DEVIL’S IN THE DIFFERENCES

This is an account of two industrial machine-tooling and sales companies and how they each choose to produce the same new product. Both make intelligent and strategic choices. Yet those choices are very different — because the two companies and their respective access to the market are different. While the companies named here are fictitious, the details are true, and we believe you will gain some insight into when and how your own organization might incorporate additive technology. Or, why it might reasonably choose not to! (Only one company in our account does use 3D printing; yet, as we will see, both companies have chosen wisely.)

This is how the story begins. Two industrial machine-tooling and sales companies, Tried-and-True Inc. and New-to-You Corp., each come across a design for a new retaining clip that will secure safety equipment to safety helmets. Both companies recognize the growth potential in providing the clips due to increased and mandated use of personal protection equipment.

Now, safety clips are high stress items; they are prone to breaking and require replacement fairly routinely. Consequently, while each company is open to considering various materials, certainly they will both be looking for a combination of toughness, chemical and heat resistance. Both companies expect the market will bear a final retail price of $25 for 3 sets.

But if the two companies agree on what they are producing, they differ on the means of production. Let’s take a look.

Concept Picture 1
Concept Picture 2
Concept Picture 3

Day 1

Tried-and-True Inc. has a wholesaling division and has established itself with a growing number of retailers across the country. Tried-and-True is a wholesaler and not an actual manufacturer. However, this company has periodically sought the production of items — some functional, some promotional — and so has a modicum of experience with direct production.

Tried-and-True decides to investigate production of the clips by injection molding. Injection molding (IM) is one of the most efficient and commonly used technologies in the world.

From past experience, Tried-and-True recognizes that the geometry of the clip may require modification. There are a number of variations in material thickness, which could cause stress and distortion during the cooling cycle.

Tried-and-True picks three reputable IM molds producers and solicits an estimate for a mold that will contain one left and one right clip (for one complete clip set).

New-to-You Corp. works with a couple offices in larger cities, but is largely focused on internet-based sales and supply. On occasion, when it has not been able to source a needed item from manufacturers in its network, it has arranged to produce that item. New-to-You has not been able to source suitable clips, so is now investigating production.

New-to-You has been hearing more and more about the uses of 3D printing. The company has heard varying stories about speed and quality, but has decided to explore the potential of producing the clips using additive technologies.

The clip design – as is – does not pose any problem for additive processes and does not require any modifications. New-to-You reaches out to three companies that offer 3D printing services, each one using a different medium: FDM printing, SLA printing or SLS printing .

Both companies decide to make use of FDM 3D printing to produce a series of prototypes to ensure the end product will meet expectations.

Both companies take reception of the 3D printed prototypes at roughly the same time. The prototypes now allow for functional testing, but also permit the two companies to do more market research to confirm expected demand.

And the similarities end there.


Day 7

When Tried-and-True approaches the mold producers, the decision about what material to use has not yet been finalized. The clips must have some flexibility, so they are contemplating polypropylene, polyethylene or possibly polyamide (nylon).

Anticipated sales are a consideration for material choice for the clips; greater sales volume may justify a higher quality material. Sales potential is also considered when determining mold design, as it may impact how many cavities each mold should have. Because Tried-and-True has an established network of potential distributors, anticipated sales are fairly high — 10,000 sets within a 12 month period.

Three mold producers submit estimates. All advise Tried-and-True that the design is fairly complex, with a number of sharp corners and changes in geometry. Quotes range from $31,500 to $37,500 per set.

BREAKING IT DOWN…

The cost of producing each set will depend greatly on the material chosen. But the cycle time for each set is approximately 45 seconds. This means that one complete set can be produced every 45 seconds, or 80 sets per hour. Assuming a 12 hour production period, 960 sets can be produced per day.

Estimated material cost per set varies with the quote, but averages $0.40/set. Consultants place an extra $0.10 per set for post processing, so $0.50/set.

Tried-and-True does not have a injection press and will have to contract a 3rd party to produce the components. The low-end shop rate for a 65 ton press is around $65/hour, or $0.81 per set.

Cost estimates per set therefore total roughly $1.31 per set. Packaging and shipping costs are estimated to add an additional $0.60 per set to a total of $1.91. On the other hand, if the mold were designed with cavities for three full sets, every three sets would cost roughly $5.73. But this isn’t Tried-and-True’s first time around the block; it increases this estimate by 20% to account for unforeseen expenses and cost variations. Estimated cost of production for three sets of clips is $6.88.


MEANING…

Tried-and-True distributors all see value in offering the 3-pack of clips and have agreed to stock the item. They respect the $25 price point set by Tried-and-True, but would like a minimum 35 points, so the agreed upon distributor price is $16.25.

Tried-and-True will realize $9.35 on each sale, net of promotions, overheads and shrinkage.

This means that breakeven point to recover the cost of the molds is between 3,300 and 4,000 sales,. Based on the company’s initial projections of 10,000 sales in 12 months, it anticipates recovering its initial capital investment within the first half.

New-to-You Corp. believes that while the design will do well, volume will likely not exceed 500 units per month because the clips are mount-specific. Meanwhile, New-to-You has heard back from different companies about using 3D printing to produce the components.

BREAKING IT DOWN…

  • Company A boasts the use of a small farm of FDM (Fused Deposition Modeling) printers. FDM offers the widest range of thermoplastic polymers. Drawbacks of FDM printing are speed and possibly aesthetics, since the layer lines are typically visible. Because the design of the clips is not ideally suited to FDM, printing them will require fairly extensive support, which in turn will require extra time. Company A offers 5 printers.

    Production Time: 48 minutes per pair + 10 minutes of post processing. Anticipated rate of production is 5 per hour.
    Material weight: 8.10 grams (@30% infill))

    The cost of each pair is dependent on desired material, but can range from $4.60 to $6.20 per pair. It will take 100 hours to produce 500 units, using all 5 machines working on the same project.
    This includes post-processing.

  • Company B offers production via a mid-sized SLA (Stereolithography) printer with a decent build volume (350mm x 350mm x 300mm). SLA printers use thermoset resins that catalyze when exposed to specific UV radiation like that of a laser. The process is considerably faster than FDM printing and can be less expensive. The finish is much finer than FDM — almost injection-mold quality — but a drawback is limited material choice. Additionally, post-processing may be needed if aesthetic changes (such as pigmentation) are required.

    Production Time: 60 pairs every 171.8 minutes (1 pair every 2.86 minutes). Cleaning and post processing is estimated to add an extra 2 minutes per pair.

    As with FDM, the exact cost of each pair is dependent on the chosen material, but ranges from $3.83 to $5.65 per pair. It would take approximately 40 hours to produce all 500 units using one machine. This includes post-processing.

    Additionally, the SLA producer offers the option of resin casting. In that case, the SLA printer would first create a mold of the desired units, and then cast the units using silicon or urethane.

  • Company C produces parts via an SLS (Selective Laser Sintering) printer. The print size is excellent (380mm x 380mm x 500mm). There are not as many sintering powders in the market as there are SLA resins and thermoplastic filaments. However, SLS machines offer a variety of polyamide and TPU materials that will suit the project’s needs well. SLS printing offers a number of benefits. The powder used acts as a natural support; it is possible to fill the entire build volume in one build with no or minimal component supports. The drawback is that, similar to FDM prints, the final aesthetic of the product reflects the layered build. The print also often feels powdery.

    Production time: All 500 pairs can be produced in one print. It will take 21.1 hours (2.53 minutes per pair). Cooling time adds an additional 14 hours (1.69 minutes per pair).

    Note that the cost per pair is a little tighter because material choice does not vary related costs by a significant amount. It would take approximately 35.5 hours to produce all 500 units using one machine. This includes post processing.

MEANING…

Aesthetics are deemed fairly important in an end-use consumer product and SLA offers a solid combination of aesthetics, speed and price. The final price per pair is $4.74. Packaging and shipping are estimated to add an extra $0.60 per set, or total $5.34 per pair, and $16.02 for 3 sets. New-to-You builds in a 20% margin for unforeseen variables, which increases the price to $19.22. If each set is sold at $25, New-to-You would earn $5.78 — a little more than 30%.

New-to-You decides to proceed with the project, ordering 500 sets of 3. New to You will receive 1,500 pairs at $4.74 each, for a total of $7,110 (not including overheads and incidental cost).

Since most of the company’s business is generated online, New-to-You begins preliminary marketing for the clips.


Day 21

New-to-You takes reception of the 500 full sets. The project was queued for 2 days, and it took the producer 5 days to print. Packing took an extra 3 days plus shipping. Total price works out to $17.62 per set.

Initial marketing efforts have generated interest, and before any clips were received, presales were already at 75 sets. A decent start. Sold units are sent out upon arrival.


DAY 30

The mold ordered by Tried-and-True has been produced, and trial runs have been successful.

While waiting for the mold’s completion, Tried-and-True has reached out to its distributors. The company has successfully managed to pre-sell 100 sets to each of three distributors. Moreover, each distributor expects to order an additional 100 sets within 30 todays.

Not a bad start.


Day 45

Tried-and-True has received its first 1,000 units and has begun distribution.

However. Tried and True has recently become aware that, unfortunately, New-to-You Corp has already entered the same market weeks ago

Fortunately, Tried-and-True‘s production margins allow it flexibility for a promotional effort. Tried-and-True will offer distributors a matching discount to create a special introductory price that will help establish the Tried and True clip in the market. The new introductory price will be $20; both Tried-and-True and its re-sellers agree to share the reduction evenly.

Based on those arrangements, the re-sellers double their initial orders.

New-to-You has received a generally positive response to sales efforts. The company is averaging 75 sets a week with a decent upward growth trend as word spreads. Based on that information, plans are laid out for another 500 to be placed in a week’s time.

In addition to the online sales, one of the other offices has shown some interest and requested samples. But it is not necessary to physically transport samples; instead, a digital file is transferred to the office and they will have a local 3D service provider print the samples for them.

Feedback from end-use clients is beginning to provide some very key insights. Some are asking if New-to-You offers clips that can fit a different safety hat and PPE combination. This same inquiry occurs with sufficient regularity that management decides to investigate further.


Day 60

Dropping the price for the clips from $25 to $20 has been positive in boosting sales and raising interest in the Tried-and-True clip. The company has, of course, kept a close eye on its main competitor and it seems that New-to-You Corp is unwilling or unable to match its $20 promotion price. Tried-and-True decides to extend that price indefinitely.

More good news: The clip’s initial success has motivated additional distributors to come on board and carry the clips.

It certainly seems that the price reduction was the right decision. Yes, it will take longer for the project to break even, but its capacity to reduce pricing should will strengthen Tried-and-True‘s efforts to achieve market dominance with respect to PPE safety clips.

Tried-and-True’s lower price point has taken the edge off the increased sales of the clips for New-to-You. Rather than growing to 100 sets per week as had been hoped, New-to-You continues to average 75 a week. While the end production cost of the first batch of 500 was a little less than anticipated, the company finds it does not have the margin to match Tried-and-True’s introductory pricing generally. It does agree to price match on a case by case basis for customers who request it.

Investigations into production of an alternative clip variation have yielded an interesting opportunity.

The general geometry and size of these clips is roughly the same as the first, so production costs would likely be flat. Company B, which had produced the first design for New-to-You, is willing to produce a smaller run of these clips concurrently with the the next order of the first design, with no extra tooling cost.

New-to-You sees a market advantage here. It can now offer a more diverse line of products at little to no tooling cost.


CONCLUSIONS

These examples can be carried on at length! But of course, the further into the future they are projected the more speculative such examples become. Obviously, production and costing are not the only factors in a product’s success.

That acknowledged, two broad differences can be identified.

CAPITAL-INTENSIVE TOOLING

with PRICING FLEXIBILITY

Injection molding is the most efficient means of mass-producing polymer components, hands down. A company willing and able to front the tooling capital cost likely finds itself in the enviable position of being able to produce a desired component very quickly, and very inexpensively.

However, design complexity is one of the main drivers of mold cost. Additionally, the design is more static; changes to the product require the expensive production of a new mold.

REDUCED MARGIN

with DESIGN FLEXIBILITY

While some 3D printing mediums are able to produce much faster than most people realize, it is unlikely that 3D printing will overcome injection molding anytime soon, either by way of speed or cost of production.

But it may not have to.

Mediums like SLA and SLS already offer a decent production speed and a growing array of available materials. These mediums are capable of highly complex design — and efficient iterations of that design — at a fraction of the costs associated with injection molding. For many companies, 3D printing is the intelligent choice.


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