Supply Chain Management: An International Journal

Digital manufacturing-driven transformations of service supply chains for complex products

Jan Holmström Jouni Partanen
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 Research note

Digital manufacturing-driven transformations

of service supply chains for complex products
Jan Holmström
Department of Industrial Engineering and Management, Aalto University, Aalto, Finland, and
Jouni Partanen
Department of Mechanical Engineering, Aalto University, Aalto, Finland

Abstract
Purpose – The purpose of this paper is to explore the forms that combinations of digital manufacturing, logistics and equipment use are likely to
take and how these novel combinations may affect the relationship among logistics service providers (LSPs), users and manufacturers of equipment.
Design/methodology/approach – Brian Arthur’s theory of combinatorial technological evolution is applied to examine possible digital
manufacturing-driven transformations. The F-18 Super Hornet is used as an illustrative example of a service supply chain for a complex product.
Downloaded by Temple University At 02:20 31 January 2016 (PT)

Findings – The introduction of digital manufacturing will likely result in hybrid solutions, combining conventional logistics, digital manufacturing
and user operations. Direct benefits can be identified in the forms of life cycle extension and the increased availability of parts in challenging
locations. Furthermore, there are also opportunities for both equipment manufacturers and LSPs to adopt new roles, thereby supporting the efficient
and sustainable use of digital manufacturing.
Research limitations/implications – The phenomenon of digital manufacturing-driven transformations of service supply chains for complex
product does not yet fully exist in the real world, and its study requires cross-disciplinary collaboration. Thus, the implication for research is to use
a design science approach for early-stage explorative research on the form and function of novel combinations.
Practical implications – Digital manufacturing as a general-purpose technology gives LSPs an opportunity to consolidate demand from initial users
and incrementally deploy capacity closer to new users. Reengineering the products that a manufacture currently uses is needed to increase the
utilization of digital manufacturing.
Originality/value – The authors outline a typology of digital manufacturing-driven transformations and identify propositions to be explored in
further research and practice.
Keywords Information technology, Innovation, Manufacturing, Logistics
Paper type Research note

1. Introduction Much enthusiasm has been expressed over these

developments, which have even been referred to as an
Digital manufacturing technologies allow for the automatic
“industrial revolution” (Economist, 2012; Anderson, 2012; de
production of objects from CAD design files without
Jong and de Bruijn, 2013). The implications for logistics and
shape-defining tooling. Three-dimensional printing (or
supply chain management (SCM) are likely significant, but
additive manufacturing) is the best-known digital
little attention has been devoted to the emerging issues in
manufacturing technology and has been adopted for a number
logistics research and practice thus far (Christopher and
of different purposes. Recent attention-grabbing applications
Holweg, 2011).
include the distributed production of a simple gun
From the logistics and SCM perspective, these
(Greenberg, 2013) and the manufacture of a complete car
developments have important implications for theory and
body (Quick, 2010). More importantly, major industrial
practice that require new research (Tuck et al., 2007). Digital
corporations have established dedicated research centers to
manufacturing can be integrated into complex products, such
support the innovation and widespread adoption of solutions
as navy ships and isolated research stations (Peres and Noyes,
based on such digital manufacturing technologies (GE, 2011).
2006; NASA, 2013), which indicates a digital
manufacturing-driven transformation of the role of logistics in
The current issue and full text archive of this journal is available at particular problem contexts. The likely impact of digital
www.emeraldinsight.com/1359-8546.htm manufacturing is not the substitution of physical distribution

Received 24 October 2013

Supply Chain Management: An International Journal Revised 8 November 2013
19/4 (2014) 421–430 2 February 2014
© Emerald Group Publishing Limited [ISSN 1359-8546] 3 March 2014
[DOI 10.1108/SCM-10-2013-0387] Accepted 4 March 2014

421
 Digital manufacturing-driven transformation
Jan Holmström and Jouni Partanen
and logistics but the innovative combination of digital
manufacturing and conventional logistics (Holmström et al.,
2010a), resulting in new types of service operations that are
focused on value-in-use (Lusch et al., 2010). We define these
potentially innovative combinations as digital manufacturing-
driven transformations of SCM.
The concept of technology-driven transformations of SCM
builds on Arthur’s (2000) theory of technological evolution
through combination. We use Arthur’s evolutionary-
technological theory because we are interested in how the
design of solutions is transformed by the introduction of
digital manufacturing. Thus, the focus is not the diffusion
(Rogers, 1995) of digital manufacturing as an innovation in
the supply chain, but it is instead the innovative forms that a
combination of supply chain and digital manufacturing can
take. Arthur defines innovation in terms of novel
combinations of technologies. From the theoretical
perspective adopted by Arthur, technologies include any
solution and practice developed to fulfill specific human
purposes, including logistics and SCM solutions and
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practices. By theorizing the technological aspect of SCM,
Arthur’s (2000) evolutionary-technological theory
complements the more commonly acknowledged economic
and socio-economic perspectives in SCM research
(Halldorsson et al., 2007).
Electronic retailing of physical goods is an ongoing example
of a technology-driven transformation in the supply chain that
has resulted in novel combinations of Internet technology and
supply chain and logistics best practices (Kärkkäinen and
Holmström, 2002). The transformation is driven by the
introduction of the Internet for marketing and sales but relies
on state-of-the-art sourcing, inventory management,
warehouse management and last-mile distribution for
profitability and cost advantages over brick-and-mortar
retailing (Keil et al., 2001).
As a new technology, digital manufacturing similarly offers
opportunities for innovation through novel combinations with
established logistics and SCM solutions. In service supply
chains, the introduction of digital manufacturing is potentially
transformative because it is a general-purpose technology for
producing physical objects according to digital models for
which the production cost is not determined by lot size
(Christopher and Holweg, 2011). However, the
transformations are also challenging. There are still technical
obstacles to overcome, such as high cost and slow
manufacturing speed (Wohlers, 2012), and the specific service
supply chain contexts in which sufficient direct benefits can be
attained to warrant initial investments (Hanseth and Lyytinen,
2010) remain to be discovered.
For complex and high-value equipment, in this research
note, we explore the forms that combinations of digital
manufacturing, logistics and equipment use are likely to take
and how these novel combinations may affect the relationship
among logistics service providers (LSPs), users and
manufacturers. A typology of the transformations driven by
the introduction of digital manufacturing in the service supply
chain is introduced. We highlight the opportunity for LSPs to
adopt a new role in service supply chains through the
innovative combination of generic digital manufacturing and
conventional logistics services. We illustrate the concept of
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Supply Chain Management: An International Journal
Volume 19 · Number 4 · 2014 · 421–430
digital manufacturing-driven transformations for complex
equipment in the service supply chain of the F-18 Super
Hornet, one of the first examples of a product that has
incorporated digital manufacturing technology for the
production of a subsystem. To conclude, we highlight the
contribution of our theoretical analysis to SCM research and
the implications for SCM practice.
2. Combinatorial typology of digital
manufacturing-driven transformations
The introduction of digital manufacturing is by no means the
first technology to contribute to a transformation of logistics
and SCM (Gligor and Holcomb, 2012). The Internet is a
technology driving the transformation of retailing (Keil et al.,
2001; Fernie et al., 2010; Williams, 2009) and is thus an
example of a technology-driven supply chain transformation
that is ongoing. Examples from the past can also be found.
Electric motors were a technological driver of mechanization
and mass production (David, 1990), and the use of computers
for enterprise resource planning is a technological driver of
increasingly capable global manufacturing networks
(Gunasekaran and Ngai, 2004). Table I summarizes the
technological drivers, combinatorial innovations of new
technology and supply chain solutions and resulting supply
chain transformations of past and present technology-driven
transformations.
The current service supply chain for complex equipment
combines equipment manufacturing, logistics and equipment
use (Cohen et al., 2006). The introduction of digital
manufacturing in this setting has the potential to transform the
service supply chain through a number of transformative
processes in which novel manufacturing technologies are
combined with supply chain solutions to produce novel
outcomes.
A combinatorial typology of transformative processes
integrating digital manufacturing, logistics and equipment use
is developed in this study. The typology is structured to
facilitate critical realist evaluation (Denyer et al., 2008;
Henfridsson and Bystad, 2013), specifying the problem in
context, the transformation and the outcomes. The problem
in context is the introduction of digital manufacturing in the
service supply chain of complex equipment, which leads to
potentially novel combinations of technology and supply chain
solutions. First-order transformation processes result from the
combination of digital manufacturing and logistics and digital
manufacturing and equipment use. Second-order
transformations result from a further combination of
transformed logistics and equipment use (Figure 1). The
outcomes of the transformations are presented as testable
propositions to be addressed by further research. The
transformations and their proposed outcomes are introduced
in the next two sections, which elaborate on both the
first-order transformations of combining digital
manufacturing with logistics and the use of complex
equipment and the second-order transformations resulting
from the further combination of logistics and the equipment in
use. Testable propositions on the outcome of the
transformation processes are summarized in Table II in the
results chapter.
 Digital manufacturing-driven transformation Supply Chain Management: An International Journal
Jan Holmström and Jouni Partanen Volume 19 · Number 4 · 2014 · 421–430

Table I Past and present technology-driven transformations of supply chain management and logistics
Technological driver Combinatorial innovation
Mechanization Assembly and packaging lines combine mechanized
material flows, standardized parts and manual
assembly and inspection tasks (David, 1990)
Computerization Global supply networks combine mass production,
efficient global logistics and responsive resource
planning (Simchi-Levi et al., 1999)
Internet Web-based marketing and sales combine with state-of-
the-art logistics and supply chain management
(Kärkkäinen and Holmström, 2002; Garcıa-Dastugue
and Lambert, 2003)
Digital manufacturing Only early research published (Tuck et al., 2007;
Holmström et al., 2010a)
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Resulting supply chain transformation
Mass production reduces the role of local
producers and increases the role of mass-
marketing and distribution logistics, leading to a
new combination of logistics and marketing. This
new combination is supply chain management
(Alvarado and Kotzab, 2001)
Actors in the global manufacturing networks adopt
specialized roles aligned with the product
characteristics and distance to markets, thus
reducing the total costs and increasing
responsiveness (Gunasekaran and Ngai, 2004)
Electronic retailing reduces the role of physical
retail stores and distribution logistics, while
increasing the importance of last mile distribution
and supplier collaboration (Keil et al., 2001;
Williams, 2009; Fernie et al., 2010)
To be outlined in this paper

2.1 First-order digital manufacturing-driven
transformations
Next, we analyze the first-order combinatorial transformations
of digital manufacturing and logistics and digital
manufacturing and the equipment in use.
2.1.1 Digital manufacturing ⫹ logistics: transformation through
manufacturing postponement and technology deployment
The development of digital manufacturing technology
increasingly facilitates the economic manufacture of products
in smaller batches and in relatively smaller facilities
(Christopher and Holweg, 2011), thus allowing for
manufacturing postponement and locating manufacturing
closer to the points of use. Thus, we propose that the
combination of manufacturing and logistics transforms the
service supply chain through manufacturing postponement
(Pagh and Cooper, 1998; Yang et al., 2004) and the
distributed deployment of digital manufacturing capacity
(Holmström et al., 2010a).
With digital manufacturing, a parts supplier can postpone
manufacturing to the assembly lines of an original equipment
Figure 1 Typology of digital manufacturing-driven transformations for
service supply chains of complex equipment
Digital
Manufacturing
First-order combinatorial
transformaons
Equipment
Logiscs in
use
Second-order combinatorial
transformaons
manufacturer (OEM), and an OEM can locate the
manufacture of spare parts close to service units and
equipment users. Different parts can be produced in parallel
as long as there is sufficient space in the build envelope of the
machine. A complete assembly can be built simultaneously on
a single machine, and the cost of production can be split
among multiple parts of the build envelope (Ruffo et al.,
2007). The implication is that many suppliers can postpone
and combine manufacturing to later stages of the delivery
processes rather than perform these stages separately on the
premises of different suppliers; such a combination would lead
to simpler and shorter supply chains (Anderson, 2012, p.
137). Logistics costs, inventory holding, stock outs and
material handling can be reduced by scheduling parts
manufacturing when required (Ruffo et al., 2007). The likely
outcome of such manufacturing postponement is a reduction
in inventory throughout the supply chain and the
simultaneous reduction of both obsolescence and part
shortages. Such desirable outcomes are likely to encourage
manufacturing postponement, especially for rare spare parts
that are characterized by a high risk of obsolescence and high
shortage costs.
The critical transformation for the successful introduction
of digital manufacturing in logistics is not manufacturing
postponement but the deployment of digital manufacturing
capacity in the supply chain. In a service supply chain, it is
likely that initially only a small number of parts can be digitally
manufactured because products have been designed for
conventional manufacturing. The utilization of digital
manufacturing capacity for parts production will therefore be
low, which indicates that another potentially significant
transformation process exists in addition to manufacturing
postponement. The introduction of digital manufacturing in
service SCM and successful manufacturing postponement
hinges on capacity deployment and the reengineering of
products for digital manufacturing (Holmström et al., 2010a),
i.e. aligning product design with the supply chain (Khan et al.,
2012).

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Jan Holmström and Jouni Partanen Volume 19 · Number 4 · 2014 · 421–430

Table II Testable propositions of digital manufacturing-driven transformations in complex equipment service supply chains
Combination
First-order combination
Digital manufacturing ⴙ logistics
Digital manufacturing ⴙ equipment in use
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Transformation
Manufacturing postponement
(Pagh and Cooper, 1998)
Technology deployment
(Holmström et al.;2010a)
Servitization (Vandermerwe
Testable propositions on
outcomes Research approach
Digital manufacturing in combination Single-domain logistics
with conventional logistics enable Modeling and simulation
manufacturing postponement in
service supply chains Digital
manufacturing-driven postponement
reduces inventory, obsolescence and
parts shortage costs of the service
supply chain
Problem contexts can be found Multidisciplinary Design
where distributed deployment of science, cases
digital manufacturing capacity is
beneficial Product reengineering
procedures can be developed for
shifting parts to digital
manufacturing
Procedures for the incremental Multidisciplinary Design

and Rada, 1989) redesign, refurbishment and science, cases

Second-order combination
Logistics ⴙ equipment in use
Digital infrastructure
evolution (Henfridsson and
Bygstad, 2013)
Demand consolidation
(Cohen et al., 2006)
Trust-based security (Kagal
et al., 2001)
improvement of the maintenance of
equipment in use can be developed
using digital manufacturing Digital
manufacturing shifts operational
focus from product types to unique
product instances
Digital manufacturing can be Multidisciplinary Design
incorporated into a wider digital science, cases
infrastructure for standardized
processes (design, production, sales
and maintenance). Infrastructure
evolution reduces the standardization
of equipment and parts while
increasing the standardization of
processes
As aggregators of demand, LSPs can Single-domain logistics
bring digital manufacturing closer to Modeling and simulation
locations of use
LSPs need to take on a role as Multi-disciplinary Design
trusted handlers of physical parts science, case study
and digital product models Upstream
flows will increasingly involve digital
product models, whereas
downstream manufacturers will
strive to retain conventional
logistics-based solutions

Currently, the number of parts and subsystems that have been
digitally manufactured is very limited (Atzeni et al., 2010).
Most equipment contains no such parts and subsystems.
However, once complex equipment contains some such parts
and subsystems, a transformation based on the deployment of
digital manufacturing in the supply chain may be initiated.
The transformation rests on the proposition that it is possible
to develop procedures to systematically increase the number
of components – for both new and old equipment – that are
produced using digital manufacturing. The potential for the
development of such procedures for rare parts is already
evident in the use of 3D scanning to create digital models for
medical applications (Salmi et al., 2012). Digital replication
procedures and 3D product models must be combined with
the deployment of digital manufacturing in an incremental
transformation process.
2.1.2 Digital manufacturing ⫹ equipment in use: transformation
through servitization and infrastructure evolution
The introduction of digital manufacturing transforms the
use of equipment through servitization and digital
infrastructure evolution. Servitization is the process

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 Digital manufacturing-driven transformation
Jan Holmström and Jouni Partanen
through which OEMs offer more focused combinations of
goods, services, support, self-service and knowledge to
equipment users (Vandermerwe and Rada, 1989). An
infrastructure is a structure on which something else runs or
operates. In the evolution of successful digital
infrastructures, different systems are adopted and
combined in a way that supports innovation and more
effective processes (Henfridsson and Bystad, 2013).
Digital manufacturing can be incorporated into a wider
digital infrastructure for standardized processes. Just as
today’s computers and computer networks are becoming part
of a quiet, invisible and unobtrusive infrastructure (Norman,
1998), manufacturing, or the act of making a physical object,
is becoming an integral part of a wider digital infrastructure.
The digitalization of physical artifacts makes these artifacts
addressable, communicable, sensible and traceable (Yoo et al.,
2010). With the installed base information consisting of digital
product models and use information collected by users,
service personnel and intelligent equipment that monitors its
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own use compose a potential infrastructure for more
fact-based processes in design, sales and maintenance
(Holmström et al., 2010b). It is possible that digital
infrastructure evolution will allow processes to be more
standardized, though the products and services are becoming
more customized. This ability to differentiate products
according to customer requirements without sacrificing
cost-efficiency is the basis for mass-customization (Pine,
1999).
The extension of the life cycle of the products in use
through limited product development efforts is a conceivable
path for the expansion of digital manufacturing. Likely
products for initial application are those that were originally
engineered to order and customized. For example,
incremental weight reduction and performance improvement
of mobile equipment would be possible through redesign for
digital manufacturing. The introduction of digital
manufacturing may thus enable equipment manufacturers to
focus on the equipment being used by individual users and
improve user operation in terms of value and performance
(Lusch et al., 2010). The outcome of this servitization
transformation, coupled with the digital infrastructure
transformation, is that manufacturers focus more on unique
product instances than on product types.
A servitization transformation driven by digital
manufacturing and access to digital infrastructure for
monitoring performance may, for example, allow equipment
manufacturers to overlap product design and improving the
equipment in use (Reeves et al., 2011), thus rendering a type
of “product Darwinism” possible. Consecutive versions of
equipment are increasingly adapted to the equipment’s
purpose as equipment is redesigned, refurbished and
monitored in use and its performance is systematically
improved. Alternative solutions can be deployed in similar
problem contexts, and the best solutions are selected and
transferred incrementally to all users. Manufacturers would
then be able to provide customers with a product that may
actually become better rather than degrade over time
(Anderson, 2012, p. 133).
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2.2 Second-order digital manufacturing-driven
transformations
The introduction of digital manufacturing also changes the
relationship between logistics and equipment use in
second-order combinatorial transformations. Next, we
consider the form that these second-order transformations
may take.
2.2.1 Logistics ⫹ equipment in use: transformation through
demand consolidation and trust-based security
We identify two possible second-order combinatorial
transformations from the introduction of digital
manufacturing in the service supply chain of complex
equipment. These transformations are the consolidation of
demand (Cohen et al., 2006) and the trust-based security with
regard to the distribution of physical parts and digital product
models (Kagal et al., 2001). The consolidation of demand
allows service providers to invest in and dynamically improve
the utilization of assets, such as digital manufacturing, that are
needed in service provision. Trust-based security allows for
the delegation of responsibility, ensuring that parts and digital
product models are used for legitimate purposes without
endangering the safe use of equipment.
The introduction of digital manufacturing is not likely to
replace conventional logistics. Although it is conceivable that
the digital manufacturing of spare parts is included as an
integrated function of the equipment in use (Peres and Noyes,
2006), the digital manufacturing of parts is a slow process that
takes hours to days, depending on the part size and precision
requirements (Gibson et al., 2009; Kruth et al., 1998).
Manufacturing also includes manual tasks such as parts
cleaning, the examination of the raw materials and the testing
of robustness and conformance to specifications requiring
knowledgeable operators (Eyers and Dotchev, 2010). These
inclusions indicate that even in situations in which there is an
urgent need for parts, it is likely faster and more efficient to
have an inventory of line replacement units on hand (i.e. a
critical part or module that can be used immediately) and to
consolidate digital manufacturing at dedicated support
locations.
Demand consolidation provides opportunities for LSPs in
terms of supporting the users of many different equipment
manufacturers by combining generic digital manufacturing
and conventional logistics (ManRM, 2005). The
consolidation of demand from a number of use locations
enables an LSP to invest in digital manufacturing using
deployment that is less risky than for equipment
manufacturers and their parts suppliers. By working with a
number of manufacturers, LSPs can potentially bring support
locations incrementally closer to equipment in use as the
application of digital manufacturing increases.
Proactive innovation has been shown to positively affect the
loyalty of LSPs’ customers (Wallenburg, 2009). However,
LSPs’ ability to play this role depends on their ability to act as
gatekeepers of product models and physical parts. The
development of trust-based security is essential if LSPs are to
play a significant role in a transformation driven by digital
manufacturing. Because of the intellectual property value of
digital product models and data collected by embedded
systems, it is likely that equipment manufacturers want to
control end-user access (Paar and Weimerskirch, 2007).
 Digital manufacturing-driven transformation
Jan Holmström and Jouni Partanen
Manufacturers may even want to restrict access to physical
parts because the development of scanning and replication
technology makes unauthorized and potentially hazardous
copying increasingly easy (Raja and Fernandes, 2008). The
development of trust-based solutions by LSPs would lead to a
transformation in which upstream supply chains would
increasingly handle digital product models, whereas
distribution between support locations and locations of
maintenance and use would be based on conventional
logistics.
Trust-based security signifies that instead of developing
complex solutions to interact with a large number of users,
OEMs can manage access by collaborating with third parties
who act as trusted gatekeepers. An LSP is likely to share an
interest in keeping digital product models secure and avoiding
unauthorized copying with the OEM. End-users who engage
in digital manufacturing do not share financial interest with an
OEM in the controlled access and use of product models
(Lan, 2009).
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2.3 Testable propositions for further research on
digital manufacturing-driven transformations
The implications of introducing digital manufacturing is not
yet fully recognized as being relevant for supply chain
innovation (Ageron et al., 2013). Thus, our research note is a
contribution that notes issues to be investigated in a new
stream of supply chain innovation research building on the
theory of technological evolution through combination
(Arthur, 2000). In Figure 2, we summarize the first- and
second-order transformations that we identified for
successfully using digital manufacturing technology in
combination with logistics and complex equipment.
Testable propositions for further research on the
combinatorial transformations in the context of complex
equipment are presented in Table II. The propositions suggest
the type of outcomes that can be expected, though the first
service supply chains combining digital manufacturing,
conventional logistics and monitoring of equipment use are
only now being introduced on a small scale. Many in the
vanguard of this digitally driven industrial transformation are
“makers” who use open-source software and hardware
platforms (Anderson, 2012), while established manufacturers
of proprietary designs (e.g. aeronautics manufacturers) are
increasing their efforts to follow suit (de Jong and de Bruijn,
2013).
Figure 2 Digital manufacturing-driven transformations of service
supply chains for complex equipment
Digital
Manufacturing
Trust-based security
Equipment
Logiscs in
Demand consolidaon use
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Some of the proposed outcomes of combinatorial
transformations fall fully within the domain of logistics and
SCM and can be studied using familiar methods.
Manufacturing postponement and demand consolidation are
single-domain logistics research topics and are thus suited to
research using modeling and simulation methods (Harrison
et al., 2007). However, other outcomes of the combinatorial
transformations traverse established disciplines of SCM,
product design, information systems and service engineering.
Research on this type of exploratory and early-stage
combinatorial transformation is well-suited to a design science
approach elaborating both problems and possible solutions
(Holmström et al., 2009; Holmström and Romme, 2012). For
example, an understanding of how technology deployment
potentially changes the service supply chain is at a very early
stage. Practice-oriented trial and error using digital
manufacturing is of course needed, but such piloting also
requires design-oriented research for developing solutions to
shift spare parts to digital manufacturing. For insights into
trust-based security, researchers can use a case-based
approach to seek comparisons with industries in which the
digitalization of manufacturing and delivery has already
occurred (Voss et al., 2002).
3. Digital manufacturing-driven transformation
in practice: the F-18 Super Hornet service supply
chain
The F-18 Super Hornet is one of the first products for
which a complete subsystem has been manufactured using
digital production techniques. Although digital
manufacturing has only been used for producing this
subsystem, the Super Hornet provides a realistic setting for
evaluating the potential for digital manufacturing-driven
transformations in the context of the service supply chain of
complex equipment.
3.1 First-order combinatorial transformations
3.1.1 Digital manufacturing ⫹ logistics
The air-cooling ducts of the F-18 Super Hornet fighter jet
environmental control system are produced via selective
laser sintering, an additive manufacturing technology
(Hopkinson et al., 2006). Spare parts for the fighter plane’s
air ducts could, in principle, be produced centrally in the
manufacturing plant, in distribution centers or on airbases
at the point of maintenance. However, the parts are large
and slowly manufactured, whereas the user response time
requirements for spare parts are high. Thus, regardless of
where the parts are produced, line replacement units must
be available at the point of maintenance. Manufacturing
postponement eliminates the need for inventory to cover
order fulfillment lead times by upstream echelons, but not
the need for inventory to cover digital manufacturing lead
time.
Considering the current cost of deploying digital
manufacturing, direct benefits of manufacturing
postponement are absent unless applied in particularly
challenging settings, such as aircraft carriers and isolated
airbases (Peres and Noyes, 2006). Furthermore, because only
one subsystem of the Super Hornet is produced using digital
manufacturing, such a deployment is very costly. The location
 Digital manufacturing-driven transformation
Jan Holmström and Jouni Partanen
of manufacturing at each US Navy point of maintenance
would require 20 machines, whereas only five would be
required in scenarios in which manufacturing is located in the
factory or within distribution centers (Khajavi et al., 2014).
Here, the Super Hornet example illustrates how product
reengineering efforts are needed to increase the number of
parts that justify the deployment of digital manufacturing in
the service supply chain. In the case setting, the redesign of
environmental control systems for other airplanes would
facilitate the deployment of digital manufacturing closer to
points of maintenance by aggregating demand for parts of
different types of airplanes.
3.1.2 Digital manufacturing ⫹ equipment in use
The introduction of digital manufacturing in the Super
Hornet service supply chain illustrates the potential of
servitization by focusing on equipment in use. The F-18
fighter jet’s air ducts were not originally produced through
digital manufacturing. Digital manufacturing was only
introduced because the customer wanted to improve the
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performance of the fleet of airplanes already in use. The
requirement was the addition of six new avionics systems,
which limited the space available for the environmental
control system air-cooling ducts. At the same time, the
addition of new computer systems increased the need for
cooling. Digital manufacturing was necessary for the design
team to redesign the environmental control system of the
existing equipment. Digital manufacturing facilitated the
combination of different ducts into single parts for integrating
the attachment mechanisms into the parts and reducing the
overall number of parts (Hopkinson et al., 2006).
Regarding the evolution of digital infrastructure, the
improvement of equipment in use in the Super Hornet
example is connected to the product type. Individual airplanes
are not redesigned and refurbished based on performance
tracking and condition. Digital manufacturing is not
considered part of a wider digital infrastructure for
performance-based design, logistics and maintenance of
individual airplanes. However, in the defense sector, there is
increasing pressure on equipment manufacturers to find new
ways to improve performance and reduce cost throughout the
life cycle of the equipment in use (Kim et al., 2007), which
Figure 3 Network benefits of the consolidation of demand for digital manufacturing
Digital manufacturing in central locations in
collaboration with one OEM
Central locaon Line replacement
unit
OEM
Source: Holmström et al. (2010a)
Supply Chain Management: An International Journal
Volume 19 · Number 4 · 2014 · 421–430
may eventually make it more interesting to differentiate
individuals of a fleet over time.
3.2 Second-order combinatorial transformation
As indicated above, the capacity utilization of digital
manufacturing dedicated to the production of spare parts for
the environmental control system falls drastically as
manufacturing is postponed until the point of maintenance.
However, the low initial utilization is also an opportunity for
generic capacity. In central locations, high-capacity utilization
of digital manufacturing could be achieved in collaboration
with one or a few equipment manufacturers. Because digital
manufacturing is moving closer to the use locations, a single
machine has sufficient capacity to support a higher number of
equipment manufacturers. Figure 3 illustrates the opportunity
to consolidate the demand of different manufacturers in the
naval airbase setting.
In the Super Hornet example, the organization of users is
well-positioned to consolidate the demand for parts from
many manufacturers. Thus, there is not a significant role for
an LSP in consolidating demand. However, in settings where
users’ equipment fleets are smaller and more dispersed, a
third-party digital manufacturing provider would have an
opportunity to consolidate many manufacturers’ demand for
parts and be able to deploy digital manufacturing close to
users.
Regarding the possibility of trust-based security
transformation, digital product models are not handled and
shared openly in the Super Hornet setting.
4. Conclusions
Applying Arthur’s combinatorial theory of technological
evolution, we have indicated how the introduction of digital
manufacturing in the supply chain is likely to result in new
combinations of existing practices, while also creating a need
to develop further supporting solutions. On the one hand, the
innovative combinations of digital manufacturing and supply
chains will decrease supply chain complexity through simpler
and more effective solutions. Instead of dealing with supply
chain complexity (Bozarth et al., 2009), manufacturers can
use digital manufacturing as a means to simplify their supply
Digital manufacturing at point of maintenance in
collaboration with many OEMs
Installed base Line
Point of
OEM replacement Installed base
maintenance
unit
427
 Digital manufacturing-driven transformation
Jan Holmström and Jouni Partanen
chains (Hoole, 2005) by producing parts closer to assembly
lines and points of maintenance. On the other hand, it is
essential to recognize the added complexity from new
procedures for reengineering products in use. Because the
utilization of digital manufacturing is initially low when only
parts with special requirements are produced digitally, the
willingness and ability of equipment manufacturers to
re-engineer their products for digital manufacturing is pivotal.
Thus, from the perspective of the equipment manufacturer,
the introduction of digital manufacturing is not initially a
process reengineering challenge, but it is instead a product
reengineering challenge to enable digital manufacturing-
driven postponement and servitization.
A practical implication of our analysis is that digital
manufacturing is a potential infrastructure technology.
However, as with all infrastructure, someone must build it.
For an infrastructure to emerge incrementally requires that
some party is able to bootstrap direct benefits from a limited
number of first users to attract an expanding network of new
users (Hanseth and Lyytinen, 2010). Our analysis indicates
Downloaded by Temple University At 02:20 31 January 2016 (PT)
that significant and direct benefits can be identified for
manufacturers of complex and high-value equipment in
particularly challenging settings. However, to create an
infrastructure, it is neither the manufacturer nor the end-user
but the LSP that is best positioned. Assuming that digital
manufacturing will evolve as a general-purpose technology,
LSPs have been given an opportunity to consolidate demand
from initial adopters and incrementally deploy capacity closer
to users as new applications are introduced.
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Corresponding author
Research, Vol. 21, No. 4, pp. 724-735. Jan Holmström can be contacted at: jan.holmstrom@aalto.fi
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