3D Printing of Spare Parts Via IP License Contracts

33 Pages Posted: 14 May 2019

See all articles by Bram Westerweel

Bram Westerweel

Eindhoven University of Technology (TUE) - Department of Industrial Engineering and Innovation Sciences

Jing-Sheng Jeannette Song

Duke University - Fuqua School of Business

Rob J.I. Basten

Eindhoven University of Technology (TUE)

Date Written: April 15, 2019

Abstract

Additive manufacturing (AM), also known as 3D printing, has the potential to shift supply chains from global networks that rely on centralized production with traditional manufacturing technologies to largely digital networks with decentralized, local 3D printing, i.e., digital inventory. One type of firm that is particularly well positioned to drive this transition are original equipment manufacturers (OEMs), who design and produce capital goods. In this paper we propose that the OEM acts as an intellectual property (IP) licensor by selling spare parts designs, rather than physical spare parts. With these designs a buyer can print spare parts locally at much shorter lead times and at lower setup costs. We consider both an OEM who serves multiple identical buyers, and an OEM who serves two non-identical buyers. For both cases we characterize the optimal IP license contract. This determines which customers opt for the IP license channel and which remain in the traditional centralized sales channel, thus creating insights into the degree to which a supply chain decentralizes. We numerically show this to occur in a surprisingly large number of cases and we observe significant profit increases for OEMs who adopt this new business model. Our results thus show that IP licensing by OEMs can become a major enabler in the transition to digital networks with decentralized 3D printing.

Suggested Citation

Westerweel, Bram and Song, Jing-Sheng Jeannette and Basten, Rob J.I., 3D Printing of Spare Parts Via IP License Contracts (April 15, 2019). Available at SSRN: https://ssrn.com/abstract=3372268 or http://dx.doi.org/10.2139/ssrn.3372268

Bram Westerweel

Eindhoven University of Technology (TUE) - Department of Industrial Engineering and Innovation Sciences ( email )

Den Dolech 2
Eindhoven
Netherlands

Jing-Sheng Jeannette Song

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Rob J.I. Basten (Contact Author)

Eindhoven University of Technology (TUE) ( email )

PO Box 513
Den Dolech 2
Eindhoven, 5600 MB
Netherlands

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