Calculating the value of 3D printing

Quantifying the cost of 3D printing requires a calculator, quantifying the value it brings requires a new mindset

For every business investment, you need a business case. How do you make a compelling business case for 3D printing? Too often, we see business cases that are simply an addition of cost savings across a few manually identified parts. While this type of business case can justify a machine purchase, it will never justify a business transformation.

Understanding costs is a matter of evaluating a simple formula of fixed and variable costs. In manufacturing, fixed costs include tooling, sourcing, and setup and are amortized across volumes. Variable costs include labor and materials. Any analyst can add up these figures to compare costs, but that is far from a fully developed business case for additive.

Focusing solely on piece-part cost reduction means you’ll miss 90% of the iceberg. Once you’ve determined the cost, to correctly calculate the value of using 3D printing requires a different mindset. In this book, you’ve seen stories of leading companies leveraging the multiplicative effects of changes to products and processes and the exponential effects of new business opportunities enabled by 3D printing. Many of these examples go beyond part-for-part cost reduction and instead identify value as both tangible and intangible, near term and long term benefits.

How do you calculate the cost?

Material cost: Material usage for the part, support material, and other material waste

Machine depreciation: Portion of the machine price attributed to a part due to the time the machine is being used to build the part

Consumable costs: The cost of consumables used for the build (build trays, argon gas, filters, printhead, etc.)

Labor costs: Personnel cost involved in the build (build file preparation, machine preparation, build monitoring, machine clean-up, and support removal)

Risk: Risk of failure involved in building a part. Usually comes in two different types, time risk – the longer the print, the higher the risk of failure, and geometry risk – certain geometries might have higher risk of printing failure

Machine Depreciation = MachinePrice x PartBuildTime

Cost DepreciationYears (326 x 24 x MachineUtilization)

Once you calculate the costs, how do you quantify the value?

How your organization derives value from 3D printing will depend on how and to what ends the technology is deployed within your organization. Some organizations will derive value from incremental replacements and improvements to parts and processes, but some will use the technology to enable transformative change in their businesses, enabling new products and services never before possible.

1/ Substitution

Often the simplest case for additive value involves substituting conventional processes and parts with 3D printing to reduce costs. Substitution can make sense in cases where the economics of traditional production make it less attractive than additive.

Benefits from substitution will usually come in the form of reducing fixed costs of production: Sourcing, production setup, tooling, and other fixed costs may make 3D printing highly attractive, especially at lower volumes.

2/ Augmentation

Many businesses have discovered that 3D printing enables them to do the things that they do, but better. 3D printing can automate manual processes by converting physical work into digital manipulation. It can also produce more robust products, through assembly consolidation.

Gains from augmentation will happen in increased efficiency and lower lead times, or improvements that lead to simpler processes or more robust and functional products.

3/ Transformation

Whether it’s new avenues of personalization and customization or completely new ways or delivering product, 3D printing can create opportunities for new product categories, new ways of servicing customers, or fundamental changes to how products are made.

Because 3D printing can enable entirely new business and product lines, in a transformational 3D printing initiative, most of the value will come in the form of revenue growth, new market opportunites and new business models.

Examples of substitution

Reduced cost of producing spare parts

Cut costs from sourcing jigs and fixtures

Reduced lead time and costs for prototypes Examples of augmentation

More realistic facial expressions and movements

Increased yield from advanced mold tools

Additional premium customization options Examples of extension

New luxury product lines

Digital library of vintage spare parts

More iterations of prototypes