Distributed 3D Printing of Spare Parts via IP Licensing

Abstract

Problem definition: We consider an OEM supplying a single part to multiple buyers over an infinite horizon. We study how the OEM can digitize the spare parts supply chain by leveraging 3D printing via intellectual property (IP) licensing. Academic/practical relevance: Additive manufacturing, also known as 3D printing, has the potential to shift supply chains from global networks that rely on centralized production with traditional manufacturing technologies to mainly digital networks with distributed, local printing. Particularly well positioned to drive this transition are original equipment manufacturers (OEMs) who design and produce capital goods. Methodology: We first set up a benchmark model of the traditional physical supply chain with centralized production by the OEM. We then propose the OEM to act as an IP licensor by selling spare parts designs, rather than physical parts. With the license agreement, a buyer can print parts locally through a third-party printing service provider, enjoying a shorter lead time and lower setup cost. Given a license, each buyer chooses whether to switch to the IP licensing channel or stay in the traditional channel. The OEM selects the license terms to maximize the total profit across both channels. Results: We characterize the OEM’s optimal license and the resulting supply chain configuration. We show that 3D printing’s competency in price plays a dominant role in production decentral- ization. The conventional wisdom that 3D printing is suitable for slow moving parts holds only when it is competent along several dimensions. In a numerical experiment with realistic parameter settings, decentralized production occurs in a surprisingly large number of cases, and the proposed new business model can significantly increase the OEM’s profit. Managerial implications: Our results indicate that IP licensing by OEMs can become a major enabler in the transition to digital supply networks with distributed 3D printing, benefiting all parties involved.

Recent Inventions in Additive Manufacturing: Holistic Review

“…Licensing facilitates a wider reach, the diversification of revenue streams, and collaborations with established market players. An example specifically enabled by AM is the licensing of spare parts based on creating and managing a digital inventory [22].…”

Personal fabrication as an operational strategy: Value of delegating production to customer using 3D printing

“…Zhang et al. (2022) study how business‐to‐business licensing of product designs for 3D printing can reduce the inventory and distributional cost of spare parts. Westerweel et al.…”

“…Song and Zhang (2020) study the spare parts logistics decision in the presence of a 3D printing alternative. Zhang et al (2022) study how businessto-business licensing of product designs for 3D printing can reduce the inventory and distributional cost of spare parts. Westerweel et al (2021) study the benefits of 3D printing spare parts at remote locations and apply their model to a real-world case study.…”

Research Handbook on Inventory ManagemenT

“…There has been empirical research on determining which spare parts are economically interesting to print [13,9] or how companies may share their printing capacity [8]. There has further been analytical research on models that include the option of 3D printing [24,31], investigate when to switch from conventional manufacturing to 3D printing [30], or investigate how to arrange IP licensing such that users of spare parts may be allowed to print spare parts themselves [33].…”