The new software-defined supply chain

Preparing for the disruptive transformation of electronics design and manufacturing

Adaptability is a hallmark of the Electronics industry, with its history of changes ranging from incremental to radical. Traditional manufacturing has shaped worldwide trade flows and built industry structures based on economies of scale, as well as supply chains that are both multi-tiered and global. But today, three new technology revolutions – 3D printing, intelligent robotics and open source electronics – promise unprecedented supply chain upheaval. In this report, we show that these newer technologies will produce an average 23 percent unit cost benefit and reduce entry barriers by an astounding 90 percent. Yet half of our survey sample has no manufacturing strategy to manage the impact of digitization. To compete in this fast-approaching future, companies and governments must understand and prepare for this new software-defined supply chain.

As the twentieth century dawned, Ford Motor Company set the rules for modern manufacturing. Production of the Model T used interchangeable parts on an assembly line to usher in an era of standardization that has continued with refinement for more than one hundred years. By the 1920’s, competitors were extending Ford’s mass production model and gaining market share, thanks to the use of sub-contractors, modularization and common parts across models and even brands.

Over time, three major manufacturing and product design trends emerged, shaped by the physical reality of the industrial supply chain: parts continued to become more standardized; assembly has continuously shifted toward modules from basic components; and complex mechanical controls continue to be replaced by simplified digital intelligence. More than a century later, these same rules still drive industry strategy, not just in Electronics, but across a variety of manufacturing industries.

Despite the press coverage that technologies like 3D printing receive, manufacturing leaders remain ill-prepared for their impact.

Now, the historical rules hardened by a century of experience are being overturned by three emerging technologies: 3D printing, intelligent robotics and open source electronics. Together, these new technologies are creating a manufacturing environment that is driven by digital data. We describe this transformation as moving from a supply chain that is hard-ware-based to one that is “software-defined.” The result: a reconfigured global supply chain will emerge in the coming decade. It will radically change the nature of manufacturing in the Electronics industry, shifting global trade flows and altering the competitive landscape for both enter-prise and government policy makers.


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Veena Pureswaran

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, Associate Partner and Global Research Leader for Quantum Computing, IBM Institute for Business Value

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