Tuesday, October 25. 2011
In our last two posts we explored some of the reasons why the price to 3D print objects is still high - at least compared to traditional manufacturing technologies. In particular, we examined how the high price of low output equipment combined with materials that are expensive by both necessity and design, leads to additive manufacturing prices that are usually higher than traditional manufacturing.
For the final piece of the high price puzzle it is necessary to understand how 3D printing is typically provided: through 'service bureaus'. (Service bureaus are companies which provide business services for a fee. SAAS - software as a service - companies are good examples.)
Since 3D printing equipment has always been expensive, and the applications limited primarily to prototyping, only the largest companies could justify the investment in their own 3D printers. Still with a steady demand for 3D printing from smaller companies requiring prototyping services, new and existing companies evolved to offer 3D printing to a multitude of customers as 'service bureaus'. Over time, service bureaus have become a significant source for 3D printed parts. With service bureaus come two other factors which typically increase the price of 3D printed objects: overhead and pricing policies.
Traditional Service Bureaus Have Significant Overhead
3D printing is an automated process so the direct labor component for any particular part should be small. The indirect expenses that a company must spend in order to operate is usually lumped into overhead. This might include support staff, facilities, etc. The larger the company, the greater the overhead. These costs must be allocated to the various products which the company sells. (How that is allocated is a large part of cost accounting.) When you order a 3D printed part from some companies, you're in effect paying for the company picnic.
Further, creating a print-ready STL file was not always as straightforward as it is now. Many companies needed dedicated personnel to take client-supplied 3D CAD files and produce printable files. This was - and apparently still is - built into the overhead of many 3D printing services.
In recent years however, producing print-ready STL files has become much easier. If good 3D CAD design practices are followed most design programs will export relatively 'clean' STL files. Even if these files are not fully print-ready they can often be 'fixed' by any of a number of free automated stl fixing services.
What this means is that it is now possible for service bureaus to offer 3D printing services with substantially less overhead; it's simply easier to support the additive fabrication process now than it was, say, 5 or 10 years ago. Smaller service bureaus following a low overhead model can now compete with larger bureaus. And unless they have a significantly greater number of customers (thus benefiting from economies of scale) larger bureaus with extensive services will likely have larger overhead, and subsequently higher 3D printing prices.
Cost-Based Pricing Is Usually Lower Than Market-Based
In setting prices companies generally have two options: pricing according to what the market will bear or pricing according to its costs plus a standard profit margin. Although most companies will use a hybrid of market-based and cost-based pricing, one or the other will typically take precedent. This could be due to factors such as the company's understanding of the market or plans for the future. In one company, maximizing per customer profit to eventually invest in other ventures might be the goal while in another it might be maximizing the number of customers (with lower cost-based prices).
For example, 'traditional' 3d printing service bureaus often see rapid prototyping as the 3d printing market. This is a B2B market with relatively cost-insensitive customers - especially since even with large profit margins 3D is competitive with conventional prototyping. These companies will therefore lean towards the market pricing model; they will price as high as their customer base will bear.
On the other hand, companies which view the 3d print market as perhaps broader may lean towards a cost-plus pricing. In this view, 3d printing can and should have many applications. As much as possible it should compete with traditional manufacturing. Some customers might be particularly cost-sensitive and prices should therefore be as low as possible. This typically results in lower, cost-based pricing.
*The final price of a 3D printed part is affected by service bureau overhead and pricing choices. Larger service bureaus may have higher overhead than smaller service bureaus. Further, service bureaus which view the 3d print market as fairly established and cost-insensitive will likely follow a higher priced market-based pricing scheme; those that view the market as broad and expanding will likely follow a lower priced cost plus scheme.
For 3D print customers the best advice is to choose your service bureau carefully by comparing technology, delivery and most especially, prices.
3D Additive Fabrication, Inc. (3dAddFab) is a start up company located in Colorado, USA. 3dAddFab provides high quality 3D printing that is easy to price and order, at a lower cost than existing fabricators.