It’s a common belief that a 3D printer will drive a herd of clients your 3D printing business, each ready and willing to line your pockets with immeasurable wealth. In reality, you’re not Kevin Costner and you’re not trying to lure baseball players to your backyard, simply building it won’t make them come.
The business of 3D printing
The underlying business model of a 3D printing service bureau is called: “Art-To-Part”, which consists of generating profits over materials and machine time.
To succeed with this business model, a service bureau must secure sufficient business to maximise throughput and output of their 3D printers while minimising, if not eliminating, every other operational costs (as discussed in this article).
Throughput consists of the cm3 per printer-hour, while output consists of the printed cm3 per bulk unit of raw material.
In theory, the business model is fool-proof, the insatiable demand for 3D printing combined with the supernumerary industry growth forecasts should make any business venture successful.
In reality, the market saturated too quickly, the over-supply triggered race-to-the-bottom and left many service bureaus grasping at straws trying reach this profitable efficiency, struggling to break-even, sustain and grow.
It is an absolute certainty that 3D printing will evolve to become a prevalent mean of commercial manufacturing, where individual consumers will interact with 3D printed parts on a daily basis and benefit from the technology in so many other aspects of their lives.
This said, while this great revolution is happening, the service bureau industry that has been shouldering this transformation is starving and struggling to stay alive.
We say this because, historically, the service bureau industry has been driven by one-offs and prototypes, which were individually priced in accordance to the impact they brought to a client and their willingness to pay for the benefit. This high profit scenario put very little pressure on the service bureaus to minimise their costs and optimise their business processes, and instead the market self-regulated upwards to bear the high cost of the service.
Unfortunately, market saturation combined with the rise in availability and adoption of low cost 3D printers (on the end-consumer, startup and SME fronts), have let these one-offs and prototypes business segments to almost completely disappear (with the exception of niche industries such as automotive, aerospace, etc.), leaving many service bureaus with the burden of maintaining a high operation expenditure baselines, while experiencing a decrease in revenue and thinning profit margins, barely enough to make ends meet.
This pain, contrary to popular belief, is not an indicator of the decrease in demand of 3D printing, but a shift in the type of demand; moving away from one-offs and prototypes towards short series and small lot productions.
We believe this new type of demand will be responsible for driving the industrialisation of 3D printing technologies, enabling them to move downstream and bridge the growing gap to mass manufacturing, thus fulfilling the prophecy.
In this industrialised economy, the role of the service bureau will pivot to become mini-factories focused quasi-exclusively on short series and small lot production for a B2B client base. Effectively reducing or eliminating their dependency on one-offs and prototypes, and instead leveraging the remnant business to optimise their build volumes (as discussed in this article).
To win, service bureaus will need to adapt their market offering to capture these types of opportunities and bring forward operational changes that will enable them to be competitive in this new paradigm. Consequently, service bureaus incapable of pivoting, in time or at all, will see their pains amplified and force them to diversify their value proposition in other ways to stay afloat.
Business development and go-to-market strategies aside, successfully pivoting to address the needs of short series and small lot production requires a service bureau to streamline its operations and business processes to achieve commercial viability in a context where gross profit margin trends towards 10 to 15%, in line with traditional part manufacturing industries.
Achieving commercial viability under these conditions will effectively industrialise 3D printing and make it a true viable option for commercial manufacturing.
Unlike traditional part manufacturing industries, which cuts costs primarily by relocating production to low cost regions while maintaining sales and support in close proximity to clients; the benefits of 3D printing are only maximised when production is maintained in proximity to the client. Consequently limiting the 3D printing industry from cutting costs in a similar fashion, which also artificially re-enforces the justification of high service cost.
This said, unlike traditional part manufacturing industries, the 3D printing industry benefits from highly digitalised client-facing workflows, creating the opportunity to automate and outsource, or relocate, activities such as sales, support and services to low cost regions, effectively reducing operational costs and providing service bureaus the flexibility needed to become a competitively priced mean of commercial manufacturing.
Automating, outsourcing or relocating
Leveraging on automation to lower operational bottom-lines has been the driving mantra of Fordism since, well, the time of Henry Ford. This said, no matter how impactful automation has been shown to help large manufacturers reduce their costs, small manufactures are still struggling with its fundamentals and in many cases are even uncertain how to proceed or get started with it.
In essence, the primary objective of automation in a 3D printing service bureau is to minimise the reliance on manpower and the bottlenecks they create, both in securing revenue generating opportunities and in delivering on them.
In a conventional service bureau setting, all inbound opportunities are funneled to account managers, there to entertain every client regardless of value or importance their associated opportunity brings to the company. This level of service democratisation does have its merits, but it also places high-school students with a $5 phone case at the same level as deep pocketed jet engine manufacturers. Combined with the tidal wave of tire kickers and quote collectors, account managers quickly become overwhelmed and incapable of offering the attention and consideration high value clients and opportunities require, stemming business intake and impeding a service bureau’s ability to sustain and grow.
To successfully implement an automation and outsourcing strategy, key workflows, processes and tasks must first be identified, divided into their constituent parts then ranked according to their suitability to automation or outsourcing.
To illustrate this process, let’s imagine segmenting the source of sales opportunities in a service bureau in four distinct categories:
- Touchless web-sales where clients autonomously order prints online (such as on Shapeways, Materialise, etc);
- RFQ Forms where clients initiate a transaction by submitting files through a form on a service bureau’s website;
- Direct Emails where clients initiate a transaction by directly emailing a service bureau’s account manager, and
- Internal Opportunities where 3D printing services are part of a larger project or an opportunity.
Across these four sales channels, our statistics show an average of 15 to 20 % is made up of low value opportunities that can be fully automated, directly (through a touchless web-sales portal) or indirectly following an initial automated pre-processing. Of the remaining 80 to 85 % of opportunities, 70 to 75 % represent run of the mill opportunities that require very little attention, while the remaining 10 to 15 % represent key or strategic opportunities requiring extensive attention and consideration by high value adding localized team members.
In other words, 85 to 90 % of all sales opportunities can be either automated and/or outsourced, in turn drastically reducing the cost of sales while increasing the client facing bandwidth.
With this in mind, the first step in automating a service bureau revolves around the integration of unsupervised opportunity pre-processors to handle all inbound requests, automatically validating, ranking, routing and re-routing opportunities through the most effective pathways. Winning opportunities by either delegating them to a fully automated order fulfilment platform or to an internal, or external, account manager for tailored support.
As a capability enhancing tool, automation can be leveraged on to streamline tasks and workflows to instantly boost manpower productivity and throughput, while delivering consistency and repeatability across clients, account managers and locales. And, when tasks can’t be automated or augmented, outsourcing can then be leveraged on as a cost mitigating solution to further reduce non-automatable costs.
Beyond the sales organisation, a service bureau can also leverage on outsourcing and relocation to reduce the costs of other core activities such as engineering services, design and other pre-fabrication workflows and tasks like file repair, build tray preparation, etc.
By addressing cost centers in their sales and production organisations, service bureaus enter a revitalised position and become able to compete much more aggressively on opportunities that would normally be captured by traditional manufacturers: short series and small lots. This flexibility enables them to safely move their value proposition further downstream, focusing on the type of clients and opportunities that will sustain their business for years to come.
A transformed industry
As a result of this transformation the future service bureau industry will be separated into three types of businesses:
- Massive ultra-efficient online “Art-to-Part” 3D printing services to handle low value opportunities (phone cases and other trinkets) at rock bottom prices, such as Shapeways, Materialise, etc;
- Service bureaus highly specialised in the production of one-offs and prototypes for specific niche industries, such as automotive, aerospace, medical, etc, and
- Service bureaus focused on delivering cost effective commercial manufacturing solutions, as an alternative for mass manufacturing, for short series and small lots production.
All able to leverage on automation, outsourcing or relocation to reduce their operational costs, while increasing consistency and maximising efficiency.
If you want to be involved in this venture, please email us. We are looking for partners in North America and Europe who want to join us in taking the 3D printing industry to the next level while creating opportunities for people in all parts of the world.
This article is a follow up to our initial overture, ”Talk is Cheap” by Ki Chong Tran, discussing the opportunities 3DO.am aims to create, and how they can be leveraged to satisfy the manpower needs of 3D printing service bureaus, while creating meaningful employment opportunities in emerging markets.
These articles are precursors to the soft launch of 3DO.am, our new 3D printing technical and business process outsourcing platform where our objective is to provide 3D printing service bureaus with access to cost effective fractional manpower to handle things like customer support, file repair, design and build tray preparation etc.
Our 3DO.am platform will be leveraging on many of the service orchestration, model manipulation and AI features developed by Fabnami to streamline the outsourcing process and ensure the fluidity of the service bureau operation and integration of remote workers.