|Global Knowledge Gateway||
Performance & Financial Management
3D Printing Technology Shifts the Cost Modeling Game—What You and Your Clients Need to Know
by Eli R. Khazzam, Senior Professional, Economic Development & Emerging Technologies. | June 1, 2015 |
Accountants need to be aware of how 3D printing changes the cost models that drive businesses, especially those accountants who work with and advise manufacturers and retailers. Ultimately, 3D printing could be the key determinant for whether or not many businesses will thrive or fail in the future. In the past, manufacturers were restricted to somewhat inflexible cost models due primarily to technological constraints of the time. However, with 3D printing, cost models will increasingly become more dynamic and flexible, providing an almost inconceivable variety of inexpensive manufacturing options.
A Future Look at Cost Modelling: 3D Printing for Numerous Manufacturing Applications
The first 3D printing technologies appeared more than 25 years ago in the form of rapid prototyping, which utilized computer-aided design (CAD) software to blueprint and sculpt items made of resins. The technology we now call 3D printing has evolved to encompass the utilization of CAD software as well as 3D scanners to design and/or replicate an object in many different types of materials. These include plastic, ceramic, wood, paper, food, and even bio-materials. These objects can now be printed in high resolution to create very precise objects. Nearly all industries, from technology to jewelry and pharmaceuticals, are beginning to use 3D printing either in research and development or manufacturing. 3D printing offers some powerful features that will likely change the cost model for manufacturers.
- Material variation: Whereas many kinds of manufacturing machinery are exclusively designed to produce certain types of materials (e.g. plastic, aluminum, food materials, etc.), 3D printing offers a wider range of materials. These materials can be substituted for one another when the product or available materials change.
- As an example, see Shapeways 3D Printing Service, which effectively illustrates the flexibility for creating and/or marketing products with respect to qualitative factors such as durability, material composition, function, and aesthetics.
- Customized manufacturing: 3D printers can produce products individually and according to specific parameters. The days of standardized sizes will give way to products that fit exact body measurements that consumers once would have only dreamed about. Manufacturers and distributors will no longer have to gamble with stock quantities and warehousing costs to accommodate projected demands.
- Reduced machine set-up time: There is little in the way of prep-time for 3D printers compared with their mechanical counterparts. There are no molds or dies involved in the process; however, some measures of calibration need to be taken as well as maintenance procedures regarding the printer itself (see Airwolf 3D Printers for examples). These procedures are not labor-intensive.
- Reduced cost-per-unit: The current model of mass production can be highly inefficient in terms of customization on a limited scale. With 3D printing, the cost per unit remains flat without the need for retooling delays (which cost time and labor), and products can be customized on an individual scale.
- Decreased waste: While there is an industrial waste factor associated with 3D printing, it is less than traditional manufacturing technologies. 3D printing uses the process of additive manufacturing (objects are assembled layer by layer), as opposed to cutting away from material. According to the US Department of Energy, this can reduce material needs and costs considerably.
- Cleaner technology: According to a recent webinar, the Clean Tech Nation Briefing Series, 3D printing uses much less energy than traditional manufacturing formats—for electric power for machinery but also reducing transportation and distribution costs as digital files can be sent to printers for production anywhere.
- Consolidation: 3D printing technology is relatively low cost and does not require intensive technical expertise. As a result, some businesses bring production in-house.
3D printing can be a game changer for many industries. It can be especially appealing to smaller businesses because of flexibility and lower costs. For professional accountants in business and small- and medium-sized accounting practices working with manufacturers, 3D printing should come to mind in a variety of circumstances.
- To trial or develop a highly customized or specialized product for a smaller market—one that involves limited production runs.
- To develop a new product line requiring a wide range of unit sizing or options in material quality.
- To manufacture and distribute a line of products in numerous locations that render transportation costs and other logistical factors prohibitive.
- To retail and manufacture a product onsite, whereby customers can order to specific configurations and customization from storefront, kiosk, or online.
- To save inventory costs by establishing an on-demand manufacturing system that is highly responsive to seasonal changes and fluctuations in consumer buying patterns.
- To cut costs by cutting out the role of outsourcing to custom manufacturers by bringing production in-house.
- To reduce your business’s environmental footprint (and costs associated with waste) by reducing industrial waste.
There are also likely many opportunities that remain unseen. Ultimately, 3D printing swings the pendulum back in favor of tinkerers and entrepreneurs. It is conceivable that larger forces of mass-production will find a way to scale-up the benefits of 3D printing as they have with nearly all industrial processes in the past. However, the window has just begun to open, leading the way for innovation, new markets, and product breakthroughs in nearly all industries.
As key advisors for many different types of businesses, accountants should be equipped to inform their clients on all the benefits of 3D printing—not only those related to lowering production costs but also developing innovative new products and reducing negative impacts on the environment.
The cumbersome, grueling days of my father’s heavy mechanical world may be coming to an end but, undoubtedly, he would have recognized the common-sense prospects of 3D printing and seized upon them with the same pencil-and-paper instincts that lead all businesspeople to success.
(Did you miss the beginning of this cost modelling conversation? Check out “3D Printing, My Father, and Cost Modeling” for a look at traditional cost modeling.)
How might 3D printing revolutionizing cost models in your industry? Are you seeing changes yet?
Like what you see here? Subscribe to The Latest, our customizable update sent every two weeks.
Do you have a perspective you'd like to share with the global profession? Email Gateway@ifac.org to inquire about becoming a Gateway contributing author.