A1) AM Disruption at Different Scale – What is Happening and Wild Guesses (1)

In my last AfT blog, I discussed the importance of delta profit on AM disruption, and the MECE deltas that can be categorized as AM disruption on the process, product, and management. If the MECE deltas work toward a positive delta profit with realistic numbers of current technologies, we know AM can be disruptive.

But are those MECE delta working?

In this blog, I will offer some rough estimates, rules of thumbs and run the numbers with you. You will clearly see the answer, understand what is happening of AM disruption, and why it is happening.

“Trust the process” – Joel Embiid, 2018 NBA All-star of 76ers

I will start with the scale of the process since this is where the disruption starts. Let’s say you want to add in AM capacity into your processing line today. The first thing is investing capital for machines and then immediately facing depreciation through ownership. Depending on the level of the machines, the depreciation plus maintenance would be about $15k-$120k/year for every polymeric AM machine and $60k-$270k/year for metal AM.

As for now, delta profit: deficit $15k-$120k/year (polymer AM), or $60k-$270k/year (metal AM) at the delta term of depreciation.

Printing parts directly sometimes can save mold, die, other tools, and the associated depreciation costs. This can be a more widely situation with polymeric processes. Take injection molding as an example, the depreciation costs saved of a mold can vary from $2.5k/year to $50k/year, depending on the complexity of the part and production volume. Considering this, the delta of depreciation under different conditions of part complexity and production volume:

With an AM machine sitting on your floor, you are facing ~$15k-$300k deficit from depreciation in most scenarios except if you plan to replace the production of complex plastic parts with small volume.

(Sounds familiar? This is one of the AM disruptions described as happening right now in many sources and materials. Examples include rapid prototyping and customized products.)

Now let’s start printing. Every build consumes loads of materials, which combining with machine depreciation generally represents significant portions of AM total costs. But unfortunately, AM material is expensive. How expensive? Super, 10-400 times more expensive for most materials compares to its conventional form (bar, sheet or others). Even if you consider the AM advantage as a near-net-shape process with relative little scrap, plus the mass reduction generally achievable for most designs, the unit cost of material is still a raise for most polymers and metals, except expensive metals such as Ti64 or Inconel and a huge amount of machining involved for the original part.

As a result, you will generally see a negative delta of the unit material of $10-40 per single polymer part, $10-70 per complex polymer part, and $50-400 per simple metal part (assuming 100g polymer part and 1kg metal part). You may see a negative delta of $50/part to a positive delta $600/part for complex metal applications depending on the level of complexity and material type.

So in most scenarios, the delta profit will add another deficit from the unit material costs increase multiplied by production volume. Until now, AM production not only starts with a deficit but keeps adding deficit when you produce more. The only exception is complex parts with expensive metals to be machined away.

(Sounds familiar? This is one of the AM disruptions described as happening right now in many sources and materials. Examples include aerospace parts such as fuel nozzle. Counterintuitively, for this exception, you should not consider AM for small volume production as AM usually suits for. Instead, you should print as many as you can to cover up the delta deficit in depreciation. This may be one of the reasons for GE ramping up AM capacity quickly for the famous fuel nozzle production.)

Now you roughly see what is happening at the process scale with AM disruption. AM is facing extreme difficulties claiming a positive profit delta purely from the cost perspectives with current economics. I am not even counting on post-processing, inertia gas supply, and other possible cost increase. You may ask how about labor? I doubt AM production can save $50/polymer part (about 2 hours labor per part) or $200/metal part (about 8 hours per part) for most cases since direct labor generally represents a very small portion of total costs.

So my #1 core message of this blog: forget about the process scale if you consider current AM disruption for most cases. If it happens for certain applications or industries, the fundamental changes probably happen in the product or management. Think about other MECE delta terms in the map I offered you: Indirect Labor, S, G&A, unit price, unit volume….

Among all these terms, the most important delta you can count on to reverse the negative is the unit price. Whether it is lighter weight, better performance, or a longer lifetime, the unique features achieved through AM offer a competitive advantage in charging more for each part. It’s nearly impossible to squeeze $40/polymer part from direct labor or production supplies, but gain extra $40/part for faster delivery or better performance is achievable although may not be easy.

So my #2 core message here: product, product, product!

The current and near-term AM disruption would probably happen at the product-scale. The value added and the ability to charge extra from product innovation majorly determine the Top Line of the delta profit of AM. If you see a way to raise your product price with $80/polymer part or $500/metal part through AM, don’t hesitate to jump in and embrace the disruption.

But remember, raising price is always difficult. How can you prove and sell the value-added among all those uncertainties of AM processes and parts? The best case is the AM product is disruptive with nearly no competition, which offers you great power in asking whatever the price is if your customers can afford. Such case applies to nearly all major industries that AM currently penetrates deep, such as medical (customized crown and implant), prototyping (fast delivery), and tooling (informal cooling).

But sometimes the improvement is incremental, then selling the improvement may not be fun anymore especially when the product is a part of a system with hundreds of thousands of parts. This is due to the dilution of the improvement inside a complex system (assuming 20% performance improvement, and the part contributes 5% of the total performance of the system, after dilution the total improvement of the system from the innovative part is 1%). The assembler of those parts needs to consider finding a way selling single-digit improvement to final customers and balancing risks and uncertainties, which is difficult. Such scenario applies to industries such as aerospace and automotive, which you see a lot of integration of AM internally and pass vertically. Easier to sell, higher confidence. Also, you see GE is trying to build a turbine with as many AM parts as they can because it is easier to sell to the customer with a disruptive product adding up many single-digit improvements instead of a double-digit improved part.

Core message #3: disruptive final product (not part) directly to customers, if you think about best product strategy for AM technology.

All my discussions about the bottom line and top line of the delta are based on current or past AM performance. What about future? What’s the trend of AM development? How does the bottom/top line change in future? Keep your patience and I will give my predictions (or wild guesses) based past data I collected in my next blog in a few days. Please share, like, comment and follow our website if you enjoy this article!

My ending question for you:

What’s the exception successful case for AM disruption at the process, product and management scale? (I am also highly interested considering my personal limited scope)

Thanks!

Runze

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Some of my references to those number:

1. DS Thomas and SW Gilbert, Costs and cost effectiveness of additive manufacturing, NIST Special Publicaion, 2014
2. M Baumers, Raw material pricing and additive manufacturing, EPSRC, 2014
3. R Song and C Telenko, Material and energy loss due to human and machine error in commercial FDM printers, Journal of Cleaner Production, 2017