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How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
How to Justify the Cost of A Rapid Prototyping System
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How to Justify the Cost of A Rapid Prototyping System

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You know the value and need for a rapid prototyping system. But it is often less clear to management and accounting. To improve the odds of gaining approval, here are tips and guidelines for creating …

You know the value and need for a rapid prototyping system. But it is often less clear to management and accounting. To improve the odds of gaining approval, here are tips and guidelines for creating a compelling business case for the acquisition of additive manufacturing equipment for prototyping.

Published in: Technology, Business
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  • 1. MAKING THE CASE How to Justify the Cost of a Rapid Prototyping System
  • 2. Who is Stratasys FDM Technology
  • 3. Today’s Event Host  Kim Killoran, Stratasys, Inc. Presenter  Todd Grimm, founder and president, T. A. Grimm & Associates, Inc.
  • 4. Additive Manufacturing Justification Enormous value…  Time, cost and quality But…  Difficult to quantify  Difficult to put into words Getting to “Yes”  How to build a business case
  • 5. Business Case Report that summarizes:  Proposed capital expenditure  Associated value, risk and investment Business case includes:  Executive summary  Situational analysis • • • • Current challenge/opportunity Proposed solution Alternatives Risk  Financial (cost) justification Tip:  Seek help & guidance
  • 6. Executive Summary Executive summary  Will make (or break) the case State: Tip:  Be succinct Tip:  Be compelling  Challenge, solution, investment and return  2 or 3 paragraphs Highlight the highlights  Emphasis on the numbers
  • 7. Situational Analysis Current situation (the diagnosis)  Describe the challenge or opportunity • State who is affected and how  Hone in on one justifiable aspect  Emphasize the numbers Sales R&D Prototypes + ECOs $50M $2.5M (5%) $80K/year $50K/year TELCO
  • 8. Situational Analysis Proposed solution(the treatment)  Describe the additive manufacturing proposal • What is being proposed • Total investment • Implementation time Tip:  State end result Tip:  Lead with hard numbers  Detail the benefits • Stress the hard numbers • Reference the softer gains AM System On-Going Savings $105K $34K/year $75K/year TELCO
  • 9. Situational Analysis Alternatives  List options considered  State why each was not selected Risks  List possible risks  State how each will be addressed Tip:  List only the obvious
  • 10. Financial Justification Two alternatives  Cost reduction  Revenue increase Two parts  Capital expenditure • And on-going costs  Return (value)
  • 11. Investment Initial investment       System Ancillary equipment & licenses Installation & training Shipping IT expenditures Facility modifications AM System Equip/License Install/Train $90K $8K $7K TELCO
  • 12. Investment On-going expenses      Maintenance contract Routine maintenance Materials/consumables Labor Facility charges Input needed  Estimated part count  Operational estimates Maintenance Consumables Labor $15K $12K $7K TELCO
  • 13. Financial Justification ANALYSIS SUMMARY -- RETURN ON INVESTMENT (ROI) (5 year) TELCO -- Simple annual ROI INTERNAL RATE OF RETURN (IRR) NET PRESENT VALUE (15% cost of capital Year 1 -- PAYBACK PERIOD Year 0 --- Year 2 Year 3 Year 4 Year 5 Investment - CapEx ($105,000) - On-going expense ($34,000) ($34,000) ($34,000) ($34,000) ($34,000) -- -- -- -- -- -- Total ($105,000) ($34,000) ($34,000) ($34,000) ($34,000) ($34,000) CUM. TOTAL ($105,000) ($139,000) ($173,000) ($207,000) ($241,000) ($275,000) Return
  • 14. Return Challenge: hard numbers  2 weeks = $________ ? Recommended approach  Three-tiered • Hardest to softest  Iterative • Realistic yet compelling
  • 15. Return Tier 1  Savings from transition of work to AM system Two sources  Outsourced • AM and conventional  In-house Collect historical data  12 to 36 month look back
  • 16. Return Outsourced costs Tips:  Create buckets  Use averages  Document everything  Part, engineering, labor  Expedite fees, shipping, taxes In-house  Internal cross charges  Seek cost accounting assistance Prototypes Patterns Total $60K $5K $65K TELCO
  • 17. Financial Justification ANALYSIS SUMMARY RETURN ON INVESTMENT (ROI) (5 year) TELCO 10% Simple annual ROI INTERNAL RATE OF RETURN (IRR) NET PRESENT VALUE (15% cost of capital) Year 1 Year 2 Year 3 15% -$1,100 46 months PAYBACK PERIOD Year 0 48% Year 4 Year 5 Investment - CapEx ($105,000) - On-going expense ($34,000) ($34,000) ($34,000) ($34,000) ($34,000) $65,000 $65,000 $65,000 $65,000 $65,000 Return - Outsourced Total ($105,000) $31,000 $31,000 $31,000 $31,000 $31,000 CUM. TOTAL ($105,000) ($74,000) ($43,000) ($12,000) $19,000 $50,000
  • 18. Returns Tier 2  Increasing prototyping activity  Due to speed, ease, convenience & cost Leverage  Generally accepted values Concept P P Design P Test P Produce Pilot P
  • 19. Project  Increased prototype activity  Resulting return ECOs TELCO $10K
  • 20. Financial Justification ANALYSIS SUMMARY RETURN ON INVESTMENT (ROI) (5 year) TELCO 19% Simple annual ROI INTERNAL RATE OF RETURN (IRR) NET PRESENT VALUE (15% cost of capital) Year 1 Year 2 Year 3 27% $32,400 31 months PAYBACK PERIOD Year 0 95% Year 4 Year 5 Investment - CapEx ($105,000) - On-going expense ($34,000) ($34,000) ($34,000) ($34,000) ($34,000) - Outsourced $65,000 $65,000 $65,000 $65,000 $65,000 - ECOs $10,000 $10,000 $10,000 $10,000 $10,000 Return Total ($105,000) $41,000 $41,000 $41,000 $41,000 $41,000 CUM. TOTAL ($105,000) ($64,000) ($23,000) $18,000 $59,000 $100,000
  • 21. Returns Tier 3  Value of speed Recommend  Omit from calculation  Include as added value If needed to justify  Locate last-in-process step  Show cause-and-effect
  • 22. Financial Justification ANALYSIS SUMMARY RETURN ON INVESTMENT (ROI) (5 year) TELCO 19% Simple annual ROI INTERNAL RATE OF RETURN (IRR) NET PRESENT VALUE (15% cost of capital) PAYBACK PERIOD Year 0 Year 1 Year 2 Year 3 95% Year 4 27% $32,400 31 months Year 5 Investment - CapEx ($105,000) - On-going expense ($34,000) ($34,000) ($34,000) ($34,000) ($34,000) - Outsourced $65,000 $65,000 $65,000 $65,000 $65,000 - ECOs $10,000 $10,000 $10,000 $10,000 $10,000 Return Total ($105,000) $41,000 $41,000 $41,000 $41,000 $41,000 CUM. TOTAL ($105,000) ($64,000) ($23,000) $18,000 $59,000 $100,000
  • 23. Recap Business case  Financials  Situational analysis  Executive summary Recommendations  Concise & compelling  Compelling & realistic  Realistic & tangible
  • 24. Stratasys • Stratasys uses tough engineering-grade thermoplastics • Dimensionally stable materials lock in accuracy • Technology can be used for manufacturing tools & end-use parts
  • 25. More Information More information: www.stratasys.com/CostJustification  Request a free sample part, download White Paper, presentation & more Customer Success: Polaris  Previously used injection molding for prototypes  Purchased a Fortus machine  Evaluated physical part, improved design  Would have required $60,000 in mold revisions Method Cost Time Injection molding $60,000 70 days In-house FDM prototyping $1,200 2 days Savings $58,800 (98%) 68 days (97%)
  • 26. Questions? More information: www.stratasys.com/CostJustification  Request a free sample part, download White Paper & presentation

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