Additive or Conventional Manufacturing? That is the Question
What is the true cost of 3D printing for manufacturing?
Managers need a method for calculating the actual cost of additive and conventionally manufactured items that apply to their offerings
Cost curves are ideal tools for communicating the difference between any two technologies when the data behind the curve is accurate and comprehensive
A quantitative analysis of your additive and conventional manufacturing options reveals the hidden internal costs of both options
How to calculate the costs of additive manufacturing?
Whether contemplating a 3D printer purchase or outsourcing part production, astute managers know they must objectively assess their options. Yet, they lack the tools necessary to produce an accurate ROI analysis, especially when they have limited or no experience with 3D printing. Even the actual cost of their current, conventionally manufactured parts made with casting, forming, molding, subtractive, or assembly techniques are often shrouded in mystery, with internal chargebacks based on incomplete or inaccurate production costs and overhead calculations.
To solve the ROI problem, purchasing personnel solicit pricing from a 3D print service provider and a traditional manufacturing outsourcer, the idea being that the two prices reflect market realities. Worst case, the thinking goes, is that both suppliers' prices will be higher than the internal costs because of the suppliers' profit margins. But purchasing's focus on external pricing masks hidden internal costs such as warehousing, spoilage, ordering costs, handling labor, logistics, the value of capital tied up in inventory, and more. For example, 3D printing can avoid supply chain disruption costs like emergency freight and lost revenue. These hidden costs can be particularly significant for spare parts.
To uncover those hidden costs and calculate the real cost of additive and conventionally manufactured items per unit, purchasing personnel should use a calculation that varies by the quantity ordered and applies to their unique circumstances. Only then, after having determined which 3D printing vendor's solution meets your quality and performance requirements, can you compare the proposed and existing production methods.
The 3D Printing Cost Curve illustrates this point. Conventional manufacturing has high set-up and make-ready costs. Think about the lead-time and costs associated with injection mold tooling. The high tooling cost (but not the long lead-time or delayed revenue, which are significant factors) is amortized over high volumes of identical parts. The more parts produced, the lower the upfront cost as a proportion of the total cost per piece. The cost of conventional manufacturing steadily declines as more parts are made.
On the other hand, 3D printers have a lower initial cost for set-up and make-ready, with no tooling investment and faster time-to-revenue. So, while there is some initial burden on the 3DP cost, it is amortized quickly and leads to an almost horizontal cost curve. Don't forget that most 3D printed parts require post-processing to remove supports and excess material, polishing, or post-print cooling time that may be more than needed for the conventionally manufacturing equivalent and must be factored into the ROI calculation. Different 3D Printing technologies differ in levels of complexity of post-processing required (e.g., certain technologies like Xerox's liquid metal printer removes the powder removal step making post-processing faster).
The intersection of the two curves results in a break-even point. The lower quantities to the left of the break-even point should be produced with 3D printing, while the higher amounts to the right should be made with conventional manufacturing:
The 3D Printing Cost Curve
Today, most organizations have cut all the unnecessary costs out of their conventional manufacturing processes. There are meager cost reductions left that would lower your cost curve's vertical placement and move the break-even point to the left, toward fewer parts.
Since the introduction of 3D printing, the technology has been greatly improving in terms of cost, quality and performance. This trend will continue, with the technology already at the point of being a viable alternative to traditional methods.
Cost curves are ideal tools for communicating to management and staff the difference between any two technologies. But for the curves to be meaningful – and accepted by skeptics – the data supporting the chart must be accurate and comprehensive. Whether you create a spreadsheet, utilize a vendor's application, or employ a tool developed by a consulting firm such as AMPOWER, make your comparison in conjunction with a qualitative assessment of:
Build size range
Output quality (finish, fit)
Performance and longevity
Replacement part availability
How to decide whether to pursue additive or conventional manufacturing
A quantitative analysis of your additive and conventional manufacturing options complements the qualitative analysis of the 3D printer's output. Your decision on whether to invest in 3D printing will be fact-based by using a cost comparison tool that:
Is unbiased (used with any vendor and technology)
Incorporates 3DP and conventional production processes that are unique to your organization
Uses your time, labor, and overhead costs
Is comprehensive (covers costs from order entry to post-processing to warehousing)
Accounts for the cost of warehousing, spoilage, ordering costs, handling labor, logistics, the value of capital tied up in inventory, and supply chain disruption costs
Pete Basiliere provides research-based insights on 3D printing and digital-printing hardware, software and materials, best practices, go-to-market strategies and technology trends. Before founding Monadnock Insights, Pete spent eleven years as Gartner’s Research Vice President – Additive Manufacturing. Pete’s full bio can be found here.
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