Retailing with 3D Printing

Abstract

Given the promise of 3D printing, also known as additive manufacturing, some innovative consumer goods companies have started to experiment with such a technology for on-demand production with mass customization capabilities. However, the potential impact of 3D printing on retail and supply chain operations is not well understood. In this paper, we consider two adoption cases of 3D printing in a dual-channel (i.e., online and in-store) retail setting, and evaluate their impact on a firm's channel strategy. First, when 3D printing is adopted online, the firm may shut off the in-store channel when the production setup cost is high and the demand uncertainty is high. When both channels are served, our results show that the firm's optimal online price is higher than the optimal in-store price under most scenarios, so that the traditional channel price relationship may be reversed. Our analysis further shows that the improved fit in the online channel would enable the firm to reduce the inventory underage cost for the in-store channel by inducing in-store customers to buy online when the store runs out of stock. Second, when 3D printing is further adopted in-store, it dominates the 3D printing online case when the production setup cost is high and the demand uncertainty is moderate. In this case, the firm's optimal online price becomes lower than or equal to the optimal in-store price. We further find that there will be no stockout-based substitution from the in-store channel to the online channel under almost all scenarios.

Keywords: 3D printing; dual channels; build-to-order; channel strategy; pricing; supply chain management