Deloitte Consulting LLP

Advanced Manufacturing Working Group

Initial Meeting

October 1, 2014

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Agenda

Topic Presenter Timing

Welcome Mark Price 10 Minutes

Introduction Jim Brett 10 Minutes

Objectives Chris Averill 15 Minutes

Advanced Manufacturing Report Mike Reopel 15 Minutes

Report Structure Brooke Lyon 10 Minutes

Report Content Brooke Lyon

Mike Reopel 50 Minutes

Review and Next Steps Chris Averill

Mark Price 10 Minutes

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Welcome and Introductions

Advanced Manufacturing Working Group

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Objectives

What we hope to achieve with this working group

Advanced Manufacturing Report

Endorsing legislation

Update on RAMI act

What we hope to achieve today

Insights for the Advanced Manufacturing Report

Thoughts on next steps

As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a

detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules

and regulations of public accounting.

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Advanced Manufacturing Report 2009

Highlights of the findings from the first

report issued in 2009

Conclusions

Recommendations

What we achieved

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Advanced Manufacturing Report 2014/2015

What we hope to achieve by refreshing the report now

What are the major items that have changed since the first report

Hubs

Additive manufacturing

New clusters and areas of advantage

Innovations in education and skill-force development

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Timeline for Report Refresh

October November December January February

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Initiate

Define Objectives

Working Group Mtg 1

Draft

Interviews

Research

Draft

Working Group Mtg 2

Finalize

Edit and adjust

Final Report

Publicize

Publish

Disseminate and discuss ongoing

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Outline – high level

1. Overview

current state and trends

2. Clusters

refine and draw networks, showing competitive advantages

3. Game Changers

emergence of digital and additive manufacturing

4. New Economics of Machining

automation, lean design, role of foreign investment

5. Education and Skill-force Development

role of community colleges and state universities

6. Policy

role of state economic development and required innovations

7. Growth Action Plan

next steps, interdependencies, timing, resources, innovations

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Desktop Design, Make and Sell-A Brand Changing

Proposition

1. CAD as the word processor for fabrication 2. 3D Scanner-can digitize the world

3. 3D printing-imagine it and then make it 4. Alternative Makes

Desktop CNC

Desktop Laser Cutter

Desktop water jet

5. Add electronics/sensors for

The internet of things 6. Market and sell on the web

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Overview

1

2

Sizing Advanced Manufacturing

Overall in NE

Each NE state

Economic Trends

Employment

GDP Growth

3

5

Productivity

Skills audit by state

Trends in apprenticeship

Value of Shipments

4 Investments

Companies that are investing and why

What states and regions are investing in

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Potential Clusters

Medical Devices

Aerospace and

Defence

Signal Processing,

Navigational Optic,

Measurement

Semi-conductors,

Complex Electronic

Components Material

Sciences

Competitive

Advantage? Advanced

Computing, AI

Instrumentation

and Sensors

Robotics and

Automation

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Game Changers

1

2

3

Advanced Manufacturing

Digital

Additive

4

Geographic Barriers

On-line collaboration

Small batching

Investment

Hubs

Innovation funds

Flexibility

Small/Medium batches

Low transportation costs

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Additive Manufacturing Defined

Additive manufacturing can transform the way products are manufactured and brought to market

Additive manufacturing is a process of joining materials to make objects from 3D model

data, usually layer upon layer, as opposed to subtractive manufacturing methodologies

Electronic design file

(e.g., .STL) of object

created using CAD or

scanner

Software slices model

into cross-sectional

layers and sends file to

AM

Following the design, the

AM layers raw material(s)

until the final object

emerges

Final object is

produced

with little/no waste

Additive Manufacturing can be used to….

Improve Quality Reduce Costs Increase Flexibility

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Structural Cost Differences

Melbourne,

Florida Waco, Texas Greensboro,

North Carolina Boston,

Massachusetts Keene, New

Hampshire Portland, Maine

Labor

(Ave Annual Salary) Electromechanical

Assembler $40,782 $39,042 $41,760 $49,741 $42,225 $41,897

Electronics Assembler

(general) $28,976 $27,421 $29,894 $35,909 $30,518 $30,597

Mechanical Engineer $83,819 $82,011 $83,970 $99,316 $82,099 $82,729 Mechanical Design

Technician $57,058 $55,683 $57,980 $69,162 $56,627 $57,426 Electrical Test

Engineer $87,763 $85,914 $87,879 $103,705 $85,947 $86,576 Manufacturing

Manager $95,139 $89,046 $94,479 $113,024 $92,325 $89,247

Estimated Benefits 30% 30% 30% 30% 30% 30% Real Estate

(Lease/ ft2/ yr)

Ind/ WH Ave Rent $6.40 $5.19 $4.91 $13.95 $7.05 $5.73

Office Ave Rent $13.00 $12.05 $13.70 $37.13 $12.80 $14.95

Energy Rate Cost per kWh (by

county) $0.13 $0.08 $0.06 $0.13 $0.14 $0.13

Tax Tax Rate-Local plus

State 7.63% 7.76% 12.3% 11.13% 11.78% 10.87%

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DRAFT FOR DISCUSSION PURPOSES ONLY

-33%

-2%

-5%

-10%

Product Cost Economics

Will be revised for Medical Device, Aerospace, and

Signal Processing/High end Electronics Products

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Rate

Annual

machining value

add per

employee ($000)

Machining

value add per

hour worked

($/hr.)

Machining value add

per dollar wage

2010 2015

US average $145 $73.0 $1.93 $2.03

US with high automation $240 $121.0 $2.97 $3.12

NE low cost county $140 $71.0 $2.33 $2.45

China average $14 $7.2 $4.49 $3.35

Mexico average $55 $28.0 $3.50 $3.37

Machining value add

A new view of competitiveness

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Take

Advantage of

New

Technologies

• Value of skills over scale

• Economics of complex parts of low to medium volume

• Productivity vs. Rate

• Consider Total Cost of Ownership

• Digital manufacturing network driven by PLM and other collaborative technologies

• Value engineering across the network

• Invest in automation (“lights out” operations) capabilities

• Employ advanced machining optimization software

• Focus on low cost county suppliers for higher labor content parts

• Invest in dedicated cells for high velocity material flow

• Conduct joint process improvements such as APQP, value engineering and level loading

• Leverage network material spend and special process contracts

• Take advantage of Additive Manufacturing

• Leverage other advanced technologies such as MIMs and Advanced Analytics

5

Manufacturing Equipment:

CN

C - 1 spin

dle

CN

C - 2 S

pin

dle

s

Screw

M

achin

e - 1 S

pin

dle

Screw

M

achin

e - 2 S

pin

dle

s

Mill-T

urn C

enter

Horiz

ontal Lathe

Vertic

al Lathe

Manual

To

tal

CN

C V

ertic

al 3 A

xes

CN

C V

ertic

al 4 A

xes std.

CN

C V

ertic

al 5+

A

xes std.

Horiz

ontal 3 A

xes

CN

C H

oriz

ontal 4 A

xes

Horiz

ontal 5+

A

xes

Manual

To

tal

Internal

External

Internal - E

xternal

Centerle

ss

Surface

Jig

G

rin

d

Hone

To

tal

Stereolithography

To

tal

Tum

bling E

quip

ment

Vib

ratory E

quip

ment

Drag F

inis

hin

g E

quip

ment

Deburrin

g S

tatio

n

To

tal

Riv

etin

g

To

tal

Assem

bly

To

tal

Manual fusio

n

Autom

atic

fusio

n

Resis

tance (S

pot)

Resis

tance (S

eam

)

EB

W

eld

ing

To

tal

QTY 0 0 0 0 0 0 0 0

Gla

ss B

ead P

een

Shot B

ead P

een

Vapor B

last

To

tal

Jig

B

ore

Gun D

rilling

Laser D

rilling

To

tal

Sin

k

Wire

Fast H

ole

To

tal

Laser

Water Jet

To

tal

Mechanic

al <

= 50 T

ons

Mechanic

al >

50 T

ons

Hydraulic <

= 100 T

ons

Hydraulic >

= 100 T

ons

Hydro F

orm

Turret P

unch &

Laser

Turret P

unch

Manual <

= 50 T

ons

Manual >

50 T

ons

CN

C <

= 50 T

ons

CN

C >

50 T

ons

To

tal

A B C

To

tal

Surface

Internal

To

tal

Gear G

rin

der

Gear H

obbin

g

Gear S

haper

Gear H

onin

g

Bevel G

ear C

uttin

g

Helical G

ear G

rin

der

To

tal

QTY 0 0 0 0 0 0 0 0

Additional Types of Manufacturing Equipment (with Quantity):

RivetingDeburring

Press Gear ManufacturingLapping Broaching

WeldingAssy

List any additional manufacturing equipment here.

Prototyping

EDM Cutting

Milling GrindingTurning

Peening Drilling

Invest in

Distinctive

Skills

4 Invest in

Automation

and

Optimization

3 Leverage the

Network for

Superior

Design

2 Structural

Cost

Vs.

Product Costs

1

New Economics of Machining-Skills vs. Scale

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Education and Skill-force Development

1

2

3

4

Role of public schools

Start in grade / high schools

Competitions and college credit

Vocational schools

Role of Higher Education

Apprenticeship models

Community Colleges or State Universities to

work with companies to sponsor certification

Loan and scholarships to connect to the

model

Innovations

Around the country

In New England

Possibilities

Competitive Advantages

Design schools (RISD, etc.)

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Policy

1

2

3

Role of Federal and State Policy

Legislation

What role do the States play in this?

Innovations

Inventory of innovations nationally

What innovations have spurred economic

development

Public/Private Partnerships

Role

Prospects

Social impact bonds

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Growth Action Plan

What should be done

Who should lead the action

Who should be involved

How to make the recommendations become

reality

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State Survey of Skill Gaps/Advanced Manufacturing Jobs Available

Desktop Design, Make, and Sell Technology and Engineering (Community

College/High School)

Talent Investment Scholarships and Loans

Community College-Industry-Community Apprenticeship Programs

Investment Credits for Automation

Product Innovation Competitions

Advanced Manufacturing Hub

…..

…..

……

Potential Recommendations/Emerging Ideas

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Review of the Timeline

October November December January February

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Initiate

Define Objectives

Working Group Mtg 1

Draft

Interviews

Research

Draft

Working Group Mtg 2

Finalize

Edit and adjust

Final Report

Publicize

Publish

Disseminate and discuss ongoing

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of

member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed

description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/about

for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest

clients under the rules and regulations of public accounting.

Copyright © 2014 Deloitte Development LLC. All rights reserved.

Member of Deloitte Touche Tohmatsu Limited

Appendix

24

Additive Manufacturing Adoption Timeline

Additive Manufacturing has been slowly gaining traction, specifically within design, however, new

technologies have the potential to amplify growth and extend usage within production

1989

AM Rapid

Prototype

System (FDM)

2011

SULSA

Prototype

2030-2050

(Estimated)

Completed Product

1986

AM

Invented

(SLA)

Design

Main Applications 1986 - 2011:

− Product Design

− Product Part Production

− Rapid Prototyping

− Concept Modeling

2014

Selective Laser

Sintering Patent Expires

2009

FDM Patent

Expires – Growth

in Consumer 3DPs

AM

Milestones

Impacts on

Aerospace

Industry

1986

Rapid

Prototyping

2004

Component

Manufacture

2007

Real-time

Spare Parts

Manufacture

2007

RepRap

Movement

2008

User

Generated Art

Product Design

Prototyping and Customization

Production

Scaling in Volume, Size, and Availability

Additive Manufacturing Timeline: The Shift in Additive Manufacturing Applications

2012

3D System

Acquires Z Corp

GE Acquires

Morris Technology

2016

Mass Production

LEAP engine part

Main Applications 2014 -

Future:

− End Product Production

− Mass Production

− Democratized Consumer

3D Printing

Catalyst for Mass Production Adoption1:

− GE plans to mass-produce 25,000 LEAP engine

nozzles with AM – already have $22B in

commitments

− Parts will drive production and operational cost

savings

− First test to see if AM can revolutionize production

There are a number of Additive Manufacturing technologies that can be categorized into four

groupings based on process

1

Granular Materials Binding

A laser or print head is used to sinter

the material into a solid by fusing the

material layer by layer in a granular

bed

2

4

3

Sheet Lamination

Extrusion Deposition

Light Polymerization

Thin sheets of laminated plastic or

metal material are unwound from a

feed roll and a heated. A laser or

knife is used to cut the desired area

Build material is allocated through a

heated extrusion nozzle moving

across the X-Y plane and selectively

depositing material

Process Description Usage Vendors

Drops of a liquid plastic are exposed

to ultraviolet light and converted into

a solid through a curing process

Multiple techniques

supporting a wide variety of

materials including metals

Certain applications require

post processing

Can build molds and cores

3D Systems

Stratasys

Arcam AB

EOS

ExOne

Cubic

Technologies

(Formerly Helisys

Inc)

Fast, inexpensive

manufacture of large parts

Due to glue between

layers, parts may not be

homgeneous

3D Systems

Stratasys

EOS

Builds strong, complex

parts, but slower method

Integral part of product

development due to its

speed and low cost

3D Systems

Stratasys (Objet)

Envision TEC

First rapid prototyping

process

Complex geometries with

high precision

Most profitable but future

adoption may lag other 3DP

Material Type

Processes End Market Users Plastics Metals Ceramics Composites

Light Polymerization

− Digital Light Processing

− Stereolithography (SLA)

− Film Transfer Imaging (FTI)

− PolyJet

Extrusion Deposition

− Fused Deposition Modeling

(FDM)

− Plastic Jet Printing

Granular Materials Binding2

− Direct Laser Sintering

(DMLS)

− Electronic Beam Melting

(EBM)

− Selective Laser Sintering

(SLS)

− Plaster and Sand Based

− Powder bed / Inkjet.

Sheet Lamination2

− Laminated Object

Manufacturing

Depending on the Additive Manufacturing technology, a number of different materials can

be used however, plastics and metals are the most predominant

1Wohlers Associates, Additive Manufacturing and 3D Printing State of the Industry, 2012, and various other web sources, Deloitte analysis 2In addition to the four major categories of materials listed above, Powder Bed and Inkjet Head 3D Printing (Granular Materials Binding) use sand molds, Laminated Object Manufacturing (Sheet

Lamination) uses paper, Electron Beam Melting (Granular Materials Binding) uses carbon, and Selective Laser Sintering (Granular Materials Binding) uses glass

Industrial Aero. & Defense Architecture Automotive Consumer Goods Legend:

Jewlery Medical Packaging Academics

Sample

Outputs

CP Models

Turbine Blades

Car Parts

Models

Forecast

Actuals

$ Bil.

Global Additive Manufacturing (3D Printing) Market Size and Forecast

Market Outlook

• Forecasts for growth of the AM

market by equity research analysts

range from: $7 billion by 2020, on 18

percent CAGR (Paul Coster of JP

Morgan), to bull market scenarios as

high as $21.3 billion by 2020, on 34

percent CAGR (Ben Uglow of

Morgan Stanley)

• Wohlers Associates predicts the

market for AM products and services

will reach $10.8 billion worldwide by

2020, taking into account previous

patterns of cyclicality, and barring

another global recession or

unforeseen natural disasters;

The global additive manufacturing market, reached sales of $3.0 billion in 2013, on annualized growth of

35 percent over sales of $2.3 billion in 2012. AM industry growth over the last 25 years has been 25.4

percent, and 29 percent in the last three years.

Note: Actuals based on Wohlers data.

Source: Wohlers Associates, May 2013; Morgan Stanley Research, September 2013; J.P. Morgan, January 2013

10.8

7.9

6.0

4.0

3.0 2.2

1.7 1.3 1.1

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

202020192017201520132012201120102009

AM Market Size ($ Bil.)

- 29 -

Product Lifecycle Management encompasses all the major engineering processes and

enabling tools for concept to launch and service across a network

Configuration Management

Stage-Gate Processes

Project Analysis, Methods, Metrics, Scorecard, Executive Dashboard

Product Quality Management

CAPA ,RCA’s, Non-Conforming Material, audit , customer complaints, field service

Project Selection Process, Work Breakdown Structure, Schedule, cost Project Planning & Management

Design Collaboration Design Management

MCAD, ECAD, Simulation, SIL/HIL Test Technology, Design Practices

Resource Management

Behavioral models, vendor /supplier/customer collaboration

Work partitioning, allocation, estimates, deployment and budget management

Project Management

Build management, design version management, - design, test, release

Solution

Project Mgmt

Release

Management

Customer / Voice

Marketing

Sales

Field Engineering

Design Partners

Procurement

Suppliers

Research

Partners

Advanced Tech

Design

Engineering

Product

Management

Systems Engrg

PLM

Voice, Requirements Mgt, System Design, Spec Management, Integration and Validation

Requirements Management

Change Management

Problem Report, ECR, ECN, spec change, part changes, deviations, new part release, etc.

Supplier Management

Supplier Selection, RFP, RFQ, Approved manufacturer lists, design for cost

Product Compliance

Design for regulations, standards adherence

Hardware development and ERP Integration, Data exchange, UI extensions, process integration, web based portals

Integration Framework

Product Information

Product Definition, Specifications,

Product Structure and BOM

Management, Revisions

Effectivity Dates

Supplier

price/

rate

Tra

nsporta

tion

In tra

nsit in

vento

ry

Tariffs

(insura

nce, c

usto

ms, e

tc.)

Term

s o

f paym

ent/d

eliv

ery

Rew

ork

, scra

p, re

turn

to s

upplie

r

On tim

e d

eliv

ery

Warra

nty

Quality

inspectio

n c

osts

Tra

nsactio

n, p

rocess c

ost

Invento

ry c

arry

ing c

osts

Fle

xib

ility/E

merg

ency re

sponse

Afte

r-mark

et in

vento

ry

Supplie

r capability

enhancem

ent

Supply

base d

evelo

pm

ent

Afte

r sale

s b

usin

ess

Gauges/to

olin

g/fix

ture

s

Engin

eerin

g c

olla

bora

tion

New

pro

duct in

troductio

n

Perfo

rmance b

ased c

ontra

ct p

enaltie

s

Effo

rt dedic

ate

d to

impro

vem

ent e

fforts

Capacity

shortfa

lls

Landed Costs

Supply chain/Ownership cost

Life cycle cost

Opportunity cost

Total cost of ownership framework

Basics matter: Total cost of ownership

Total Cost of Ownership (TCO) analysis is a framework for

evaluating the combination of price and non-price financial

impacts of procured goods and services

Basics matter: Value engineering early in development

100%

VE Cost Reduction

Opportunities

Life Cycle Cost

Determined

Conceptual Design Detailed Design Production Service Support

70%

85% 95%

40%

25% 20%

80%

40%

0%

60%

15%

10%

The greatest lever to reduce total

lifecycle cost is making the right

design decisions early on

Learning Curve and New Technologies

Learning, Forgetting and Leapfrogging

Innovative technology may enable cost competitiveness

without the need for volume leverage

X 2X X4 8X 16X

Leapfrogging

Technology

New Materials/New

Technology

• Tight tolerance

assembly

• Additive

machining

• Risk-based

planning &

scheduling

• Moving assembly

lines

• Composites

• Metal injection

molding

• Automated cells Volume – Log Scale

3

$ Cost

2

1

Forgetting Curve due

to configuration

changes

Traditional

aerospace

learning curve

Prototype

92 – 86%