3D Printers – An Exciting New Technology

3D printers are a new-ish technology that has received a lot of interest. This blog post is here to explain a few things about 3D printers and what sort of economic impact they might have, as well as what sorts of economic impacts they will not have.

To start, we must first discuss the idea of a production function. A production function shows amount produced as a function of certain inputs. The usual inputs in most situations are capital and labor. Labor represents the work of individuals, while capital represents ownership of equipment and other things essential to production.

In a very rough sense, capital represents sunk labor costs. That is, most things that are considered capital had to be produced by the input of labor and capital, and that capital had to be produced by the input of labor and capital. Eventually, you move back to things that were produced solely by labor, although that would take an incredible number of steps backward in most cases.

Moving from this rough idea, we encounter 3D printers. With a 3D printer, you can take the appropriate raw materials and schema for some item and the printer will produce the item for you with little to no labor costs. This essentially means that the production function for use of a 3D printer almost entirely disregards labor, and is focused entirely on capital.

For a 3D printer, capital comes in two major forms – the printer itself and the schema. Without some unforeseen new technology, you will also require raw materials to input into the printer, usually of a specific type.

We then examine the cost function of a 3D printer. It contains only three variable costs – the raw materials that go into the item you are producing, possible repairs to the printer from use, and your time in operating the printer. Everything else required – the schema and the printer – is fixed.

So what we have with a 3D printer is a method of production with little variable cost, high fixed cost, and an intensive focus on capital over labor. This sort of production is almost always characterized by economies of scale – that is, it is more efficient to produce many units than to produce few units.

From this, I can then say that, barring a gross misunderstanding or some new development, 3D printers will probably never become something that is used in every household. This, of course, depends on the price of the printer, but in any case where the price of the printer remains even slightly high, the low usage rate by a single household will make it impractically expensive.

There are, of course, exceptions. People looking to do things such as fix the family car or keep up with the latest technology would probably purchase them. They could even be of use to IT support companies who could, theoretically print spare parts in the office. Beyond simply do-it-yourself-ers, there might also be a slew of potential uses for miniature, specialized 3D printers for doing things such as creating pencil lead or erasers for mechanical pencils.

In addition, I can say fairly safely that the 3D printer will not take over the mass production of large, expensive items, such as cars. While 3D printers may be used to create the pieces for the production of cars, the facilities for putting those pieces together without the use of labor already exist, and will not be replaced, even if they could be, without some large number of benefits, which I do not see a 3D printer providing.

The place I see for 3D printers is in small businesses that require production of simple parts, either for internal use or for creation of products that require some assembly. For instance, a cheap furniture store might simply turn into a 3D printer with a selection menu, that would then print both the directions and the parts for the furniture directly for the consumer. Or a diesel generator repair shop might print the part it needed to fix a specific car, rather than worrying about shipping the part from elsewhere.

This possible new paradigm will result in a high value being placed on the schematics for producing certain things via the use of a 3D printer. I would suspect them to be either held secret by businesses or fall under a new sort of copyright protection, as otherwise anyone would be able to print an important part if they were able to obtain the necessary raw materials. Similarly to how movies and music are treated today, I would expect them to be legally protected but pirated on a regular basis, using many of the same means.

And that, then, is my take on 3D printers. They’re not magical, they won’t be able to fix all the world’s problems by printing people whatever they want wherever they wish it. They probably won’t even be highly adopted outside of highly developed nations, as the cheap cost of labor elsewhere in the world, i.e. China, makes labor-intensive production methods much more attractive. They have uses, but they won’t be radically altering the fundamentals of how the world works anytime soon.

Anyways. Hope that was an interesting read. I’ll start looking into more technology-related economics topics for later posts.

 

So Yo Want to Set Up Your Own Logistics Company?

In the industry, they call them 3PL – 3rd party logistics businesses that stay in business to help take logistics and operation- related headaches off the hands of all kinds of companies. Come to think of it, you could say that Shore Porters was a well-thought out 3rd party logistics company. But there are other kinds too.

Some of them completely take warehousing and other such business-related handling problems off their clients’ hands. What exactly does it take to set up a third-party logistics business of your own?

You can’t just go and set up a generic logistics operation without thinking about the exact niche you’ll cater to at first, of course.You will need to think through the kind of service exactly that you Will provide, the kind of industry that you’ve will serve, the side of business you be willing to take on, and so on. A lot of that comes down to how much experience you have. How much capital and you’re willing to bring to the table is the other thing.

A good way to go about it at first would be to start small and cut one’s teeth on a small client whose business won’t crash and burn should you screw up. Study how the large third-party logistics businesses operate for success, and you find that their clients often switch from one provider to another quite regularly. There’s always something. Logistics can be a very complicated kind of business. Failure is frequent. When it happens, your clients fire you. Basically, you need to make sure that your business stays away from letting the client down as far as possible.

What you need is a clear vision of how your logistics operation will do this. You need to plan this out ahead.

Your first step would be to write out operating procedures for every single task and process that all keep your company running. You need to mentally go over how every person at his desk doing his job will look at what’s before him. You’ll need to anticipate everything he’ll need and write it into your plan. Anything that doesn’t him seem clear, you need to completely sort it out. Even if it seems like a small problem on paper, you can be assured that it’ll be a really huge deal when things are actually tried out in the real world.

You’ll need to study every single business whose logistics you plan to take care of, talk to professionals engaged in the industry to see how they view third-party logistics providers, and so on. You’ll have to write down the kind of standards you expect your services to match and find out how you’ll actually get there. And finally, you have to learn how to do this to a price.

Basically, if you want to get into third-party logistics, you’ll have to make like Abraham Lincoln said he would – given five hours to chop down atree, he said he would spend the first four-and-a-half hours sharpening his axe.