Strategic Adoption of 3D Printing in Multi-Product Supply Chains: Cost and Capacity Considerations

TL;DR

This paper analyzes how 3D printing impacts supply chain strategies, especially under capacity constraints, using game theory to identify when AM adoption is advantageous despite higher costs.

Contribution

It introduces a multi-product, capacity-aware model for strategic AM adoption, deriving equilibrium conditions and critical cost thresholds in supply chains.

Findings

AM can be viable even with higher costs than traditional methods.

Limited capacity can restrict AM adoption under high demand.

Equilibrium conditions depend on demand distribution and cost thresholds.

Abstract

This paper explores the integration of Additive Manufacturing (or 3D printing) into decentralized supply chains, focusing on the strategic decisions manufacturers and retailers make when facing capacity constraints. Using a Stackelberg game framework, we analyze how AM impacts traditional wholesale pricing across two scenarios. First, a manufacturer producing two distinct products and second, a case involving multiple products, each affected by AM's capacity limitations. For the first scenario, we derive sufficient conditions to find the equilibrium under a generic demand distribution, and for a uniform distribution, we fully derive the equilibrium and identify the critical cost threshold below which AM adoption is preferable. For the second scenario, we determine the conditions for the equilibrium, offering insights into the feasibility of AM relative to traditional manufacturing. Furthermore, we find that, contrary to some literature, even when AM incurs higher per-unit costs than traditional methods, it remains viable for some supply chains. However, limited AM capacity, particularly under high demand, may restrict its adoption, highlighting capacity constraints as a pivotal factor in AM decision-making. This study extends current research by examining multi-product and capacity-driven scenarios, providing valuable guidance for supply chain managers weighing the benefits of traditional manufacturing against those of AM.