3-D Printing May Not Reduce Supply Chain Risk

MarketLine Expert View (Formerly Datamonitor)

April 8, 2014

The overall effect of 3-D printing on manufacturers' reliance on third parties is still an unknown, and will be determined by individual businesses' supply chains. Business interruption insurers need to be aware of the individual factors to avoid overestimating the impact.

The use of 3-D printing is slowly increasing for both commercial and personal applications as restrictions are lifted due to the expiry of patents. The technology has the potential to significantly alter the manufacturing sector by enabling companies to produce products or parts of products more independently. This will have implications for insurers underwriting business interruption as well as other lines of business such as property and liability.

While 3-D printing may reduce manufacturers' reliance on third-party suppliers by allowing them to make parts themselves, whether it will reduce supply chain risks for these businesses is another matter. It is entirely possible that moving to 3-D printing will merely shift individual risks without significantly changing overall exposure. Businesses that utilize 3-D printing will be dependent on these systems functioning as they should. More specialized printing techniques will mean a higher risk of business interruption in the event of a disruption to the system.

Similarly, businesses that require specific materials will still be dependent on the suppliers that provide those materials—this will particularly be the case for regulated products, such as prosthetics that require certain materials for health and safety reasons. Reducing risk by cutting a parts supplier from the supply chain may merely result in another risk arising due to the involvement of a materials supplier. 3-D printing will become more and more widespread over time and may indeed reduce supply chain risks for some businesses. However, the main beneficiaries of this technology are likely to be those that are less specialized and less dependent on specific 3-D printing techniques or materials. Insurers providing business interruption cover will need to ensure they are aware of the individual factors to correctly judge the impact.

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