Modernizing the Spare Parts Market Through Digitalization and Sustainability

Home » Modernizing the Spare Parts Market Through Digitalization and Sustainability
December 22, 2022

Industries, such as oil & gas and manufacturing, have been gradually finding their way into a long-awaited transition from conventional manufacturing processes to digitized systems that have the potential to revolutionize the industry. This transformation has generated demand for industrial automation systems that can ensure more efficient, reliable, and sustainable processes. Such demand has brought about the growth of the industrial automation spare parts market.

According to a 2022 market research report, the global industrial automation spare parts market is estimated to grow at a CAGR of 5.7% to reach about USD 16.54 billion in 2029. This growth is largely attributed to the integration of digital and automation technologies in industries like oil & gas, automotive, and consumer goods, to name a few. These technologies are said to improve decision-making, troubleshooting, and performance efficiency.

Moreover, the impact of digitalization has further reached the spare parts logistics market, which has seen similar growth rates. A report by Future Market Analytics has estimated the spare parts logistics market to exceed USD 32.5 billion in 2028, following a CAGR of 5.7% between 2021 and 2028.

But how exactly is digitalization transforming the spare parts market? And how is it paving the road for sustainability efforts within the industry?

Long-standing issues for spare parts

From manufacturing to storing all the way to transporting and delivering, spare parts suppliers have continually endured a costly and laborious supply process, especially when customer orders are infrequent. In fact, some suppliers have opted to limit their offerings of irregularly ordered spare parts because of the high costs associated with maintaining such stocks.

This costly issue has been around for quite a while. A study back in 2001 stated that 5-10% of a company’s total investment base is generally allocated to investing in spare parts. With spare parts being produced in relatively small volumes and sometimes even individually, the cost inevitably increases. On top of that, long lead times can result in a lose-lose situation for companies, as they stock up on relatively pricey spare parts, trying to avoid downtime expenses, only to end up with seldomly used parts that may even become obsolete.

For that reason, researchers asserted that reducing a spare parts inventory can lead to substantial savings and suggested that spare parts held in several locations can be consolidated together in one place. While that is a step in the right direction, that does not completely solve the accompanying issues, such as stock imbalances, disorganized inventories, and poor visibility into all these inventories, which can lead to reduced productivity and potentially bad decision-making.

Today, much better solutions are being proposed, especially with the advent of digitalization and additive manufacturing. Integrating such technologies into the business models of suppliers – and even those of buyers – has shown huge potential in slashing costs, minimizing lead time, and improving productivity.

Leveraging 3D Printing and Digital Warehousing of Spare Parts

Additive manufacturing, also known as 3D printing, has always been renowned for its revolutionary advancement in prototyping new products, laying the ground for the so-called ‘rapid prototyping’ industry. Nonetheless, it has been slowly but surely moving up the ranks to compete with traditional manufacturing processes, especially in small-volume manufacturing.

Suppliers today are able to make use of 3D printing to produce and send spare parts upon request. The rapid and local production capabilities that come with 3D printing can help suppliers reconstruct their supply model entirely. Basically, a spare parts supplier would not need to commit significant resources to produce large quantities of the same part anymore.

Using the more agile additive manufacturing instead, a supplier can produce parts on an on-demand basis without the requirement of a minimum quantity. In fact, they can even produce different parts using the same machine, and they can do so at a local level. In other words, with the convenience of 3D printers, spare parts suppliers would no longer require conventional centralized production.

All they need is a 3D digital format of the part, which is input into the local 3D printer closest to the customer, and then the part is produced in a relatively short time and delivered to the customer directly. Instead of a lengthy and costly process of production and logistics to deliver a spare part to a customer, 3D printing enables a much faster, much cheaper, and much more convenient supply of the product.

Not only that, but buyers can even bypass suppliers altogether by printing their own desired parts themselves. For that, they can reverse engineer their process by scanning the part they want to replace (or digitally design it) and then producing it using 3D printing. This not only enables them to manufacture it then and there, but it also gives them the ability to digitally store their part for later use.

But what if this digital storage capability is not merely for one part? What if suppliers can turn all their spare parts inventory into a digital format? This is where the concept of digital warehousing comes into play.

Digital inventory of spare parts is basically keeping those parts as digital assets ready to be produced on-demand using 3D printing. Such a solution not only cuts costs associated with managing physical inventories, such as shipping, customs, and fixed costs, but it also eliminates almost entirely the issues of stock imbalance and lack of visibility. A well-structured digital inventory provides a clear view of the whole stock and enables a much faster and more convenient supply process, especially with suppliers converting their supply chain from traditionally centralized production to more localized manufacturing closer to their customers.

A study by Strategy&, a consulting business unit at PWC, forecasted that more than 85% of spare parts suppliers would be integrating 3D printing into their businesses this year. It also predicted that companies in the future would turn to selling copyrights rather than physical products, alluding to the combined potential of digital warehousing and 3D printing.

A Road to Sustainability in the Spare Parts Market

As companies struggle to consistently meet their sustainability goals, solutions like additive manufacturing and digital inventories are perfectly suitable to help them overcome such a challenge.

Sustainability, in its three core pillars (environmental, economic, and social), has become an inevitable prerequisite for any company, let alone manufacturers. Spare parts suppliers can capitalize on promising technologies like digitalization and additive manufacturing to minimize their environmental footprint by avoiding the need for a physical inventory, traditional centralized manufacturing, and their respective logistics. They can improve their economic structure by cutting costs significantly and maintaining a favorable revenue model with such solutions. They can also create opportunities for local workforces and improve their manufacturing skills and abilities.

All of these would propel the companies towards more sustainable business models and eventually modernize the spare parts market into a more coherent and sustainable market.

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