Three technological changes are transforming manufacturing: 1) 3D printing is achieving production-ready performance levels, 2) Intelligent robotics are becoming cheaper and easier to use, and 3) Open-source electronics are enabling general purpose computing anywhere. These changes will rewrite the rules of product design and manufacturing by enabling more customized, flexible production driven by software. Enterprises must rethink strategies like supply chains, design processes, and business models to leverage these new technologies and stay competitive.

1. Global Business Services
The Software Defined Supply Chain:
How it will change product design and the
competitive landscape in every industry
Siemens PLM Innovation Conference
Phoenix, Arizona
March 2013
1 © 2013 IBM Corporation

2. The Triumph of The Model T
Three Forces At Work
Rewriting The Rules of Product Design & Manufacturing
Strategies for Staying On Top
2 © 2013 IBM Corporation

3. The Model T set the rules for modern manufacturing
The first mass
produced automobile.
The first to use
interchangeable
parts.
The first to be built on
a moving assembly
line.
Source: Wikimedia, Wikipedia, IBM Research 3 © 2013 IBM Corporation

4. Henry Ford unleashed mass production and mass consumption at an entirely new scale
Ford Automotive Output, 1901-1929
3,500,000
$5 Daily Wage
Introduced
Assembly time down to
1.5 hours
2,625,000
1,750,000 Shift to moving
production line.
875,000
Model T Introduction
Assembly time per car:
14 hours
0
1901 1903 1905 1907 1909 1911 1913 1915 1917 1919 1921 1923 1925 1927 1929
Source: Wikipedia, Ford 4 © 2013 IBM Corporation

5. By the early 1920s, competitors had copied Ford’s mass production model and were gaining
share
3,000,000
Chrysler Total
Ford Total
• Parts commonality across GM Total
models and even brands
2,250,000
• Sub-contractors and
modularization
1,500,000
“A car for every purse
and purpose”
750,000
- Alfred P Sloan
0
1901 1903 1905 1907 1909 1911 1913 1915 1917 1919 1921 1923 1925 1927 1929
Source: Wikipedia, Ford, GM, Chrysler 5 © 2013 IBM Corporation

6. From custom but interchangeable parts to standardized components in differentiated products
Custom Components Standard
Parts Assembly Modules
Mechanical Digital
Complexity Control Simplicity
6 © 2013 IBM Corporation

7. These three design principles govern how we achieve variety and quality without losing scale
The result: decades of rising productivity and quality with falling costs:
Income Compared to Automotive Pricing, 1935-2010
6,000
Income
Auto CPI
4,500
3,000
1,500
0
1935 1939 1943 1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007
Source: IBM Institute for Business Value 7 © 2013 IBM Corporation

8. The Triumph of The Model T
Three Forces At Work
Rewriting The Rules of Product Design & Manufacturing
Strategies for Staying On Top
8 © 2013 IBM Corporation

9. Today, three technological changes are at work that will transform manufacturing
Intelligent Open Source
3D Printing
Robotics Electronics
Images: MakerBot, IBM
9 © 2013 IBM Corporation

10. 3D Printing is rapidly achieving levels of performance required to be production-ready
Already used in production for
medical devices and
aerospace
Performance is improving year
on year
At lower volumes, unit costs
are competitive with machining
and plastic injection molding
10 © 2013 IBM Corporation

11. More than just a tool, 3D printing is an emerging ecosystem
Materials
Science MakerBot
Thingiverse
Printers
TinkerCAD
Open
Design
Source
Applications
Designs
Kickstarter
11 © 2013 IBM Corporation

12. We are entering the third era of robotics with the rise of truly intelligent robotics
Hard Flexible Intelligent
Automation Robots Robots
• Fixed location and • Integrated into • Easy set-up & move
function production line • Work alongside
• Delicate with low • Flexible & re-usable people
MTBF with long lead times • Low cost
Images: IBM, ABB, RobotWelding.com
12 © 2013 IBM Corporation

13. Intelligent Robots are slower and cheaper but much, much smarter
Baxter is a new kind of robot.
Baxter is cheap - about
$22,000.
Baxter is slow and safe
enough to work alongside
people.
The key to Baxter is software
that allows rapid teaching and
understands concepts like
conveyor and object.
Source: Rethink Robotics 13 © 2013 IBM Corporation

14. The final ingredient in our transformation mix is the rise of open-source general purpose
computing hardware
Embedded General Purpose
Electronics Computing
• Cheap but only in • Expensive in volume,
volume cheap as single unit
• Fixed functions • Highly flexible
• Highly reliable • Complex to manage
14 © 2013 IBM Corporation

15. We’ve reached the point where general purpose computing power can go anywhere
The Apple Lightning Digital
HDMI adapter for the iPhone.
Full ARM SoC as powerful as
many cell phones with 2GB of
RAM.
Boots when connected. Runs
Mac OS Core (XNU)
Receives MPEG stream and
converts it to HDMI output.
Embedded in the connector.
Costs $49.
Source: Cult of Mac 15 © 2013 IBM Corporation

16. All three of these tipping points have something in common: Software
From Hardware-Driven To Software-Centered
Production & Design Cycle: Production & Design Cycle:
Build A Mold or Design & Print On
Cast Demand
Hard-Wire A Easily Reconfigured
Production Line Assembly
Develop An App Development on
Embedded Chip Standard Systems
16 © 2013 IBM Corporation

17. The Triumph of The Model T
Three Forces At Work
Rewriting The Rules of Product Design & Manufacturing
Strategies for Staying On Top
17 © 2013 IBM Corporation

18. Let's come back to three guiding principles that driven product design
Custom Components Standard
Parts Assembly Modules
Mechanical Digital
Control
Complexity Simplicity
18 © 2013 IBM Corporation

19. First, the long term migration from customization to standardization will be reversed.
Custom Components Standard
Additive Manufacturing
What product options and choices would we design if there were no volume
requirements?
19 © 2013 IBM Corporation

20. Second, the shift from parts to modules will be reversed as marginal “labor” becomes free.
Parts Assembly Modules
Robotic Assembly
What kind of flexibility does your production line have if you start with
simple parts? How many tiers might you eliminate from the supply chain?
20 © 2013 IBM Corporation

21. Finally, everything product, even your light switch, will become radically smarter.
Mechanical Digital
Control
Complexity Simplicity
Radically Smarter
If you could the power of an iPhone in your toaster could you finally have a
perfect piece of toast every morning?
21 © 2013 IBM Corporation

22. These trends don't just interact with each other, they interact the whole social and digital design
ecosystem that already maturing very quickly
Crowd Sourcing Apps
Design Social Mobile Everywhere
Public Cloud Apps
Based Design Cloud Local Everywhere
22 © 2013 IBM Corporation

23. The rate at which open-source design repositories are growing looks a lot like the growth of
other social and collaborative online endeavors - which is exponential
30,000
The number of
items on
Thingiverse is 22,500
on an
exponential
upwards path. 15,000
Number of new items
uploaded into
Thingiverse each 7,500
month.
0
11/1/08 3/1/09 7/1/09 11/1/09 3/1/10 7/1/10 11/1/10 3/1/11 7/1/11 11/1/11 3/1/12 7/1/12 11/1/12
70.0
The
complexity of
new items is
on a steady 52.5
upward path.
As measured by the 35.0
most complex new
item uploaded each
month - in terms of
number of parts.
17.5
0
11/1/08 3/1/09 7/1/09 11/1/09 3/1/10 7/1/10 11/1/10 3/1/11 7/1/11 11/1/11 3/1/12 7/1/12 11/1/12
Source: Economist in cooperation with IBM 23 © 2013 IBM Corporation

24. The future is here now. Consumers are leading the way.
December 2012:
3D Printed AR-15 Lower
Receiver developed on
Thingiverse, the open-source
3D printing platform
In testing, the device fails After
15 after just 6 shots.
Thingiverse removes all
weapons projects.
Stratasys recalls the printer
used for the project.
Source: TechCrunch, Wired 24 © 2013 IBM Corporation

25. Thanks to social networking and open-source hardware design, the latest versions can easily
fire over 1,000 rounds
By March 2013:
DEFCAD and WikiWeapons
enable broad collaboration on
open-source, 3D printed
weapons.
Version 5 of the 3D printed
AR15 Receive succeeds in
shooting over 600 rounds
without failure.
Creator Cody Wilson tells the
press, “I believe in evading
and disintermediating the
state”
Source: TechCrunch, Wired 25 © 2013 IBM Corporation

26. Thanks to social crowd-sourcing, you needn’t even own a 3D printer yourself.
MakeXYZ.com enables
people to share and get paid
for their 3D printer usage.
Search locally based on
postal code.
Transmit design, print and
receive the same day.
Corporate buyers actively
considering if they really need
to buy 3D printers to
manufacturing using them.
Source: TechCrunch 26 © 2013 IBM Corporation

27. The scope and scale of crowd-sourced technology vision is extraordinary
Source: DIYRockets 27 © 2013 IBM Corporation

28. Integrating these new technologies, nimble start-ups are able to re-write the traditional end-to-
end processes that large enterprises take for granted
Idea to Market
The foundation of
Market To Order business process
design is end-to-end
Order To Cash
thinking.
New entrants are 1 Idea
leveraging technologies 5 Marketing Kickstarter 2
to drive big disruptions in
business models 4 Product Cash 3
28 © 2013 IBM Corporation

29. From Rip, Mix, Burn to Design, Download, Print.
Source: Apple 29 © 2013 IBM Corporation

30. The Triumph of The Model T
Three Forces At Work
Rewriting The Rules of Product Design & Manufacturing
Strategies for Staying On Top
30 © 2013 IBM Corporation

31. What are the likely consequences of all these changes on enterprises?
Lower Cost Design Reduced Scale for
Through Open Source Competitive Pricing
Much Faster Time To Fewer Suppliers &
Market Tiers Required
Far Less Capital
Required
Lots More Competition
31 © 2013 IBM Corporation

32. What lessons might we learn from the software business that could apply?
Supply
Services Innovators
Chain
12 345 Product
Clients
Design
32 © 2013 IBM Corporation

33. Rethink your suppy chain
Are your PPE investments
consistent with a shift to
flexible manufacturing?
The software defined supply
chain will be:
Simpler & Shorter
More Flexible
Near Design Centers or Key
Markets
33 © 2013 IBM Corporation

34. Rethink your design process
Product design is now
product marketing.
Treat digital design assets like
re-usable software code, and
use them in a much greater
variety of product.
Embrace and leverage an
open-source community
around your digital design
assets.
34 © 2013 IBM Corporation

35. Deliver products as a service
Products are typically sold as
transactions. They are the
easiest thing to replicate.
Services deliver on-going
value aligned to your client’s
needs.
Services provide a continuous
stream of revenue and a
continuous stream of
customer insight.
35 © 2013 IBM Corporation

36. Help, don’t hinder, your clients’ technology transition
Clients will figure out how use
these same technologies.
Help them.
Don’t go to war with your
clients by loading your
products with DRM or
preventing their use of new
technology.
Shift away from spares as a
source of margin and towards
higher value support services.
36 © 2013 IBM Corporation

37. Solicit innovation or face competition
80% of consumers told IBM in
a survey that they are willing
to help enterprises develop
their products.
Accept their help.
Or see them build your
competition on Kickstarter.
37 © 2013 IBM Corporation

38. In this transition, we want to help
How should my supply chain look
in light of these new models?
What IP should I protect and what
should I make open-source?
When should I start making the
technology and supplier
transitions?
- Strategy
- Execution Support
- Technology Implementation
- Outsourcing
38 © 2013 IBM Corporation

39. How soon is now?
How do you find out?
1. Tear down products built
by traditional supply
chain
2. Estimate new BoM and
BoA using a Software-
Defined Supply Chain
Concepts
3. Enlist world’s top
manufacturing experts to
build technology
roadmap for the Software
Defined Supply Chain
4. Feed new BoM and BoA
into an iLOG simulation
model
39 © 2013 IBM Corporation

40. Let’s Stay In Touch
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40 © 2013 IBM Corporation