3D Printing Executive Overview

STRATEGIC
WHITE PAPER
3D PRINTING TAKEAWAYS
3D PRINTING
EXECUTIVE • It is the “Next Industrial
Revolution”
OVERVIEW
by Chris Norman • It Will Redefine The
Supply Chain
and Patrick Seaman
January 2013 • It is a Concept that is
“Bigger than the Web”

Pepperwood Partners© All Rights Reserved January 2013 Page 1

Topics in this White Paper
 First Industrial Revolution 3  Online 3D Printing Services 29

 Enter: 3D Printing 5  Industrial 3D Printing Hardware 33

 Skilled Labor 10  Edge Manufacturing 31

 Energy and Materials Efficiency 12  Industrial 3D Printed Parts & Items 33

 The Perfect Storm 13  Digital Rights Management Issues 37

 History of Additive Fabrication 14  Future Developments 41

 Military Applications 20  Summary & Conclusions 45

 Consumer Applications 23  References 50

 Case Study: Kraftwurx / Digital Reality 25  About the Authors 51

 About Pepperwood Partners 53


First Industrial Revolution
Henry Ford established the
model for the mass-
manufacturing era of the
Industrial Revolution when he
created the assembly line. The
assembly line promised to
make products more
affordable by producing many
copies of identical parts. Most
everything consumers buy
today is produced in this
manner, using large factories
with lots of expensive
machines and people to run
them.


First Industrial Revolution
Products made in this manner
are distributed to you through
an enormously complicated
global supply chain created to
distribute the produced goods
to far-away consumers. Global
mass-manufacturing factories
are spread across Asia,
sending a never-ending stream
of giant container ships to North
American and European
consumer markets. This
complicated infrastructure
stemmed from businesses
chasing lower operating and
labor costs, to bring products to
you.


Enter: 3D Printing

Additive Fabrication or, as it
has become more
affectionately known by the
public, 3D printing, recreates
an object layer-by-layer. Using
a 3-dimensional digital model
(CAD model) as the
“blueprint,” successive layers
of material are precisely
deposited by a computer
controlled “printer”. The result
is a precise “copy” of the
object.


Enter: 3D Printing

The Economist asks, is this “the PC all
over again?” Machines that turn digital
objects (bits) into physical objects are
“Pioneering a whole new way of making
things – one that could rewrite the rules
of manufacturing in much the same way
that the PC laid waste to traditional
computing.” 1


Enter: 3D Printing

Today’s 3D Printing technologies make
use of a wide variety of materials including
plastics, metals, ceramics and even
biological materials. Some companies are
experimenting with composite materials
such as combining plastic and cellulose
for a wood-like result. By using multiple
print heads, different materials can be
deposited at different stages, changing the Figure 2: 3D Printed Turbine Engine (© Kraftwurx)

characteristics of the object.

Research about 3D Printing at major universities and private companies
focuses primarily on materials. Attempts to print virtually everything are
under way, including food products like chocolate or sugar.


Enter: 3D Printing

On that larger scale, there are efforts
to 3D Print with concrete, with the
potential to “print” a house in hours
or days .

Supported by USC, the US Military &
NASA, this concept takes the 3D
Printing concept to a new paradigm
in both scale and utility. Figure 3: 3D Print a house (© Contour Construction)


Enter: 3D Printing

(of 3D Printers)
“They represent the next industrial
revolution… It will be bigger than the web.”

-- Chris Anderson,

Former Editor-in-Chief of Wired Magazine


Skilled Labor

Although much hyped, 3D Printing has the potential to create the “perfect
storm” for manufacturing. What used to require a highly skilled machinist
with a deep background in many complex methods and techniques has
been replaced by a computer controlled machine.

Following the basic tenet of the Industrial Revolution, removing the
skilled labor needed to operate the machine to produce one-at-a-time
items, removes much of the barrier to produce that item at affordable
price points.


Skilled Labor

Often, a machinist cannot complete a part that has complex geometry
without manipulating the object – such as flipping the part or object over
to machine the other side. 3D Printing eliminates this burden because it
removes the penalties of the complexity of a part by creating an object
layer by layer.

3D Printers allow working assemblies to be printed with built-in hinges
and other features. Parts can be combined in ways that traditional
machining cannot accomplish, reducing part count in an assembled
product.

Consider the example of a ship in a bottle: A 3D Printer can build this
easily whereas a traditional machine cannot.


Energy and
Materials Efficiency

3D Printing is an efficient manufacturing
process. In contrast, traditional
manufacturing is not. For example,
machining / milling uses blocks of metal
that will be machined; removing large
portions of the block result in the desired
part. An analogy to this would be how a
sculptor chips away marble to create a
statue. The chips, which also took energy
to form, become scrap. Figure 4: Traditional machining / milling is inefficient

In this example, the scrap metal must be shipped back, re-smelted, and
shipped out again, repeating the cycle.

In contrast, 3D Printing adds material, building-up the part layer by layer.
Not only does this save material, but it also saves energy because the
machine only uses the energy necessary to form the part, nothing more.

The Perfect Storm

Suppose that a set of presentations and
reports needed to be delivered to multiple
locations around the country. By sending
the electronic files to a service like Office
Depot®, FedEx Office®, or Staples®, exact
duplicates of the documents, including
color, number of pages, binding methods,
etc., are produced and delivered. In the
same way, sending the electronic files for Staples and Mcor have
an object will result in the identical part or announced a new store-
product being made, regardless of printer pickup based
location. Note that Staples® has 3-D printing service
announced that it will begin a project to called Staples Easy 3D
add 3D Printing services to its stores5.


History of Additive Fabrication

“That allows designers to create both intricate
internal structures to develop extremely strong
parts …. For those very reasons the Navy is
already using “a number of printed parts such
as air ducts” in F/A-18s.”
-- United States Naval Institute



3D Printing is arguably one of the least promoted revolutionary
technologies of all time. After 3D Printing was invented in the early
1980’s, it was adopted by the aerospace industry to create prototypes.
The fledgling industry became known as Rapid Prototyping due to its
speed and ease of use. Later, the technology was adopted to create cast
titanium parts for fighter jets including the FA-18 Super Hornet and later
the F22 Raptor.



While first coined in the 1990’s, the term “3D Printing” was not widely
used until around 2008, as marketing and the public began to embrace
the technology. Other related terms used to describe the technology
include:

• Direct Digital Manufacturing
• Additive Manufacturing
• Additive Free-form Fabrication
• Solid Freeform Fabrication
• Rapid Prototyping
• Layered manufacturing



By the 2000’s, the technology had
expanded well past prototyping
parts. Research on the technology
began to explore “Bio-Printing,” 3D
Printing of biological materials such
as blood vessels and experimental
human organ components. This
technology is still in early stages
and most likely years from FDA
approval in the United States.
Blood vessels, orthodontic implants, Figure 5: Developing: Printing Human Organs (© BBC)

bone replacements, and other Surgeon Anthony Atala successfully
simpler structures are becoming implanted an “engineered” 3D Printed
more common in 3D Printing. To bladder into patient Luke Massella .
date, there is at least one well
documented organ implantation.


Just as in the computer revolution,
equipment that used to cost
hundreds of thousands of dollars
and could only be afforded by large
organizations has evolved into an
ecosystem ranging from the
industrial grade high end all the way
down to consumer-grade desktop
models costing a few hundred
dollars. Analogous to higher dots-
per-inch in ink or toner printers, the
Figure : Industrial 3D Printer (© 3D Systems)
more expensive 3D Printers will
create objects with higher Cheaper 3D Printers will generally
resolution, often with multiple or create objects with rougher edges
difficult to use materials. and use cheaper raw materials.



In addition to the uses described Manufacturers around the globe
above, the technology of 3D utilize 3D Printing and related
Printing is now used to create equipment to produce everything
everything from custom prosthetic from oil field parts to jet engine
limbs12 to automobile components to components to an ever-expanding
aerial drones13 to custom gold and array of custom devices and
components.
silver jewelry.

The US Army is testing 3D
Printers14,15,16 with the idea to
construct spare parts and
components near the front lines,
reducing the supply chain from
weeks or even months, to days or
hours.
Illustration: 3D Printed prosthetic limb


Military Applications
Imagine that an Army tank breaks
down and the nearest replacement
part is misfiled at a supply depot,
located somewhere in an endless
sea of shipping containers. The
next closest replacement part is
thousands of miles away.
This particular solution is already
A 3D Manufacturing network could commercially available through
analyze the part, its destination, software created by Kraftwurx
materials, and other factors parent company Digital Reality. That
required to produce the part and software, dubbed Digital Factory™
find an appropriate 3D Printing is currently being used for
facility in a nearby NATO country distributed Edge Manufacturing of
and deliver it within a day. This is consumer goods.
Edge Manufacturing.



On Military Adoption of 3D Printing:
"With the right systems engineering, the remaining barriers
for adoption can be removed so that out-of-stock parts can
be deployed to units in the field well ahead of the current
supply chain. It will make it easier for military units to
accomplish their missions. For fiscal year 2011, the
Operation & Maintenance portion of the DoD's total budget
request comprises $283.1 billion. If these costs could be
reduced by one-tenth of one percent, that would account for
$283 million in savings. "
-- James Barkley, MITRE



“The ability to replicate part quickly and
cheaply is a huge benefit to the warfighter.
Instead of needing a massive manufacturing
logistics chain, a device that generates
replacement parts is now small and light
enough to be easily carried in a backpack or
on a truck.”
-- D Shannon Berry, Future Warfare Office


Consumer Applications
In recent years, the technology has
found a home in the hobby market.
These less capable but intriguing
consumer-grade and DIY 3D Printers
retail for several hundred to a few
thousand dollars.

The consumer grade equipment has
garnered much press coverage and a
cottage industry of artisan created
figurines, toys, jewelry and art. Leading Figure 7: Makerbot consumer-grade 3D Printer

the pack of the consumer 3D Printer
hardware vendors is Makerbot, with
competitors including 3D Systems’s low-
end Cube, Solidoodle, uPrint, and many
more.


Consumer Applications

These consumer grade machines have limited capabilities and are
considered hobby grade equipment. However, the quality difference
between the low cost machines and the high cost machines is narrowing.
Although the consumer market is the hottest segment seeing growth, it is
by far substantially lower in total revenue and accounts for a small
fraction of the total industry, relegating it to hobbyist use.


Case Study: Kraftwurx / Digital Reality

Digital Reality, the parent company
to Kraftwurx, first demonstrated
their business model in 2006.

The company has patents and
patents pending branded as Digital
Factory™, which is designed to
provide sales, manufacturing, and
distribution for 3D Printing.

This Edge Manufacturing Platform as a Service (PaaS) provides the
infrastructure necessary for any company wishing to take advantage of 3D
Printing for their own business without spending the millions that some
companies have spent to build their own platform. The system can be
white labeled, so brands can use it as their own.


Kraftwurx provides its patented1 Edge
Manufacturing network to its customers
that includes more than 110 facilities
worldwide. When a customer requests
that an item be manufactured, the
system polls Edge Manufacturers after
analyzing the part, material, and end
use category. The system then routes
the orders to facilities in concentric
circles around the customer
until the optimal combination of price and time-to-deliver are reached. The
item may likely be manufactured in the same city as the customer because it
reduces shipping costs and potential customs fees and delays.

1
. US Patent # 13/374,062



Kraftwurx recently produced two copies
of a small product. The first product was
made in Houston, Texas, and the
information for the second product was It took 3 days to send, print and
sent electronically to China. The product
made in Houston was physically shipped deliver the product. Production
to China. The product arrived 14 days costs were similar but shipping
later at a shipping cost of $140.00. was $115 cheaper. Time and
When the box was opened, the product money were saved, as well as a
was broken, and the box had been few trees as no jet fuel or cargo
labeled “opened by customs”. The ships were needed to deliver the
second product was produced in China, part.
very close to the destination.



The platform affords small and medium By offering this platform,
businesses a means to go to market by Kraftwurx hopes to spur an
either investing solely in the design of a industrial revolution and reshape
3D model of a product, or, alternatively, the global economy by equipping
outsourcing the design to a growing small businesses to compete
network of design professionals. worldwide.


Online 3D Printing Services

It is not necessary for professionals or
hobbyists to buy and operate their own
hardware because PaaS online services
can take uploaded 3D designs and print
and deliver them. These online services
are offered by companies like Kraftwurx,
Shapeways and Sculpteo.


Industrial 3D Printing Hardware

To get a sense of the growth
of the overall 3D Printing
market, it is helpful to look
at the publicly traded stocks
of two of the leading
industrial 3D Printing
hardware manufacturers,
3D Systems and Stratasys.
Also note that in the past
two years, 3D Systems
acquired rival Z Corp18, and
Stratasys merged with
Objet19.
Figure 9: Growth in 3D Printing Hardware Stocks (source: Yahoo)


Edge Manufacturing

Edge Manufacturing is an evolution of the supply chain model, where
Manufacturing-On-Demand bureaus, such as those employing 3D
Printing, are called upon to manufacture an item due to their proximity to
the destination / customer. Note the example of Edge Manufacturing in
the Kraftwurx case study, above.

The ramifications of Edge Manufacturing are enormous. It will affect the
global economy in ways that governments cannot yet fully
understand.


Edge Manufacturing
For example:

The design for an item originates in Texas and is showcased on the
internet. A customer in Australia browses and buys the product. While the
design for the item is in the USA, the item is Edge Manufactured in
Australia, so there are no USA sales taxes, international shipping, or
import/customs duties.

Suddenly, the US company is competitive in Australia.


Industrial Applications

On Industrial 3D Printed Parts and Items:

In the US and Europe, many 3D Printing
bureaus have been operating the
technology for as long as 20 years


While consumers are experimenting with entry-level hardware, the
industrial applications are mature. In the US and Europe, many 3D
printing bureaus have been operating the technology for as long as 20
years. Most are owned or operated by employees of the long forgotten
DTM Corporation20, now known as 3D Systems. Many 3D Printing
bureaus provide the technology as a service to clients who use it for their
own competitive and speed to market advantage.

Figure 10: (left to right) Aircraft duct for Boeing 777, Turbine Parts, and Turbine Fuel Injector Ring


Examples of industrial parts created with 3D Printing:

Figure 11: (left to right) Lightweight aircraft door hinge, Knee implant and 10kt White Gold Jewelry


Examples of industrial parts created with 3D Printing:

Figure 12: Examples - miscellaneous custom parts


Digital Rights Management

On Digital Rights Management (DRM) for 3D Printed items:

If a 3D “blueprint” can be used to make just
about anything, who controls the design?
Who profits from it? Who decides?



When you consider that “objects” are another form of “content” –
something to be used and consumed, the questions of copyright and
trademark of the digital blueprint are sure to arise.

If a digital blueprint is made of an object,

Who controls that design?

Who profits from it?

If a ‘knock-off’ digital blueprint is made – how do brands prevent copies
being 3D Printed that they don’t benefit from or control?

Who decides if a 3rd-party digital blueprint is an illegal copy or homage?



The traditional manufacturing cycle adds a significant amount of time to
the equation, allowing some policing. However, once a brand creates a
3D digital blueprint today, it can be made, well… today. While this opens
the door to new DRM challenges, it also changes the life cycle of
products.

Now brands can potentially create new designs all the time, tying in to
current events, trends and fashions on a global daily basis – macro – and
also on a micro-geo scale, targeting specific product designs and
customizations for micro-targeted campaigns. This can be done without
inventory, and without months or year-long manufacturing and
transoceanic shipping and national warehousing and distribution cycle.



When consumers are given the ability to personalize products
themselves, more product diversity and a larger selection of products to
choose from emerges, even with branding. Consumers suddenly drive
their own designs and create new trends.

If brands cannot ultimately turn these new capabilities to their advantage
against copyright violators, then perhaps these brands are destined for
the scrapheap of obsolescence along with buggy whips and VCRs.


Future Developments

Just as the industrial revolution brought huge
societal changes, what happens when we no longer
need factories and the people that run them?
What happens when machines build the machines?


Future Developments

3D Printing is the first step toward
a major shift in society. Companies
like Nanorex have created
Computer software called Nano
Engineer™, which allows for
precise control of building objects
at the atomic level. The control of
materials at this scale sets the
stage for something right out of
Star Trek! Illustration: Molecular level fabrication


Future Developments

Scientists in the Joint Quantum Institute
(JQI) at the University of Maryland and
the University of Michigan have
announced they have successfully
teleported light. The next step is to
teleport entire atoms…eventually! The
3D Printer may become the replicator
from Star Trek, producing items from
stored patterns (computer files).

Eventually, you may very well be able to
print anything you want at home. What
will become of a society when we no
longer need factories and employees to
Illustration: “Star Trek Fabricator”
create the things we need and want? © Paramount


Future Developments

Aldous Huxley wrote ‘A Brave New
World’ in 1931. What Brave New World
will the 3D Printing Revolution bring?


Summary & Conclusions

3D Printing will ultimately change the way that products are designed,
manufactured, and shared. “Edge Manufacturing” will create new
markets and transform (turn upside down) the global supply chain. In the
1980’s, Just-In-Time Manufacturing transformed manufacturing. 3D
Printing takes the idea even further with Edge Manufacturing. More
products will be made Just-As-Needed, manufactured only when they are
actually ordered, and will be manufactured geographically close to the
customer – reducing or eliminating much of the costs of shipping and
warehousing and reducing wastage from unused products.

3D Printing really is green.



eBay democratized the global marketplace, empowering anyone to buy
and sell to anyone else. 3D Printing is poised to democratize
manufacturing and empower anyone to create and sell or share products
with anyone else.

For the conceivable future the majority of consumer goods will continue
to be mass-produced. Over time, the best and smartest manufacturers
will find ways to turn their economies of scale to their advantage in the
evolving technological world. Indeed, China is concerned about the
impact of 3D Printing on its own future, and is looking to jump on the 3D
Printing bandwagon itself21.



Will brands and manufacturers sleep through
the next few years and awake to find
themselves in trouble, or, will they be part of
the solution?



The Economist asks, is this “the PC all
over again?” Machines that turn digital
objects (bits) into physical objects are
“Pioneering a whole new way of making
things – one that could rewrite the rules
of manufacturing in much the same way
that the PC laid waste to traditional
computing.1”



This is not a better widget. This is not continued incremental
improvement in existing processes and methods. This is, without
exaggeration, world changing.

Why I left Wired Magazine –
3D Printing Will Be Bigger Than The Web.
23

-- Chris Anderson, former Wired Magazine Editor in Chief


References
1. http://www.economist.com/news/technology-quarterly/21567201-difference-engine-just-computers-make-it-easy-copy-music-
3d-printers-will
2. http://www.wired.com/design/2012/11/3d-printer-wood-filament/
3. http://www.popsci.com/technology/article/2012-08/researcher-aims-print-3-d-print-entire-houses-out-concrete-20-hours
4. http://www.zdnet.com/chris-anderson-why-i-left-wired-3d-printing-will-be-bigger-than-the-web-7000007535/
5. http://www.fastcompany.com/3003509/staples-launches-easy-3d-printing-service-just-time-best-holiday-parties-ever
6. http://news.usni.org/news-analysis/news/3d-printers-are-here-are-sea-services-taking-advantage
7. http://www.bbc.co.uk/news/technology-14946808
8. http://www.bbc.com/future/story/20120621-printing-a-human-kidney
9. http://www.economist.com/node/15543683
10. http://www.theatlanticwire.com/technology/2011/12/reality-3d-printed-body-parts/45649/
11. http://www.ted.com/talks/anthony_atala_printing_a_human_kidney.html
12. http://www.ubergizmo.com/2012/08/3d-printed-arms-help-give-little-girl-a-new-lease-of-life/
13. http://www.popsci.com/technology/article/2011-07/uk-engineers-print-and-fly-worlds-first-working-3-d-printed-aircraft
14. http://www.army.mil/article/88464/
15. http://www.wired.com/dangerroom/2012/11/new-army-arsenal/
16. http://www.bbc.co.uk/news/technology-20269645
17. http://www.mitre.org/news/digest/advanced_research/08_10/layer.htm
18. http://www.3dsystems.com/press-releases/3d-systems-completes-acquisition-z-corp-and-vidar
19. http://www.fool.com/investing/general/2012/12/03/merger-creates-worlds-largest-3d-print-company.aspx
20. http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=217950
21. http://www.zdnet.com/cn/china-looks-to-3d-printing-for-manufacturing-edge-7000008931/
22. http://www.economist.com/news/technology-quarterly/21567201-difference-engine-just-computers-make-it-easy-copy-music-
3d-printers-will
23. http://www.zdnet.com/chris-anderson-why-i-left-wired-3d-printing-will-be-bigger-than-the-web-7000007535/


About the Authors

Chris Norman is CEO of Kraftwurx and Digital
Reality, the first and only B2B & B2C mass-
customization system for 3D Printing. Mr.
Norman is a member of the Direct Digital
Manufacturing sub-committee to the Society of
Manufacturing Engineers and 16 year member of
SME. Mr. Norman earned his MBA in Technology
Management from the University of Phoenix and
a BS in Manufacturing Engineering from Texas
A&M University. Contact Chris at
chris@kraftwurx.com, and
www.linkedin.com/pub/chris-norman/b/7b0/b12.


About the Authors

Patrick Seaman is Chief Technology Advisor
to Pepperwood Partners and COO of the
social publishing platform company
WhichBox Media. Seaman is the former
COO of the video eCommerce company
Cinsay, and former Director of Technology at
Broadcast.com. Patrick serves on the
Advisory Board of Kraftwurx Inc, and Qples,
Inc. and on the UT Dallas School of Natural
Sciences & Mathematics Advisory Council,
and is an IEEE member. Contact Patrick at
patrick@pepperwoodpartners.com,
patrick@patrickseaman.com and
www.linkedin.com/in/patrickseaman/.

About Pepperwood Partners

Pepperwood Partners is a boutique
investment banking advisory firm
headquartered in Dallas, Texas.
Pepperwood provides a suite of
investment banking advisory
services to businesses in the Two Lincoln Centre
technology, media, telecom, 5420 LBJ Freeway, Suite 535
nanotechnology, energy and Dallas, Texas 75240 USA
+1 214.442.6056
alternative asset sectors. With a info@pepperwoodpartners.com
strong focus on institutional
relationships in the Russian, Learn more at:
European, and CIS regions, www.PepperwoodPartners.com
Pepperwood works with businesses
to achieve capitalization and growth
objectives.


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