The implications of emerging technologies such as 3D printing on the industrial manufacturing market are often hotly debated. Some experts in the industry feel that it will be hugely disruptive, while others believe the technology is decades away from viability.
Forecasts project significant growth in the industry over the next five years. As stated by the website On 3D Printing, “The 3D printing industry is expected to change nearly every industry it touches, completely disrupting the traditional manufacturing process. As a result, the projected value of the industry is expected to explode in the near future.” In fact, On 3D Printing projects that the market for 3D printing technology itself is expected to grow to $5.2 billion by 2020.
As the market grows and the cost of printers falls, it is likely to give rise to new competitors in traditional markets, and spur innovative new products, as prototypes for new products will become significantly less expensive and less risky to fabricate.
Yet product development and the competitive environment are just two of the potential implications. This emerging technology is also likely to have a significant impact on how manufacturers do business, specifically as it relates to shifts in material cost, incremental cost calculations, and traditional assembly line and product pricing strategies.
Material Cost Savings
3D-printing technology has the potential to make the manufacturing process options infinite and extremely precise. For example, today, using what’s known as “subtractive process,” if you want a part made out of aluminum, a block is placed into a CAD system and the excess material is cut away to make the part. Using this process, approximately 60 to 70 percent of the aluminum block ends up as scrap depending on the complexity and shape needed. The scrap is later melted down and reused for future manufacturing needs.
By contrast, 3D-printing technology is “additive,” and manufacturers are able to use the minimum material needed to fabricate a part. In the example above, using a 3D printer could essentially eliminate the process of melting down excess scrap material and wasted resources, ultimately driving down total material costs for the manufacturer. For the manufacturing industry in general, this could significantly reduce capital tied up in raw materials and costs to reclaim scrap.
Improvement to incremental cost calculations
While the initial cost of a 3D printer could be upwards of a million dollars, the technology has the potential to substantially reduce incremental unit costs for a manufacturer. There is a considerable chance that a part made on a 3D printer could cost far less than one completed through traditional manufacturing processes.
Eventually, the industry may reach a tipping point where the fully allocated costs associated with 3D printing will fall well below the traditional manufacturing process — even with the upfront investment in the printers themselves. If that’s the case, then it is likely we will see a complete shift in the way industrial manufacturing is done.
Assembly line and pricing strategy transformation
During the manufacturing process, sales teams must work very closely with the production teams to make sure all delivery dates are met and the customer is kept happy from point of sale through production and delivery. In a traditional assembly line process for engineered-to-order products for instance, the tools and material must be changed out for each individual job and reprogrammed for each customer and product. With 3D printing, the production team is given greater flexibility since assembly is a single operation and set up time is reduced to nearly zero. Due to flexibility in this new assembly line process, sales reps would be able to push orders through faster and in a greater capacity, since they are fulfilled almost immediately without waiting for optimal production windows which can accommodate the particular tooling or material used for each order. Additionally, the manufacturing process can be done at a lower cost and every order can be treated like a rush order with shorter production time.
On the other hand, shorter production time and lower overhead costs to the manufacturer doesn’t mean that companies will no longer be able to collect value out of a strategic pricing process. Companies may still be able to charge the same price and even enjoy an increased margin rate due to the specificity and uniqueness of products available via 3D-printing processes. Because the manufacturers’ costs are less, they can decide how much of that cost savings to pass along as a price reduction to customers in order to secure business and keep it out of the hands of competition, or how much to keep in their pockets as increased profits.
For now, the impact of 3D printing on industrial manufacturing is merely theory, but manufacturers who choose to ignore the benefits and transformation associated with this technology risk falling prey to those that embrace it. 3D printing continues to evolve at a rapid pace and each day we’re seeing something new created from it. What started as fabrication of plastic screws and small parts made of glass has turned into full manufacturing of complete end-products — working automobiles and even buildings have been 3D printed in a single manufacturing action. This proves that the possibilities of 3D-printing technology are endless for manufacturers.
Barrett Thompson is the general manager of pricing excellence solutions at Zilliant.