Formlabs Uses Supplier Development to Outpace Competitors

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Smaller compnay, SLA technology, grown fast. Move fast between printer iterations

Scalability, embedded deep into our supply chains, we are that annoying customer, production / yield / price

Cost, speed, flexibility
Competitive advantage
System that flows, automatic decisions

We share everything, production data / engineering data / logistics data
What this allows you to do
What decisions are automatic
Share forecast across the chain
Supplier, supplier’s supplier and so fort
Whose responsibility situation
Formlabs trap
We were nice, didn’t pay, now you pay
Vecco
Capacity allocation
“Visibility” what it’s for
This needs to be a system, it happens automatically -
Mapped data sources: quality categories
Derisking, buffer stock, capacity allocation
AQL goes out the window if your line is going to be down

We share everything, production data / engineering data / logistics data
What this allows you to do
What decisions are automatic
Share forecast across the chain
Supplier, supplier’s supplier and so fort
Whose responsibility situation
Formlabs trap
We were nice, didn’t pay, now you pay
Vecco
“Visibility” what it’s for
This needs to be a system, it happens automatically -
Mapped data sources: quality categories
Derisking, buffer stock, capacity allocation
AQL goes out the window if your line is going to be down

Know you’ll need more, no yield, rework plan for new suppliers
No surprises
Dispute: start charging for something ont before

If you’re evaluating two suppliers
If you’re renegotiating with one supplier

Contract manufacturer, 3pl is exchanging fixed for variable costs, that’s outsourcing
Insourcing and equipment
Quality control earlier on the line

Yields
Too much data
RMA
Barcodes
Fix it in sw
Supplier quality
Many software options, made our own

Reinforcing choices
One of the big ways in which we keep costs low is by manufacturing the printers fairly cheaply. Some of the things we do that are relevant to RMAs:
We buy low cost components, and “calibrate out” all the variability that comes with that. About half of the labor in the printer is in calibration and testing, whereas for a similarly priced consumer product, it’s usually in the 2% or less range. We choose to buy cheaper components, which fail more often, and pay instead for lower yield and more work on the line. We can handle this because, well, our engineers are pretty good
We focus on what matters: MFG makes choices about what to make and not to make that are in line with Formlabs strengths. We stopped making build platforms and outsourced that, once we figured out how to make them consistently. On the other hand, we decided to start making galvos, at a higher cost, to have better control over the quality and push performance
We try not to waste money in logistics: shipping is consolidated as much as possible in order not to spend money on, well, shipping. A commonly touted figure is that ~50% of the cost of anything is in shipping. Not sure I believe that, but we try to keep that low anyway.
Note that this isn’t the only way manufcturing creates value: delivery and quality are other things that we get measured on
These operating choices we make have some pretty important consequences that are now inherent to the business model. Two key ones to highlight:
- The competition made printers with similar technology to ours and sold them for between $20k and $30k before we were on the market. This means that they’d sell way fewer of them every year. WAAAY fewer. Which also means that that technology is much less mature: there aren’t clear specs and failure modes for what we make, customers have a steeper learning curve and we’re still rolling down the production learning curves. This is also one of the main reasons that the Services team has as much work as it does.
- Low cost components are cheaper for a reason. Manufacturing pays less, but deals with the following as a result:
- Variable supply: sometimes things just don’t ship/don’t ship on time. We try to build buffer inventory when we can
- Batches have varying quality: batch to batch, our parts can swing from one end of the tolerance spectrum to the other. This makes parts have negative interactions with each other. We do careful inspections where we can, and our calibration process is constantly updated to deal with these variations
- Individual components have quality issues. We handle this with incoming inspections for stuff that’s testable
- Components have variable lifetimes
Main take away: our business model leads to a lot of variability in components, this is one of the key reasons the mfg team exists

Formlabs Uses Supplier Development to Outpace Competitors

Lora Cecere