Sustainable production in emerging markets through Distributed Manufacturing Systems (DMS)

Sustainable production in emerging markets through Distributed Manufacturing Systems (DMS)

Journal of Cleaner Production 135 (2016) 127e138 Contents lists available at ScienceDirect Journal of Cleaner Production journal homepage: www.elsev...

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Journal of Cleaner Production 135 (2016) 127e138

Contents lists available at ScienceDirect

Journal of Cleaner Production journal homepage: www.elsevier.com/locate/jclepro

Sustainable production in emerging markets through Distributed Manufacturing Systems (DMS) Erwin Rauch a, *, Patrick Dallasega a, Dominik T. Matt a, b a b

€tsplatz 5, 39100 Bolzano, Italy Faculty of Science and Technology, Free University of Bozen-Bolzano, Universita Fraunhofer Italia Research s.c.a.r.l., Innovation Engineering Center (IEC), Schlachthofstrasse 57, 39100 Bolzano, Italy

a r t i c l e i n f o

a b s t r a c t

Article history: Received 30 December 2015 Received in revised form 17 May 2016 Accepted 18 June 2016 Available online 19 June 2016

In the future, customer value will be achieved not only through the realization of a product or a service but also through socially and environmentally responsible and economically efficient manufacturing processes encouraging positive effects for society. Distributed Manufacturing Systems (DMS) are currently discussed in science as a possible approach for sustainable manufacturing. This approach consists largely of the use of decentralized, adaptable and flexible mini-factories. Such production units, organized in networks, allow production-on-demand and therefore the reduction of transport and emissions. In addition, they support the growth and development of regional economic cycles. This paper proposes an increased application of DMS in emerging markets to achieve sustainable production. First, actual challenges of production in emerging markets with a special focus on sustainability are described. In a literature review, the actual state of the art in sustainable manufacturing and distributed manufacturing is presented. Second, the concept of DMS is explained, describing reasons for a trend toward distributed manufacturing. In the next section, the effect of DMS on sustainability in production in emerging markets is analyzed based on the traditional dimensions of sustainability. The paper closes with a critical discussion of DMS and an outlook on future needs in research. © 2016 Elsevier Ltd. All rights reserved.

Keywords: Distributed manufacturing Sustainability Emerging markets Manufacturing systems

1. Introduction The world's emerging markets have become the focus of sustained research in the past two decades. This has occurred for a number of reasons. Emerging markets comprise the majority of the world's people and land, and they continue to grow faster than does the developed world (Kearney, 2012). In the middle of the last decade, the average growth rate in emerging markets reached over 7% a year. Today, more than five years after the financial crisis of 2008, emerging markets continue to grow, but this growth is slower than that in previous years. The average growth rate in the emerging world decreased to 4% in 2013 (Sharma, 2014). The four largest emerging and developing economies remain the BRIC countries (Brazil, Russia, India and China) (Wang, 2014). From now until 2017, manufacturers will continue their focus on emerging markets, particularly the BRIC markets. South Africa, Indonesia, Turkey, and Vietnam follow the BRIC countries as secondary emerging markets on which manufacturers will focus their

* Corresponding author. E-mail address: [email protected] (E. Rauch). http://dx.doi.org/10.1016/j.jclepro.2016.06.106 0959-6526/© 2016 Elsevier Ltd. All rights reserved.

investment efforts (Global Intelligent Alliance, 2012). Industrial manufacturers are looking to emerging market economies as important markets in their own right. They offer clear opportunities for growth in a post-downturn economy. Thus, emerging countries will also be the source of most new customers. The shift of production into emerging markets is often driven by growth and opportunities, but it also means new challenges for industrial companies. As increasing numbers of manufacturing and industrial companies move their growth toward emerging markets, they must be prepared to overcome a range of hurdles from securing sufficient distribution, localization of the brand, and hitting the right price point to country-specific issues such as confusing and contradictory taxes in Brazil or “tea money” in Thailand. Some of the most important key success factors for manufacturers in emerging markets, identified in a survey conducted by Global Intelligent Alliance (GIA), were local distribution and access to customers (41%), localization of products and services (26%) and adapting to local culture (25%) (Global Intelligent Alliance, 2012). Sustainable development depends on more sustainable consumption and production patterns, which respond to basic needs and bring better quality of life while minimizing the use of natural resources to avoid jeopardizing future generations' needs (Delai

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and Takahashi, 2013). In the last decade, notably, companies as key actors in society have been pressured to change how they do business, i.e., to integrate sustainable development principles in their daily practices and to disclose their effects and contributions to sustainable development (Kolk et al., 2010; Smith and Sharicz, 2011). When incorporated by the firm, such practices are called corporate sustainability and contain three aspects: economic, environmental and social (Baumgartner and Ebner, 2010). Most existing literature on engagement in corporate sustainability is based on companies operating in developed countries (Bansal, €der, 2010; Engert and Baumgartner, 2015). 2005; Ziegler and Schro Additionally, in emerging markets, the pressure to fight against poverty and to reduce resource consumption and waste discharges has increased, while still meeting people's basic needs and improving their quality of life (UNEP, 2011; Lourenço and Branco, 2013). In the future, long-established paradigms of production must continue to change to meet the demand for even more individuality, customer-specific product variants and shortest delivery times combined with sustainable and human manufacturing processes. New and innovative ways of organizing production operations will be needed. In particular, due to increasingly loud requests for sustainable and ecologically production and distribution, decentralized manufacturing systems show an ideal approach because the production occurs closer to the customer. The authors promote the concept of Distributed Manufacturing Systems (DMS) as a possible approach for sustainable manufacturing (Rauch et al., 2015) in emerging markets. This paper tries to close the existing gap in scientific concepts and methods for sustainable production in emerging countries. The authors propose the concept of distributed manufacturing as a possible means to achieve this goal. The objectives of this work are to examine sustainability-oriented reasons for and trends toward DM and to investigate the potential for and possible criticisms of DM in the context of increasing sustainability in emerging markets. The work is structured as follows: First, section 2 provides the theoretical background analyzing emerging markets and sustainability in production. After presenting the growing role of emerging countries and the opportunities and risks of manufacturing in those markets, the authors illustrate the future challenge of sustainability in manufacturing in those countries. In section 3, DMS is recommended as an appropriate model for more sustainable production in emerging markets. First, the theoretical concepts of DM and DMS are explained through a short literature review. Following, the necessity of DMS research is exposed through the demonstration of sustainability-oriented reasons for DMS. The authors then analyze the effect of DMS on sustainability in manufacturing, basing their investigations on the known dimensions of sustainability from the literature. Section 4 presents a critical discussion of the presented proposal, challenges in the development and application of distributed manufacturing and indications for further research. Finally, the work closes with a summarizing conclusion.

2. Current situation of production in emerging markets Section 2 provides an overview of the current situation of production in emerging markets and existing research results in these areas. In a first step, the growing role of emerging markets in the global economy is discussed. This change shows not only a high potential for many international and national manufacturing companies but also several risks and problematics. One large issue in manufacturing in emerging markets is sustainability. Therefore, in this section, the concept of sustainable manufacturing and related challenges for manufacturing are argued.

2.1. Growing role of emerging markets Developed markets or so-called “rich industrial countries” are distinguished from growing and developing countries e the emerging markets. The term “emerging markets” was coined by International Finance Corporation (IFC) officials in 1981 to provide such markets a more uplifting and optimistic name. Previously, these countries often were negatively referred to as “poor countries”, “non-developed countries” or “less-developed countries” (Mobius, 2015). In the literature, there cannot be found a uniform definition of the term emerging markets. Arnold and Quelch (1998) define “emerging markets” as countries that satisfy two criteria: a rapid pace of economic development, and government policies favouring economic liberalisation and the adoption of a freemarket system. This includes countries in Latin America (e.g. Brazil and Mexico), Asia (e.g. China and India), Africa (e.g. South Africa) and the Middle East. Kearney defines emerging markets as a diverse set of business, cultural, economic, financial, institutional, legal, political and social environments within which to test, reassess and renew received wisdom about how the business world works; to gain deeper insights into prevailing theories and their supporting evidence; and to make new discoveries that will enhance human welfare in all environments including the world's poorest countries, the developing world, transition countries and the developed world. In addition, emerging markets comprise the majority of the world's people and land, and they continue to grow more quickly than does the developed world (Kearney, 2012). According to Weiler et al. (2011) emerging markets include up and coming Asian nations, countries from Latin America and Africa and some Eastern European states. These countries are often referred to by the acronyms of BRIC (Brazil, Russia, India, China), RDE (Rapidly Developing Economies) or N-11 (Next Eleven). The most-used indices for analyzing emerging markets are Standard and Poor's S&P Emerging BMI, the J.P. Morgan Emerging Bond Index (EMBI) and the MSCI Emerging Markets Index (MSCI, 2015; S&P, 2015; Morgan, 2015). In Bloomberg's Morgan Stanley Capital International (MSCI) index, we can find the following 23 listed emerging countries (see Fig. 1): Brazil, Chile, China, Colombia, the Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, the Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and the United Arab Emirates (MSCI, 2015). In the past (mostly in the 80s and 90s), many industrial companies shifted their production capacities to the emerging markets, looking for low-cost sourcing. Today, industrial companies have changed their view of emerging markets and see them as growing and promising markets for building plants and selling products or services (PWC, 2011; Gosens et al., 2015). 2.2. Opportunities and risks of manufacturing in emerging markets As Alain Gomez e former CEO of the French electronics company Thomson e summarized in an interview with the Harvard Business Review in 1990, “You do not choose to become global. The market chooses for you; it forces your hand.” Thus, companies must face the challenge of global value creation and build their globally distributed activities (McCormick and Stone, 1990). Thus, many firms followed this slogan of Gomez, creating new production capacity in emerging countries. For example, Toyota has invested heavily in Thailand in recent years, making the country its third largest production base. Attracted by low labor costs and good growth prospects, Japanese companies also invested approximately $1.8 billion in Vietnam in 2011 (UNCTAD, 2014). A significant number of macroeconomic developments are produced by global companies e so-called “global players”. The number of employees

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at locations in emerging countries has more than tripled since 1990 and in 2010 was approximately 70 million (UNCTAD, 2010). Growing consumer markets in combination with low-cost wages in emerging countries remain a prime target for new production, retail and service activities in these markets. Growing urban populations are driving a rapid expansion of a future consumer generation in emerging economies. In addition, there will be a growing need for investments and goods for infrastructure projects and energy generation (UNCTAD, 2014; Gosens et al., 2015). In the past, producing in emerging markets often meant to produce standard products at a much lower price, adapting pricing and products to local conditions (GIA, 2012). In the future, potential customers in emerging markets may have different needs; therefore, approaches such as distributed manufacturing show a great opportunity for global companies to satisfy local customer attributes. The largest payoff may come when your emerging markets team designs a product that also opens up entirely new markets at home. Such an approach is called “reverse innovation” (Govindarajan and Ramamurti, 2011). Rising production capacities in emerging economies portend not only opportunities but also corporate and social risks. Several of these countries have only just begun increasing production capacity through structural reforms and the modernization of infrastructure to enhance growth prospects (Barabas et al., 2014). Political risk and cultural distance are two highly discussed host pez and Vidal, 2010; Morschett et al., country institutional risks (Lo 2010; Quer et al., 2007). This applies particularly to foreign investment and production activities of global producers in emerging markets. Because these companies often know neither the culture nor the language or lack the necessary political and institutional insider knowledge, they are exposed to important risks that should not be underestimated. High institutional distance amplifies the uncertainty concerning whether supporting resources and capabilities are locally available. An issue is how home-based internal resources, routines, procedures and management practices can be efficiently transferred to the host location (Chen and Hennart, 2004; Demirbag et al., 2007). Other risks for manufacturing firms in emerging markets are non-transparent processes, a lack of information as well as bureaucracy, corruption and a weak rule of law (GIA, 2012). Another more ecological and social risk of growing production activity in emerging countries is the lack of sustainable production systems, processes and business models in manufacturing. Actually, there is a pressing and inescapable need to change from unsustainable to sustainable production and consumption patterns (Giannetti et al., 2012). A still-open question is how to protect emerging economies and citizens from the pressures of unsustainable production and consumption (Vergragt et al., 2014). Research on the concept of sustainable manufacturing, defined as a firm's intra- and inter-organizational practice that integrates environmental, economic and social aspects into operational and business activities, would lead to better firm performance and benefits for a “grandson-fit” environment (Hami et al., 2015). As seen in the analysis of opportunities and risks, with their growing consumer society, emerging markets show high potential for local and global companies. Conversely, increasing activities involved with the production of goods in emerging countries are also generating many economic, ecological and social risks in the context of sustainability. Therefore, concepts for sustainable manufacturing are facing future challenges in developing markets. 2.3. Sustainable manufacturing e a future challenge in emerging markets Sustainable manufacturing is a highly discussed issue in

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research and practice (Drake and Spinler, 2013; Taisch et al., 2014). Current trends point the way toward sustainable production: legislation emphasizing social responsibility, local economics dynamics and consumers more interested in products and services related to economic viable practices that are socially and environmentally correct (Musson, 2012; Faccio et al., 2014). In the future, firms should turn performance improvements through sustainable manufacturing into a competitive weapon, reducing environmental harm and stimulating social solidarity (Kleindorfer et al., 2005). When compared with past practice, not only industry and government but also the general public are demanding more sustainable manufacturing processes and systems that satisfy economic and environmental goals (Terouhid et al., 2012). The term “sustainability” was first used in 1972 in a book titled, “Blueprint for Survival” (Goldsmith, 1972). The term increased in importance with the growing trend toward sustainability (Kidd, 1992). The Brundtland Report, a United Nations document (Brundtland and Khalid, 1987), is one of the most prominent initial publications addressing the topic. The report defines the term “sustainable development” as “development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs” (p. 43). Following this initial philosophical definition, the definition of sustainability has tended to shift toward a more tangible multi-dimensional characterization considering economic, social, and environmental factors (Terouhid et al., 2012) following numerous and disparate policy objectives (Atkinson et al., 2007). Glavic and Lukman (2007) describe sustainability as “the evolution of human society from the responsible economic point of view, in accordance with environmental and natural processes” (p. 1884). This sustainability development also influenced manufacturing strategies. In their literature review, Baines et al. (2012) analyzed different definitions of “green” or sustainable manufacturing. They formulated a modern interpretation of sustainable manufacturing as the application of environmentally and socially sensitive practices to reduce the negative effect of manufacturing activities while, at the same time, harmonizing the pursuit of economic benefits. Research in sustainable manufacturing and consumption keeps emerging. Particularly for developing markets, the adoption of the sustainability orientation is especially relevant to ensure their active and free integration into the mainstream global economic and political system (Nkamnebe, 2011). As populations grow and emerging economies expand, the planet's ecosystems and resources are experiencing tremendous challenges (Baines et al., 2012). In emerging markets such as China, although they signed the Kyoto protocol to curb emissions, environmental concerns remain because of the country's large population, strong capital investment due to economic growth and heavy reliance on fossil resources. In 2009, China became the world's largest energy consumer. Due to constantly pursuing rapid economic expansion in past years, China, like many other emerging markets, is struggling with unbalanced economic, ecological and social development (Pao et al., 2012). As discussed, emerging markets are already facing significant challenges addressing sustainable development in production and consumption e economic growth that improves lives without exhausting the environment or other resources (Bouton et al., 2012). There remains a notable need for developing proper approaches to achieve the goal of providing sustainable production (Shao et al., 2014; Opresnik et al., 2014). Thus, in this paper, the concept of distributed manufacturing will be presented as a manufacturing strategy to obtain more-sustainable production in developed and particularly in emerging markets.

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3. DMS as an appropriate model for more sustainable production in emerging markets Distributed manufacturing is a scheme gaining increasing popularity in the field of production science. In the following section, DM will be explained from a general point of view, presenting the actual state of art. DMS are an appropriate model for more sustainable production and appear therefore to be a suitable and potential manufacturing strategy to handle the related challenges of sustainable production in emerging markets. Thus, this chapter describes in a next section sustainability-oriented reasons for DMS and answers then to the question, why and how DMS can support sustainability in production. 3.1. The concept of Distributed Manufacturing Systems (DMS) Actually, “distributed manufacturing” is a highly discussed topic in research and practice. Manufacturing is no longer organized in traditional structures of globalized mass production in centralized production facilities (see Fig. 2). Through future decentralized “glocal” production in distributed micro-production facilities, goods will be able to meet local needs and to be delivered quickly and in a more sustainable way. In the following, the development of distributed manufacturing is summarized from the beginning of the era of globalization to the present. Currently, the trend shows an increase of distributed production with the aim of global market development and to meet local needs. So-called “glocal” production combines the goals of global market development and the fulfilment of local customer requirements (Schmid and Grosche, 2008). In the last decade, we note an increase in demand for individual products and a shift from mass production toward personalized “mass customization” (Spath et al., 2013; Hu, 2013; Bednar and Modrak, 2014). Developing product variants with respect to satisfying diverse customer needs with reasonable costs in terms of mass customization has been

recognized as a new paradigm for today's manufacturing (Mourtzis et al., 2012a; Modrak et al., 2015). Thus, a recent trend is the consideration of mass customization in DM. Innovative production concepts replace traditional network structures. For this purpose, it is necessary in the future to develop concepts and models for decentralized production networks with distributed production units offering personalized products to local customers considering the aspects of cost, time, CO2 emissions, energy consumption and quality (Mourtzis and Doukas, 2014a). E.g., manufacturing systems based on a Mini-Factory approach is one of the modern pervasive production models providing tailored products with low cost and short delivery time (Zanetti et al., 2015). In this context, only how to design and plan decentralized production networks for masscustomized products generally (Mourtzis et al., 2012b; Mourtzis and Doukas, 2014b) in a scalable and modular way (Matt and Rauch, 2012) were examined. The focus of much of this research is essentially the development of system capabilities for flexible and so-called “plug and play” manufacturing systems, in which production units can be rapidly interchanged, reconfigured and yet be capable of determining their own role in production (McFarlane, 1998). These types of modular solutions are commonly used both in the design of machines and equipment and in the construction of manufacturing systems that allow the construction of reconfigurable manufacturing systems (Bachula and Zajac, 2013). In current research, there is significant focus on changeability in distributed manufacturing systems. Such changeable manufacturing systems are able to make anticipatory adjustments in addition to reactive €mper et al., 2000). In designing changeable interventions (Westka manufacturing systems it is critical to design the manufacturing system by considering the requirements of the reconfiguration life phase (Francalanza et al., 2014). Due to the novel technical possibilities in additive manufacturing (3D-Printing-Technology), the topic of cloud manufacturing recently arose (Helo et al., 2014; Wu et al., 2013) in combination with distributed manufacturing. Specific advantages of such disruptive technologies in a context of

Fig. 1. The 23 emerging countries listed in the MSCI index (MSCI, 2015).

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Fig. 2. Differences between traditional manufacturing strategy and distributed manufacturing strategy.

sustainability were analyzed by Ford and Despeisse (2016) and can be summarized as follows: a) material saving due to more precise production, b) energy saving through more energy efficient processes for manufacturing, c) “greener” supply chain through transportation of more basic materials, d) more localized manufacturing, e) reduced inventory waste due to production on demand, f) in-situ recycling of waste, g) eventually use of recycled materials and f) in some cases also a reduced toxicity of material processing. Yao et al. (2015) present a conceptual model of cloudbased desktop factories that provides a promising approach to aggregating micro-factories into a cyber-physical virtual manufacturing society in the future. Such small scale production systems show an ideal approach for DIY (Do-It-Yourself) manufacturing, e.g., properly located within a shopping mall they are able to directly interact with the customers, while being close to them in terms of design expectations, quality, environment, costs and delivery time (Zanetti et al., 2015). However, Cloud manufacturing shows actually also possible risks and challenges for research and industry related to cybernetic security. The safety and security of cyber-physical critical infrastructures, such as cloud manufacturing systems, is quickly becoming a significant concern across the globe (Vincent et al., 2015). Cyber-attacks from outside show a possible risk for Cloud Manufacturing modifying STL files used in additive manufacturing as a standard format for design data (Strum et al., 2014). In cloud manufacturing, some of the users' data (regarded as his/her personal intellectual property) are stored at mega-data centers located in the cyberspace. In such an environment, privacy becomes a major issue (Ryan, 2011). There is strong resistance and reluctance of an enterprise storing any sensitive data on the cloud. Thankfully, there are various technologies that can enhance data integrity, confidentiality, and security in the clouds, e.g. data compressing and encrypting at the storage level, virtual LANs and network middle-boxes e.g., firewalls and packet filters (Xu, 2012). Considering the different views on data privacy and

intellectual property between the US and the EU, the transatlantic Privacy-Shield agreement, presented in February 2016, provides a new framework for the transfer of data between the EU and the United States (Weiss and Archick, 2016). 3.2. General and sustainability-oriented reasons for distributed manufacturing systems In the future, an increasing trend in the need for decentralized production structures is expected. Fig. 3 shows the key trends and reasons for the development toward distributed manufacturing. In the following, these general and sustainability-oriented reasons are described in more detail. 3.2.1. Megatrend sustainability Value creation and resource consumption are closely coupled to one another e the concept of sustainability is gaining an important role in production and logistics. No longer are the manufacture and sale of products in the foreground; value and benefit for customers are now critical. The benefit to the customer lies in the satisfaction of his demand and the simultaneous increase in his quality of life, or at least the latter is not adversely affected. The objective of this approach is the satisfaction of a demand by creating value in a socially and environmentally responsible manner. The design of the system elements should avoid negative environmental effects, optimize customer benefits and be economically efficient (Windsperger et al., 2006). The location of production facilities and the design of logistics cycles form significant system elements for the design of manufacturing systems. These are, therefore, to be designed such that products can be produced economically, and at the same time, environmental burdens caused, e.g., by long transport distances, could be minimized. CO2 emissions increased worldwide by over 50% in the years from 1990 to 2011 (FAZ, 2012). Approximately 13% of the primary resources in a production

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Fig. 3. Reasons for a trend toward distributed manufacturing.

process are consumed for freight (Cullen and Allwood, 2010). According to a statistics about World CO2 emissions by sector in 2013 (IEA, 2015) about 23% of CO2 emissions are produced by the logistics sector. The enforcement of decarbonization must, therefore, not stop at the production and logistics industries. Other than greener transport, possible solutions require a turn-away from centralized production and a return to local procurement (Müller, 2012). In developing and emerging countries, a decentralized network of highly adaptable and flexible mini-factories is therefore not only helpful to reduce CO2 emissions through reduction of transport but also serves the regional growth and social well-being of local people (Seliger, 2012).

3.2.2. Rising logistics costs In June 2015, the Wall Street Journal published an article entitled, “An era of historically low logistics costs may be coming to an end” (WSJ, 2015). Changes in logistics costs in recent years have shown that, after decades of decline, they are rising again. Logistics costs are primarily driven by rising energy, fuel and transport prices and by high personnel expenses (Itasse, 2008). According to a study by PwC, industry experts expect permanent imposition of emissions charges and rising oil prices. Climate change and rising energy costs represent the major challenges in the transport and logistics sector. Emissions will be measured in the future at every link of the supply chain, assigned to individual polluters and will be added to the product price, which leads to an increase in logistics costs. This development is attributable not, as one might suspect, solely to regulatory intervention but also to changes in consumer behavior. In 20 years, minimizing transport costs will be an important criterion in location decisions, according to the respondents of the PwC study. The study indicates that, in some industries, manufacturers will implement alternative sourcing and production networks and that the transport infrastructure will be more

decentralized (PWC, 2009). Decentralization therefore can be a measure to meet the challenges of rising fuel prices. Combined with an updated mix of transport methods, CO2-emissions could be decreased, thus contributing to reduce environmental impact (Theiler, 2012).

3.2.3. Mass customization Stanley Davis first used the term Mass Customization in 1987 (Davis, 1987). Mass Customization refers to customer-oriented and individualized mass production for a (relatively) large market, meeting the different needs of each demander of these products at costs that are comparable to those of mass production of standard products (Piller, 2001). Although the manufacturing industry in the past distributed globally standardized products to keep production costs and complexity low, today, customization of products based on customer-specific needs is becoming increasingly important. Simultaneously with this development, in the face of an increasing number of individual product variants and product configurators, requests on manufacturing systems increased. Manufacturing systems should be able to produce small quantities in a highly flexible way and to be rapidly reconfigurable (Thirumalai and Sinha, 2011). In the futurist study, “Delivering Tomorrow: Logistics 2050” of Deutsche Post DHL, one of five scenarios addresses the consequences of the trend of individualization. This trend leads to an increase in regional trade relationships. Only raw materials and data will be transported over long distances in the future. From the perspective of the logistics industry, the localization of value chains leads to a drastic reduction in long-distance transport of finished and semi-finished products. Due to the decentralized production, future critical success factors will be powerful regional logistics resources and a high-class transport network for the last mile to the customer (Müller, 2012).

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3.2.4. Democratization of design and open innovation In the future, it will be increasingly difficult for manufacturers to keep pace with the rapid development of design tools. Not only product developers but also consumers today have access to design tools that a few years ago were out of reach (Leber, 2013). The end user, in the sense of Open Innovation, is more often directly or indirectly involved in the product development process. Product development, in the future, occurs not only within the company but also can be considered a collaborative process between the company and customer. As part of this development, centralized manufacturing systems are increasingly being replaced with decentralized production structures (Ueda et al., 2004). The vision of Open Innovation is that end users design and create their product using digital design and product development tools. They then forward the relevant data streams to capillary distributed services or production laboratories in their region, which manufacture the product using generative/additive production technologies known from Rapid Prototyping. Current technology developments in the field of additive manufacturing suggest that it would already be possible in the immediate future to produce functionally suitable products under industrial requirements (Spath et al., 2013). 3.2.5. Market and customer proximity Manufacturing companies are faced with the fact that market and customer proximity have become an important factor for success in the market. To continue to sell their products in already saturated markets, they must be more differentiated and adapted to the local and individual needs of the market. Thus, new models of distributed manufacturing systems with small and flexible production facilities in the vicinity of the consumer are needed (Rauch, 2013). The vision are local and flexible mini-factories for customized products using small production centers as close as possible to the customers (Zanetti et al., 2015). The need for short delivery times may also have technical reasons, such as in the food industry. There is also recognizable a trend toward decentralized production structures for food with a short shelf life to offer the end customer and the retail partners the freshest possible products with a long shelf life. This trend is also influenced by the increasing demand for fresh, healthy, unprocessed foods with no harmful preservatives (Matt and Rauch, 2012). 3.2.6. Regionalism and authenticity The majority of business cycles currently operate nationwide. This inevitably leads to the need for long transport distances and the associated environmental impact. Parallel to the trends toward greater sustainability and health, regional economic cycles within a region are becoming stronger. More selective and thoughtful consumer behavior already can be observed than in the past. An example is the renunciation of purchasing fruits or vegetables out of season or imported from other countries, avoiding unnecessary CO2-emissions. At the same time, the existence of businesses and jobs in the region is backed by promoting the regional economy. In many cases, consumers are even willing to pay more for local products if they can trace the origin of the products or the latter are produced in time-honored manual work according to old traditions or recipes (e.g., “Authentic Food”) instead of via industrial production processes (Stockebrand and Spiller, 2008). Particularly for such niche markets, decentralized production structures play an important role in the future in developed and developing markets. 3.3. Dimensions of sustainability in distributed manufacturing systems In section 3.2, we saw general and sustainability-oriented

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reasons for distributed manufacturing systems. The following section will analyze whether and how DMS models are contributing to more sustainable production in emerging markets. A singleminded focus on economic sustainability can succeed only in the short term, whereas long-term success requires all three dimensions of sustainability e economic, ecological and social aspects (Dyllick and Hockerts, 2002; Opresnik et al., 2014). Those three dimensions of sustainability are also called the Triple Bottom Line (TBL) (Elkington, 1998), through which an enterprise can create more long-term value and achieve a higher long-term competitive advantage while encountering fewer risks (Dyllick and Hockerts, 2002; Valente, 2012). Costs of energy or materials affect economic effectiveness. This model has been expanded by introducing a fourth dimension, the political-institutional dimension (Valentin and Spangenberg, 2000). Few authors of DM mention in their works also the advantages of DMS in terms of sustainability. Table 1 shows an overview of some of the works and shows which of the four dimensions of sustainability is treated in the papers. Based on the four dimensions of sustainability, different aspects and arguments will be discussed in Fig. 4, i.e., why DMS will positively affect sustainability of manufacturing in the future. In addition, the figure identifies future sustainability-oriented challenges in the development of DMS. 3.3.1. Economic dimension of DMS The economic aspects of DMS are varied. First, distributed manufacturing enables the production of individual and customized products. Using already-known concepts and methods for mass customization, it is also possible to produce large quantities of customized products by means of reconfigurable and changeable manufacturing systems. Through decentralized and on-site located mini-factories, local tastes and requirements can be considered in the product definition. This is especially important in the food industry field, occasionally due to cultural or religious differences and differences in ingredients. Thus, DMS enable the entry into niche markets of mass-customized products and into highly differentiated markets with specific requirements or customer needs. An important economic and marketing aspect is the reduction in delivery times and in logistic costs through geographically dispersed manufacturing systems. Thus, rising fuel costs and costs for carbon taxes could be avoided. The development of cost-efficient models for the coordination of virtual DMS networks will be a challenging topic for further research activities. Fig. 5 shows an example for the relevance of rising logistics costs in emerging markets. The development of South Africans total logistic costs and its components from 2006 to 2014 is represented in the figure. Logistics costs in South Africa are constantly increasing and are higher than the growth of Consumer Price Index; therefore logistics provider and industry are in front of a big challenge to compensate this cost increase (Havenga et al., 2014). Distributed manufacturing systems can help to reduce transport costs, due to a shorter supply chain, but also inventory and warehousing cost through localization and production-on-demand. Da Silva and Rezende (2013) analyzed the impact of additive manufacturing in logistics. According to their work, this form of DMS leads to a significant reduction of costs in transportation and stocking and products will flow directly from the producers to customers without retailers, meaning fewer inventories. The task force will move from assembling lines to the new jobs in small facilities. This new model will create opportunities for the development of new management models and systems, new production models and controls and consumers distribution even in more remote places. Mashhadi et al. (2015) used an agent-based simulation model to analyze the impact of additive manufacturing adoption on future supply chains. The

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Table 1 Papers treating sustainability issues in DMS. Author(s)

Work title

Economic Ecological Social Institutional dimension dimension dimension dimension

Reichwald et al. (2005)

Distributed mini-factory networks as a form of real-time enterprise: concept, flexibility potential and case studies Transforming the landscape of manufacturing: distributed manufacturing based on desktop manufacturing (DM)2 Design of a scalable modular production system for a two-stage food service Franchise system A multi-criteria evaluation of centralized and decentralized production networks in a highly customer-driven environment Decentralized manufacturing systems review: challenges and outlook



DeVor et al. (2012) Matt and Rauch (2012) Mourtzis et al. (2012b) Mourtzis and Doukas (2013) Kreiger and Pearce (2013) Gwamuri et al. (2014) Kohtala (2015) Zanetti et al. (2015) Seregni et al. (2015) Rauch et al. (2015)

Environmental impacts of distributed manufacturing from 3D printing of polymer components and products Reversing the trend of large scale and centralization in manufacturing: the case of distributed manufacturing of customizable 3-D-printable self-adjustable glasses Addressing sustainability in research on distributed production: an integrated literature review A production system model for mini-factories and last mile production approach Development of Distributed Manufacturing Systems (DMS) concept Sustainability in manufacturing through Distributed Manufacturing Systems (DMS)

result of the simulation was, that lead time could be nearly reduced by half compared to a classic supply chain. In addition, the known pipeline effect in supply chains is stronger in traditional supply chain which results in reduced inventory levels in DMS models. 3.3.2. Ecological dimension of DMS A rising trend in DMS would drastically reduce long distance transport on the road, by sea or in the air. The reduction of transport volume results in a reduction of CO2 emissions and therefore of environmental pollution. Considering the finite resources of fossil fuel and energy, the reduction in transport helps protect the environment. The integration of low-emission vehicles will be an interesting topic in designing solutions for last-mile logistics and capillary distribution in combination with DMS. The increasing

















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application of DMS and mini-factories will also reduce traffic on the road, which is another positive aspect for flora, fauna and human society, considering noise nuisance and air pollution. The major challenge from the ecological point of view will be the development of more ecological and “green” last-mile logistics as well as a “greener” energy and resource efficient production. The example in Fig. 6 shows an energy consumption scenario for China's freight transport from 2000 to 2050 (Hao et al., 2015). Based on this scenario, the development of traffic and the necessary energy consumption is represented. With decentralized manufacturing systems not only the share of international aviation and maritime transport can be reduced, but also the much more extensive share of traffic on the road.

Fig. 4. Sustainability in manufacturing through DMS and related challenges in the future.

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Fig. 5. Example e Development of South African logistics costs from 2006 to 2014 index (Havenga et al., 2014).

3.3.3. Social dimension of DMS Changeable and flexible DMS make it possible to encourage manufacturing and entrepreneurship in emerging countries. There could be observed a trend in localization, expanding the local or regional economy. Thus, DMS lead to higher employment due to the creation of new jobs in local manufacturing via the introduction of geographically dispersed small mini-factories. According to a study of Almeida and Fernandes (2013) on local manufacturing growth in Chile, regional diversity in the sectoral composition is

associated with faster long-run growth. Locations with a more diverse set of industrial activities exhibit faster growth. Therefore the authors support the formation of heterogeneous instead of homogeneous industrial clusters. Such sectoral diversity can be achieved through the promotion of geographically dispersed small production units. While large manufacturers belong very often to capital-focused investors companies from developed countries, DMS can also be operated from local entrepreneurs, thus strengthening the local economy. With their small factories, DMS

Fig. 6. Energy consumption scenario for China's freight transport from 2000 to 2050 in million tonnes of oil equivalent (Hao et al., 2015).

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promote small-scale economic cycles, which are less sensitive to global fluctuations and crises and more robust than global corporations. In addition, in the food and other industries, customers have become increasingly sensitive to the country of origin of the product. The customer more often prefers locally made products and is also willing to pay a higher price for them. Local production also brings more tax revenues and, thus, a social benefit for the consumers if the public authorities may invest those funds in infrastructure and a rising living and working standard. If DMS are introduced in combination with collaborative product development, this drives a positive revolution in customer involvement and individualization of goods. With the increase of DMS, business in the logistics sector will decline, resulting in less traffic on the roads and thus a more livable environment. Conversely, jobs in logistics companies will decline. From a social point of view, it becomes therefore important for the future to work on a (re-)qualification of local people in emerging countries, particularly in the operation of advanced manufacturing processes and equipment.

and traffic but also at the same time strengthens the localization of production even in areas which are otherwise less attractive for traditional manufacturing plants due to their logistically disadvantageous location. Thus, small-scale regional economic cycles, a higher employment rate and social well-being can be achieved even in less industrialized areas of emerging markets, leading to more sustainable long-term development of these countries. Much potential remains in the research field of distributed manufacturing. Although a current awareness has grown of the future potential of such production systems, needed research remains to be performed in the development of manufacturing system design models and related business models for their application in practice. Additionally, in an actual era of developing cyber-physical technologies (Industry 4.0) and cloud-based networks, it is also necessary to investigate new concepts for optimized network design and coordination.

3.3.4. Institutional dimension of DMS In recent years, the topic of sustainability has become a major objective for politics in developed and in emerging countries. Pegels (2014) describes that in emerging countries it is difficult to promote and implement environmental policies. However, while industrialized countries were responsible for the bulk of greenhouse gas emissions in the past, the current growth of emissions is mainly due to the emerging countries (today, two-thirds of annual carbon dioxide emissions already stem from non- OECD countries). Governments need to play a more active role in the structural change towards more sustainability. Green industrial policy should be government intervention to hasten the restructuring of the economy towards environmental sustainability (Pegels, 2014). Thus, an increase in politically financed projects or research for sustainable manufacturing can be observed (Delai and Takahashi, 2013; Almeida et al., 2015). In the future, more rigid regulations concerning the reduction of carbon emissions will have also a positive effect on the development of DMS. Tough institutional incentives, efforts or programs enabling and facilitating the development and application of decentralized and local manufacturing are needed.

This research is part of actual research activities in the project DIMASY that are titled, “Design of decentralized and distributed manufacturing systems and their coordination in manufacturing networks” and is supported by the Free University of Bolzano (Italy) in collaboration with the research institute Fraunhofer Italia Research s.c.a.r.l., Innovation Engineering Center (IEC) and the SME company Tecnomag GmbH (Italy).

4. Conclusion and further research work Emerging markets are facing a high growth in production and consumption. These countries offer an important opportunity for industrial manufacturers because of potential new customers and markets. Conversely, developing countries are suffering because of the existing and difficult conditions for industry due to poor manufacturing and logistics infrastructures. In addition, in the past, manufacturing in developing countries was more economically oriented, and environmental and social aspects and consequences of production hardly received any attention. This has since changed. Additionally, emerging countries are working on a revolutionary change to make production more sustainable. Several contributions in this paper are significant in achieving this aim. In principle, the article proposes the concept of DMS as an appropriate form for the design of sustainable production. First, sustainability-oriented reasons for the growing trend of DMS were identified. Then, the concept of DMS was analyzed in relation to the four dimensions of sustainability. Based on these considerations, the advantages of DMS for developing countries were provided, also identifying challenges for future development and research in the field of DMS. In contrast to traditional mass production in a few production sites, the DMS concept with its micro production units allows local production on demand. This not only reduces transport, pollution

Acknowledgments

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