Economics of 3D Printing, Part Two: The 3DP Crossover Point

Economics of 3D Printing, Part Two: The 3DP Crossover Point

In our last post, we touched on the evolution of manufacturing from the days of antiquity to today.  Per its closing comments, we’re in the midst of a paradigm shift in manufacturing.  While Globalization has been defined by subtractive manufacturing at tremendous scale in low cost economies, this next generation will be defined by something quite different.  While global manufacture of simple parts in low cost locations will persist for generations to come – with simple, standard parts, it will probably always be the way – additive manufacturing for fast turn, complex parts will increasingly integrate into the supply chains of corporations around the world.  In this post, we’ll dive deeper into a comparison of the “globalization” manufacturing approach relative to 3D Printing, discuss how key cost inputs are likely to evolve, and how that impacts the “3DP Crossover Point.”

A Quick Recap

To level set from our previous post, we find it useful to track the evolution of key inputs that have driven the cost of goods over time.  The key inputs we looked at were Material, Labor, Shipping, and Overhead.  As time has gone by, costs on the whole have gone down.  At each step of the way, a different lever or combination of levers were pulled to drive down this cost.  For instance, raw materials grew cheaper through better extraction techniques, labor cost went down through outsourcing to lower cost markets, and shipping cost dropped through advances in transportation.  We’ve generally seen an increase in what we’re calling overhead as an overall percentage of cost, as sales, marketing, and management layers grew.  But in recent years, we’ve even seen the cost of that layer reduce with the offshoring of white collar jobs, as supported by advances in telecommunications support increasingly global work forces.

The New Cost Calculation

CAD-based manufacturing more broadly, and 3D Printing more specifically, stands to take this evolution a step farther.  To recap some of the detail provided in the previous post, the comparison between Globalization-style manufacturing and 3D Printing is summarized here:

Globalization vs. 3D Printing_V2

As it stands, 3D Printing has markedly higher raw material costs, comparable labor cost (due to a lower amount of labor required), and  lower shipping costs (because it tends to be shipped a shorter distance).  3D Printers are expensive, but so too are traditional lathes, mills, etc.  The net effect of these tradeoffs is that certain jobs lend themselves to one process or the other.  For now, the jobs that tend to make sense for 3D Printing / CNC Machining are rapid turn parts in small quantities.  For these smaller job, the investment in tooling required to run a traditional manufacturing process can simply be too high.  For instance, an injection molded part might cost tens of thousands for the mold but just a few dollars in variable unit cost.  To 3D print the part might only cost $10 per unit with virtually no setup cost – so long as a the print bed is filled, maximum .  As you can ascertain from this example, a crossover point tends to exist where it’s better to make a bigger up front investment and smaller unit cost.  But up to that point – so long as there aren’t material limitations – 3D Printing or CNC Machining is the better choice.

Graph of Rapid Manufacturing and Traditional Manufacturing Crossover

The Evolving 3DP Crossover Point

 

We only see the point at which 3D Printing gives way to traditional manufacturing processes gradually pushing out in the future:

Graph of 3DP - Traditional manufacturing crossover
As advances in material and equipment cost open the door to localized manufacturing (lower shipping costs), the crossover point between rapid manufacturing and traditional manufacturing will push to higher volumes

Currently, material costs are very high because manufacturers have operated with a razor and blade model – often selling the printers at relatively thin margins and capturing profit on proprietary materials to be used in those printers.  With that said, the rapid expansion of the market and recent announcements of new entrants stands to suggest an increasingly open materials marketplace.  In this future state, materials prices stand to go down – especially as large materials companies who have been waiting for the industry to mature begin pushing into the market themselves.

Labor costs are positioned to drive down in a similar way.  3D Printing is driven by Computer Aided Design (CAD) files – they read a design that’s been uploaded into the printer, and it builds the part.  Currently, there is a significant degree of art to go along with the science of 3D Printing, which means engineers play a significant role in managing the production.  But while even industrial machines are not simple push-button part machines, that is the direction printer manufacturers are going.  In this way, labor rates in a given location don’t matter, because there are virtually zero man hours allocated against production of a given part.

This then leads to Shipping costs, which also stand to be lower with 3D Printing.  Because 1) material cost should be fairly equal around the world and 2) labor cost should be a non-factor, then the need to utilize far away markets for production is significantly diminished.  Instead, customers can bring production in-house or, as our platform facilitates, utilize service providers who’ve invested in the technology.  Doing so massively drives down the cost of shipping.

Conclusion

 

Now that production quality materials have become available for industrial 3D Printers, there are many occasions when 3D Printing is a better alternative to traditional manufacturing techniques.  For now, those projects are the ones with limited volumes, high complexity, and quick turnaround needs.  That limited 3DP to a prototyping niche for the past few decades.  However, the door is opening to spare parts manufacturing and limited run production parts in the present, and in the not-too-distant future the larger scale fabrication of production parts.

We’ll discuss the implications of this in a future post…

 

 

Leave a Comment

Your email address will not be published. Required fields are marked *

Please enter your Name
Please enter