Introduction to ROI
If you don’t work in an R&D lab, you’re probably uncomfortably familiar with the three letters that stop most purchases in their tracks: ROI. While in an ideal world employees could speculatively acquire new technology without business risk, the vast majority of businesses only make investments that return value over time, often measured by return on investment (“ROI”). This rings especially true with capital expenditures — large purchases like CNC mills, robotic arms, and other large fabrication machines — that cost upwards of six figures.
For most large expenditures (think a CNC mill), potential value is well defined and easily calculable. If you have three CNC mills in house and you’re considering purchasing a fourth, you can pretty confidently estimate the potential value added based on your past experience. With emerging and disruptive technologies, ROI can be more difficult to confidently predict. These technologies tend to be unproven, and without experience it can be impossible to predict their effect on your business. As a result, many risk-averse companies shy away from adding high-potential capabilities to this business.
A metal 3D printer is a perfect example of a new, difficult-to-quantify piece of capital equipment. In this blog post, we’re going to break down our metal printer (the Metal X) around the two factors that determine ROI: Acquisition Costs and Value Added.
Acquisition Costs for a Metal 3D Printer
The first step in determining ROI is accurately defining acquisition cost: the full cost required to have a functional machine on your shop floor with properly trained operators. For a printing system like the Metal X, that number can vary depending on what bundle you purchase, the state of your facility, and where you live. Getting a full picture of the costs requires analyzing each step of the process — our breakdown of costs is listed below
- Machine Cost: The MSRP of the machine;
- Success Plan Cost: Preventative maintenance, warranty, and part replacement;
- Facility Upgrades: Preparing your facility for the system. The Metal X generally only requires a couple of small changes — power routing and ventilation drops;
- Shipping and Installation Cost: Getting the machine to your place of work and installing it; and
- Training Cost: This cost isn’t assessed formally, but represents the labor required to ramp up machine operators in house.
Though the can vary greatly facility to facility, a base Metal X System generally costs between $150,000 - $200,000 USD all in. To get a more personalized assessment, request a quote below.
Determining the holistic cost of a new machine, while tedious, is a solvable problem. Quantifying the value of implementing a new technology can be impossible without the right information. For the Metal X, we recommend the following simple, cost-based procedure to roughly estimate savings over time. This process works best when comparing 3D printing against an existing manufacturing process.
1. Find a benchmark part: Select or design a representative part to evaluate for metal 3D printing. It doesn’t have to be a part you’re planning on making 100 of, but it should represent the “average” part you intend to produce on the machine. If you’re unsure of what parts are advantageous to 3D print in metal, download our whitepaper on metal 3D printing applications.
2. Determine all printing costs for the part: Simply upload your file to Markforged’s Eiger software to generate a per-part cost for metal 3D printing the part. A number of factors go into a per part cost, including material cost, labor cost, and sintering cost (electricity, consumables, and gas). Getting a true per-unit cost is critical to the process.
3. Estimate the cost for producing your part conventionally (without 3D printing). If you send parts out for external manufacturing, a quote should provide all the details you need. If you produce the part internally, make sure to create a complete estimate. This should include material costs, labor costs (including both programming and machining), and any additional consumable/manufacturing costs. To maximize accuracy of the value estimate, make sure that you pick a realistic production volume to and evaluate both methods at the same volume [example: don’t estimate the per-unit cost of 3D printing one vs machining 20].
4. Use your fabrication time, metal printing cost, and fabrication cost to calculate the value generated per unit time as seen below.
5. Divide the overall machine cost by the cost savings per unit time to determine the time required to achieve ROI. If the time to achieve ROI is short (2 years or less), it’s likely that your boss will consider it a slam dunk. If the ROI is closer to the expected lifespan of the machine, you should think carefully about your expectations for the machine before making an investment.
This method is extremely effective for quantifying monetary benefits of acquiring a new machine, but doesn’t take into account additional benefits that come from 3D printing. 3D printing often decreases part lead times, which can shorten iteration cycles and provide significant value to a company.
When evaluating a piece of new technology, many businesses struggle to accurately assess its potential business value. Generating an ROI calculation solves this problem in three distinct ways.
- It gives you a rock solid, quantifiable justification for purchasing a piece of disruptive technology.
- It provides an accurate cost estimate of every part of the acquisition and manufacturing process.
- It allows you to set realistic expectations on how much value your new machine will generate before purchasing.
If you’re interested in taking the first step in determining the potential ROI for your business, request a quote below.