UPS United Parcel Service

By Lindsay Ellis And Laura Stevens 

At its hub in Louisville, Ky., United Parcel Service Inc. recently rolled out 100 industrial-grade 3-D printers to make everything from iPhone gizmos to airplane parts.

UPS wants to find out if 3-D printing centers could shorten supply chains and cut into its $58 billion-a-year transportation business--or give it a leg up in a potentially emerging market for local production and delivery.

For Atlanta-based UPS, the difference could be existential. It doesn't want 3-D printing to disrupt its business the way the Internet pulled the rug out from overnight document deliveries more than a decade ago.

"Should we be threatened by it or should we endorse it?" asked Dave Barnes, UPS's chief information officer, during a recent presentation to employees and customers. "We saw the capability of a logistics company to be challenged on one side but on the other be an enabler."

Its 3-D project is run by an Atlanta startup called CloudDDM LLC that UPS invested in last year. The two companies plan to expand next year with another 900 printers, and are discussing opening similar print factories outside the U.S.

The technology slices a digital image of an object into thousands of layers, which printers then recreate one at a time in plastic, metal or other materials. It has attracted investments from companies like jet-engine maker General Electric Co. and appliance giant Whirlpool Corp. So far, the 3-D printing industry hasn't lived up to the hype, constrained by slow print speeds, small sizes and rapid technology change.

Sales in the 3-D printing industry have risen about 34% annually for the past three years, and acquisitions in the industry have totaled more than $468 million in the past five years, according to data firm Dealogic.

UPS isn't the only delivery company exploring the printing business. TNT Express NV, a Dutch parcel-delivery company in the process of being acquired by FedEx, earlier this year started printing services at some locations across Germany and struck a partnership with a printing firm to expand options for customers. FedEx Corp. says it is examining the field, while Amazon.com Inc. has filed a patent for a 3-D printing truck, aimed at creating an on-demand system printing goods from inside delivery vehicles.

Deutsche Post AG's DHL recently looked at all products being shipped from Asia to Europe and concluded that only between 2% and 4% of those could be 3-D printed. It also asked employees to hand over objects for replication, and determined that only 10% of those objects--including a baby shoe and a foosball table player--could be reproduced with full functionality.

"We see a risk, but not for the mass of products," said Markus Kückelhaus, DHL's 3-D expert who leads the company's trend research team. While there may be opportunity in producing spare parts, Mr. Kückelhaus said printing speed and product liability remain deterrents. "We don't need to be scared of this technology," he said.

UPS expects more companies will migrate some production to 3-D printing from traditional manufacturing on an aggressive growth curve, according to Rimas Kapeskas, head of UPS's strategic enterprise fund. And UPS is also talking with customers about taking on a bigger role as a light manufacturer using 3-D printers.

Last year, UPS invested an undisclosed sum to take a minority stake in CloudDDM, which in May launched full operations of its printers at the delivery company's supply chain campus, something the startup describes as a "critical element" of its business plan. It prints the items and UPS ships them out to customers for quick delivery.

Late last month, the operation received an order for 40 mounting brackets for paper towel dispensers from a division of Georgia-Pacific LLC that makes dispensers, Dixie cups and cutlery. CloudDDM printed the mounts and UPS shipped them to a Georgia-Pacific engineer by the next morning. The brackets were slated for a month-long "stress test," said Michael Dunn, the senior vice president of innovation development for Georgia-Pacific.

Whirlpool turned to the operation recently when its own 3-D printers were all occupied. The maker of Maytag and KitchenAid products uses the printing method for prototypes of items like trays for refrigerators and venting systems for dryers, as a way to test parts on smaller scale.

"The quicker you can get a prototype back into the engineering team's hands, the faster they can respond" to problems, said Michael Cukier, a Whirlpool principal engineer.

In Louisville, UPS has used its own service. The company needed to develop a replacement floor beam support bracket for its fleet of Airbus A300 aircraft, which are out-of-production.

The part helps containers filled with packages easily move on and off the plane. CloudDDM printers made the part within hours and walked it across the runway for testing in a UPS plane.

Write to Laura Stevens at laura.stevens@wsj.com

(END) Dow Jones Newswires

September 18, 2015 19:39 ET (23:39 GMT)

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