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Speeds and Feeds? |
NEWS |
The way we measure manufacturing productivity is about to change. Part of this is due to macroeconomic drivers like tariffs and trade wars; the other part is due to technology innovation. We started to touch on this in the ABI Research insight “Additive Manufacturing, Spare Part Perpetuity, and the Rise of the Microfactory,” where we pointed out that the advent of production Additive Manufacturing (AM) shifts cost management control from activities that are transactional (moving a part from A to B; turning a part to be cut or milled; coordinating with machine shops and components suppliers) to those that are continuous (raw materials, feedstock, energy consumption/conservation). Since then, companies like Desktop Metal, Carbon, Formlabs, and even digital service bureaus like Fictive, 3D Hubs, and soon Origin have started to rouse the market. For Desktop Metal, it’s the company’s metal binder jetting Production System; for Carbon, it’s subscription-based pricing; for Formlabs, it’s the launch of two new 3D printers, the Form 3 and Form 3L. Meanwhile, Fictive raised a US$33 million Series C funding round, 3D Hubs raised a US$18 million Series C funding round, and Origin, although yet to officially lift the veil, has some compelling things in the pipe as the second (to Carbon) subscription-based platform provider. All of these developments warrant a finer point for AM Return on Investment (ROI)—and that finer point is what we refer to as total lifetime value.
What Goes into an Additive Manufacturing Platform Investment Decision |
IMPACT |
ROI is a metric that measures things like payback period and past cost accounting. Total lifetime value reflects the overall impact of a decision—the cost of acquiring a market position and its longer-term upside. AM, like generative design, AI, 5G, robotics, IIoT platforms, and more, is one such area where we need to think more in terms of lifetime value than ROI. Why? Because AM platform investment decisions cannot be made in isolation.
AM represents a technology family that can deliver results (parts) that cannot be manufactured with traditional techniques. As a result, if certain baseline throughput can be achieved, there is significant value to be unleashed. This is the reason why ABI Research developed its Additive Manufacturing Total Lifetime Value Calculator. But before we get into the results, it’s important to understand the mechanics of the “why.” Below is a non-exhaustive list of considerations that feed an AM platform investment decision:
How to Think about Additive Manufacturing ROI |
RECOMMENDATIONS |
If you are a mid-sized automaker with solid experience implementing new technologies, want to acquire 20 AM platforms (each of which costs US$2 million all-in), expect about US$30,000 in setup and training-related costs, and produce 100,000 units/year, you will be about US$19 million in the hole in year 1. But you’ll cover this cost before the end of year 2 with nearly US$21 million in savings and costs recouped that year alone. Year 3, you’ll see it rise to nearly US$23 million. At the end of 10 years, you will have realized US$184 million in net-new value in terms of both savings and new product creation.
If you are a mid-sized Metal Injection Molding (MIM) provider with mediocre experience implementing new technologies, want to acquire 10 AM platforms (each of which costs US$1.5 million all-in), expect about US$35,000 in setup and training-related costs (due to difference in level of experience), and produce 10,000 units/year (regardless of how many variants), you will be about US$11.5 million in the hole in year 1. You’ll cover this cost before the end of year 4, at which point the total value you realize on an annual basis will be about US$4.4 million. At the end of 10 years, you will have realized nearly US$28 million in net-new value in terms of both savings and new product creation. This is new business from engaging with customers that you previously would not talk to because it wasn’t worth your time for their unit volumes; with AM, those conversations become worthwhile. If the same company were to acquire 50 AM platforms instead of 10, and produce 50,000 units per year instead of 10,000, it would see more than US$133 million in net new value under the same conditions.
Clearly, one of the biggest costs to consider is a cost that can’t truly be accounted for until it starts to unfold: opportunity cost. AM allows companies to develop new products and, with a systems approach, pioneer new markets. Most companies get started small—as they should—but quickly see the benefit and want to scale. This statement has been generally true in clandestine operations that want to wield their competitive advantage. The difference today is that technologies like binder jetting, when combined with generative design software and part nesting, make metal AM a true production-level candidate in the manufacturing arena. It doesn’t matter if you are an automaker, aerospace provider, MIM supplier, or otherwise—now is the time to evaluate the impact of these decisions. This is why ABI Research developed its Additive Manufacturing Total Lifetime Value Calculator.