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.
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
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
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
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
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
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%)