter where a pan-industrial company is headquartered; what matters is the expertise and capabilities developed in each country or local market.
It will take a few years for companies to make the deep switch to 3D printing and reduce their dependence on global supply chains. Until then, the trade war is going to inflict damage on some companies in the United States and elsewhere. But these temporary policy dislocations should not blind us from the long-term prospects of technology capabilities that are already within reach, and nimble enough to withstand shifting Washington trade policy.