MAKING THE CASE

How to Justify the Cost of a Rapid Prototyping System

Who is Stratasys

FDM Technology

Today’s Event

Host Kim Killoran, Stratasys, Inc.

Presenter Todd Grimm, founder and president,

T. A. Grimm & Associates, Inc.

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

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

Executive Summary

Executive summary Will make (or break) the case

State: Challenge, solution, investment and return 2 or 3 paragraphs

Highlight the highlights Emphasis on the numbers

Tip:Be succinct

Tip:Be compelling

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

TELCOTELCO

Sales R&D Prototypes + ECOs

$50M $2.5M (5%) $80K/year $50K/year

Situational Analysis

Proposed solution(the treatment) Describe the additive manufacturing

proposal• What is being proposed

• Total investment

• Implementation time

Detail the benefits• Stress the hard numbers

• Reference the softer gains

TELCOTELCO

AM System On-Going Savings

$105K $34K/year $75K/year

Tip:State end result

Tip:Lead with hard numbers

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

Financial Justification

Two alternatives Cost reduction Revenue increase

Two parts Capital expenditure

• And on-going costs

Return (value)

Investment

Initial investment System Ancillary equipment & licenses Installation & training Shipping IT expenditures Facility modifications

TELCOTELCO

AM System Equip/License Install/Train

$90K $8K $7K

Investment

On-going expenses Maintenance contract Routine maintenance Materials/consumables Labor Facility charges

Input needed Estimated part count Operational estimates

TELCOTELCO

Maintenance Consumables Labor

$15K $12K $7K

Financial Justification

Year 0 Year 1 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)

Return - - - - - - - - - - - -

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)

TELCOTELCO

ANALYSIS SUMMARY

RETURN ON INVESTMENT (ROI) (5 year) - -

Simple annual ROI - -

INTERNAL RATE OF RETURN (IRR) - -

NET PRESENT VALUE (15% cost of capital - -

PAYBACK PERIOD - -

Return

Challenge: hard numbers 2 weeks = $________ ?

Recommended approach Three-tiered

• Hardest to softest

Iterative• Realistic yet compelling

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

Return

Outsourced costs Part, engineering, labor Expedite fees, shipping, taxes

In-house Internal cross charges Seek cost accounting assistance

TELCOTELCO

Prototypes Patterns Total

$60K $5K $65K

Tips:Create bucketsUse averagesDocument everything

Financial Justification

Year 0 Year 1 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)

Return

- Outsourced $65,000 $65,000 $65,000 $65,000 $65,000

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

TELCOTELCO

ANALYSIS SUMMARY

RETURN ON INVESTMENT (ROI) (5 year) 48%

Simple annual ROI 10%

INTERNAL RATE OF RETURN (IRR) 15%

NET PRESENT VALUE (15% cost of capital) -$1,100

PAYBACK PERIOD 46 months

Returns

Tier 2 Increasing prototyping activity Due to speed, ease, convenience & cost

Leverage Generally accepted values

P

P

PP P

PP

P

Project Increased prototype activity Resulting return

TELCOTELCO

ECOs

$10K

Financial Justification

Year 0 Year 1 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)

Return

- Outsourced $65,000 $65,000 $65,000 $65,000 $65,000

- ECOs $10,000 $10,000 $10,000 $10,000 $10,000

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

TELCOTELCO

ANALYSIS SUMMARY

RETURN ON INVESTMENT (ROI) (5 year) 95%

Simple annual ROI 19%

INTERNAL RATE OF RETURN (IRR) 27%

NET PRESENT VALUE (15% cost of capital) $32,400

PAYBACK PERIOD 31 months

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

Financial Justification

Year 0 Year 1 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)

Return

- Outsourced $65,000 $65,000 $65,000 $65,000 $65,000

- ECOs $10,000 $10,000 $10,000 $10,000 $10,000

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

ANALYSIS SUMMARY

RETURN ON INVESTMENT (ROI) (5 year) 95%

Simple annual ROI 19%

INTERNAL RATE OF RETURN (IRR) 27%

NET PRESENT VALUE (15% cost of capital) $32,400

PAYBACK PERIOD 31 months

TELCOTELCO

Business case Financials Situational analysis Executive summary

Recommendations Concise & compelling Compelling & realistic Realistic & tangible

Recap

Stratasys

• Stratasys uses tough engineering-grade thermoplastics• Dimensionally stable materials lock in accuracy• Technology can be used for manufacturing tools & end-use parts

More Information

More information: www.stratasys.com/CostJustification Request a free sample part, download White Paper, presentation &

more

Method Cost Time

Injection molding

$60,000 70 days

In-house FDM prototyping

$1,200 2 days

Savings $58,800

(98%)

68 days

(97%)

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

Questions?

More information: www.stratasys.com/CostJustification Request a free sample part, download White Paper & presentation