Monday, June 11, 2012

Business Plan: 3D manufacturing

This blog post presents a case study in the use of 3D printing technology for manufacturing. The information is primarily geared towards entrepreneurs looking to bootstrap their business without dealing with conventional sources of funding. If you have VC funding, you should just buy a 3D printer since it will probably cost about as much as you were going to spend on a foosball table.

At the time I Heart Engineering was created with the goals of researching experimental capitalism and building giant robots, we had been working with 3D printing technology for a while and knew that one of our initial capital equipment purchases would need to be a 3D printer. At the time, we were not sure if anyone would buy parts produced by a 3D printer or if it would only be useful for prototyping designs. We also couldn't tell if we were better off in the short term buying a 3D printer or outsourcing our production.

To determine the the best course of action, our initial strategy was to post designs on Shapeways and Thingiverse to determine which ideas were popular and to offer a few of those for sale in our online store. Our hypothesis was that if we could sell at least one or two of anything through Shapeways or our online store, then a 3D printer could probably pay for itself. Also, this would be a good place for a shout out to Ponoko who regularly provides us with excellent quality digital fabrication services. These services have helped us scale our business to where it is today.

In the past year we have used the printer to accomplish a variety of research and manufacturing goals but to simplify the cost analysis we will assume that the printer is used exclusively use it to print Trik Tripod adapters. This is a reasonable simplification as this product produces the vast majority of the tangible and quantifiable value and this will provide a worst case estimate of the return on investment.

So while perhaps not exhaustive, the following is a fairly detailed cost analysis of one product: the TriK Tripod Adapter. This adapter allows you to mount a Kinect 3D sensor on to a tripod.  It retails for $19.95 and can be manufactured in about 36 minutes using a Makerbot Thing-O-Matic.

From December 2010 to September 2011, we had 42 orders for a total quantity of 51 Trik Tripod adapters. On 9/28/11, we ordered a Makerbot Thing-O-Matic for $1,299.00 and since then we have had an additional 44 orders for 56 parts. Based on these volumes, this product would be impossible to produce profitably by any other means. Humorously, while some have questioned if 3D printers like the Makerbot TOM can make "Real" parts for "Real" products, the only complaint we have received to date is that a customer wanted the product in a different color and were unable to supply it because we ran out of that color and could not source it in a reasonable timeframe.

TriK Tripod Adapter Costs
 $0.384     8 grams Raw ABS Plastic
 $0.0182    1/4-20 Nut
 $0.222     Qty 4 Plastic thread forming screws 
 $0.124     2 x 1 1⁄4 x 3" Kraft Reverse Tuck Carton
 $0.015     2 x 2" White Laser Label
 $0.044     3 x 5" 2 Mil White Block Reclosable Poly Bag
~$3.75      NRE - Non-Reoccuring Engineering Costs
~$0.50      Labor - Push button, remove part, repeat
~$8.34      Printer operating cost

Total Cost $13.40/part

Non-recurring engineering
Time is money, and engineers want to get paid. They also want things like health insurance, vacations, comfortable chairs and some may want to pay back student loans. We are going to estimate $100 per hour for four hours of work designing the part. This includes building a CAD model, printing a prototype, drinking coffee, editing the CAD model so the screws actually fit and printing additional prototypes. If we sell one, the NRE cost per part is $400 and if we sell a thousand the cost per part is $0.40.  Unfortunately, we have no idea how many we will sell.

If you don't have someone (possibly yourself) working full/part time, it is going to be difficult to produce parts in any reasonable quantity. However, if you have someone soldering boards and packing boxes, having them remove the part and start the next print job is minimal additional work. Our current estimate is that it will take 2 minutes per part at a cost of
$15 per hour.

Printer Operating costs
The TriK Tripod Adapter takes 43 minutes to print from a cold start.  If the build environment is temperature controlled and the next part is started as soon as the previous part cools, the build time for a warm start is 36 minutes.

Our maintenance costs for the Thing-O-Matic for nine months of moderate production use include $334.75 worth of replacement/spare parts. The printer also requires about 2 hours a month in terms of repair and maintenance work fixing the extruder, tightening screws and belts and performing calibration. We are currently budgeting a cost of $20 per hour for this work. This gives a total cost for maintenance of about $77.19 per month. How much will 3D printer repair shops charge in the future?

We used a watt meter to measure the power usage and determined that the printer should cost roughly $30/month to run 24/7. While this may not be exact, it seems like a reasonable estimate. For cost estimation we will assume the printer works an 8 hour shift and costs $10/month.

In NYC and specifically Brooklyn, real estate costs are generally a serious concern. We have a 2'x4' table for the 3D printer that holds the environmental chamber, laptop, parts and plastic. With an estimated real estate cost of $1.50/sqft/month, the printer needs to pay $12/month in rent. YRMV (Your rent may vary.)

Overhead not considered
  • Cost of printing invoice/labels
  • Marketing Blogging costs
  • Transaction fees for credit cards, etc
  • Scapped parts and other losses
  • Cost  for ventilation system
Lessons learned
  • Reliability has a serious effect on costs.
    We went through three of the MK6 Plus Cartridge Heaters and have one spare on hand.
    Use an adjustable wrench to remove the nozzel and make sure staff attempting repairs are familiar with the use of set screws. When attempting to clear a jam, make sure they remove the Cartridge Heater before attempting to unscrew the heater block.

  • Spare parts help avoid down time.
    We ran into issues when a customer order a part that we print on demand and the printer was down for repair for a few days waiting for replacement parts to arrive.

  • 3D printers can make "Real" products
    As of today, people will pay for 3D printed parts and as we develop new techniques for combining it with digital manufacturing technologies, such as laser cutting and water jet machining, our products will become more complex. We believe that our only limitation is our imagination.

In addition to directly manufacturing products, having a 3D printer has had additional positive impacts on our manufacturing processes. In one notable case we constructed a soldering jig to improve quality by ensuring proper alignment of a connector and allowing for more efficient assembly. We have also been able to produce prototype parts to check design feasibility and ensure that products are assemble-able.

While less quantifiable, we also believe that the 3D printer allows us to offer products with limited or unknown demand without losing vast sums of money. There also appears to be sales driven specifically by offering wide variety of 3D print accessories for our robotics products.

Overall our 3D printer appears to have been a good capital investment; over the course of the last year it's manufacturing capabilities have pretty much paid for itself. 3D Printers like the RepRap and the Makerbot Thing-O-Matic have a strong advantage over more expensive printers where the supply of raw materials is limited to the original manufacturer. Looking forward, we believe that newer printers such as the Replicator will offer increased reliability and improved capabilities.

Now DIY!


Jmurph said...

great post! I love inside look at these type of businesses.

James Newton said...

Very interesting post, I REALLY appreciate your having taken the time to write this up. I'm a little confused about the numbers and your conclusion, however, and I hope you won't mind me asking for some clarification?

I'm assuming here that your "Printer operating costs" includes the repair costs, maintenance cost and rent?

19.95 * 56 = 1117.20 less cost: 13.40 * 56 = 750.40 so you made a profit of $366.80 for the 56 units sold so far.

So you need to do that 3.27 times over to pay for the 3D printer... e.g. you need to sell another 128 units of your product before you break even.

Do I have the right or am I misunderstanding?

Of course the NRE is spread further and becomes less important. But the printer operating cost is the gorilla in the room, and that apparently isn't going to change.

So would you say that buying a more expensive, but more industrial 3d printer (more reliable) would be a better choice in hindsight? Or do you think those repair costs are just par for the course?

I Heart Robotics said...

Feel free to ask more questions and I'll try to clarify.

We have sold a total of 107 parts, 51 of them we outsourced and 56 we printed.
Sp part of it is also perspective, do we count profit all the 3d printed parts towards the idea of owning a 3D printer, or do we only count the parts made with the printer?

$13.40 is basically the worst case cost. Likely we did better as we used the printer for many other products that we have sold.

Printer operating costs also include electricity and is somewhat prorated based on percentage of time used printing tripod adapters vs. other parts. I don't have a full log of every print job run so I'm not sure how accurate this number is, but it should be within an order of magnitude. I believe we have also erred towards the high side for normal operating costs. I would be interested in seeing anyone else's numbers on this.

So overall I think when you factor in the intangibles and the other products sold, it has probably paid for itself.

I think the maintenance costs were a probably a little high, as we have trained 4 people on repairing the printer. This means that some of the repair mistakes such as destroying the cartridge heater by not removing it from the heater block were repeated. Many of the more expensive costs were from breaking things in the process of trying to fix things. The Replicator looks like it will have lower maintenance costs due to design changes such as fixing the extruder design that was prone to jamming.

I worked with a Stratasys Prodigy Plus 3D printer that got relatively light usage. This printer required a service contract as various parts of the printer regularly needed repairs. Over the course of 3 years, the printer needed service once a year and required (IIRC) about $2-5k in parts/service to fix. Also, recalibrating the printer required a service call. As you may imagine, this was slightly more expensive than buying the service contract. So the annual support costs for a printer like the Stratasys actually exceed to cost of a Thing-O-Matic.

Since we now have 4 people in house who can fix the printer and spare parts on hand, we don't have to wait a day or two for someone like Stratasys to send someone out to fix the printer. I think repair time is one of the big advantages of open source hardware along with being able to repurpose the tool for other tasks if we upgrade to a newer machine.

Based on my experience, I would never buy a printer that required cartridges to print. The razor blade business model is a terrible idea as you have to hope they continue to offer raw material at a markup and don't force you to upgrade to a newer machine.

James Newton said...

Thanks so much for the clarification! Had you purchased the printer "on faith" at the beginning, you would have made a profit of $700, assuming the same rate of repair and other operational costs. If the cost of repair decreases (with experience) then that may be larger... e.g. if it averaged out to ~ half the current cost, for about $4 more profit per unit, you would make $1128 from the 107 total sold. So, yeah, it looks like you are close to the break even, not counting the other side benefits.

The cost of repair being partly due to breaking things while repairing is interesting to me. Being able to repair a machine because you built the machine yourself (and therefore know how it comes apart) is a justification I often use when buying (and selling) kits. But it doesn't translate when the person doing the repair is not the person who built the machine! LOL... oh well.

Again, thanks for sharing.

Bouha said...

I've been wondering if it's possible to use 3D printers for actual manufacturing operations, posted on all forums, contacted the main printers makers, nothing!

Your post is the first serious answer I read. Thank you :)

Good work and good luck!

Anonymous said...

Very interesting. The reliability of the printer seems like the biggest issue. You can not leave this thing running 24/7 with limited supervision.
Any ideas on how to make the low cost machine that can run 24/7 without someone watching for a meltdown?

I Heart Robotics said...

While the MK7 extruder has some issues, the safety cutoffs on a MakerBot ToM are pretty solid.

Two things would really improve the extruder. A sensor to detect when the filament is or is not actually moving and having used a few types the adjustable tension extruders seem more reliable.

We are currently using a modified version of this

We will probably try something like this
when the current extruder needs to be rebuilt.

Also, I think there are some design choices for most extruders that lean towards the designs being manufacturable without a machine shop. I think a more robust design would probably make sacrifices to home manufacturability.