Gaining Economies of Scale with Additive Manufacturing

Global use of additive manufacturing for final part production is growing rapidly as manufacturing companies realize the economies of scale possible using AM. (Source: Wohlers Associates powered by ASTM International.)

By Randall Scott Newton

When looking for economies of scale in a growing manufacturing operation, the cost advantages of various strategies can vary greatly. As we reported earlier this year, [see “Hours to minutes: China showcases AI innovation in manufacturing“] manufacturing companies are racing to find new ways to innovate. The gains are coming from various ways to achieve greater digitalization. 

AM has become an increasingly important element of modern manufacturing, allowing for more efficient, flexible, and cost-effective production, especially at smaller scales. Products created using AM are physical, yet they have the advantage of having been “born digital,” which means they were created from an entirely digital process. Born-digital products and companies can have a number of advantages, including: 

Competitive advantage: Born-digital companies can use their digital skills and technologies to gain a competitive advantage. 

International expansion: Born-digital companies can quickly expand into international markets. 

Efficiency: Born-digital companies can use digitalization to improve the efficiency of their value chains. 

This makes AM a crucial consideration when evaluating strategies to achieve greater economies of scale across a manufacturing operation.

Moving beyond two-dimensional thinking

Without additive manufacturing, the decision process on how to increase production comes down to basic two-dimensional analysis:  “How much X do we apply to get better Y?” Factory equipment costs are already known, as are material expenses, labor, and other key factors. 

With additive manufacturing, the decision-making process suddenly becomes multivariate analysis. Cost of material, labor, production waste, process time per part and more all become key factors to determine if production expansion can also increase economies of scale. 

Here are key considerations when deciding if and when to add additive manufacturing to existing production capabilities:

Capital investment: Building another traditional factory, or adding more machines to an existing factory, requires significant upfront costs for tooling, equipment, factory space, and other basic factors. Depending on specific needs and existing capacity, AM may offer a lower initial investment. 

Utilization: Traditional manufacturing aims for maximum utilization. The optimal cost point in AM may be lower than theoretical full capacity when such elements as fail rate and post-processing are considered. At the same time, the fully digital nature of AM offers new possibilities for flexible utilization. There is no re-tooling. It is easier to respond to design iteration and customization requests. The programmable nature of AM offers precise capacity utilization, including “lights-out” production. 

Material costs and supply chain issues: Traditional manufacturing benefits from bulk material purchases. AM material costs are more a function of total market demand, with less price elasticity for any individual customer. If using AM allows for part consolidation and reduced assembly, the cost benefits may outweigh higher expenses in other categories including material costs. 

Learning curve: Process repetition and operator experience benefit both traditional and additive manufacturing. If AM is new to the team, there will be a steeper learning curve than if adding traditional production equipment. 

Quality control: Traditional methods have well-established and respected quality control processes. AM may require new approaches to ensure consistency; these new approaches may not be “settled law” when considering industry standards. 

Customization: Small-batch production or customized items are no problem in AM. Traditional manufacturing has significant cost penalties. 

Build time and scheduling: AM requires a company to add new processes to the manufacturing engineering workflow, such as digital model prep, build volume packing, and print scheduling. 

Hybrid approaches: The decision is often not either/or. A hybrid approach of combining AM with traditional methods may be the best way to expand. 

Scalability: Traditional manufacturing generally scales linearly. AM may not show the same cost reductions with increased volume. For example, there may be a need to install additional equipment for post-production. 

Decisions about adding AM into existing processes require a nuanced understanding of both traditional and AM-specific economies of scale. AM offers flexibility, customization, and possible lower initial investment. AM also introduces new variables that might impact scalability and cost-effectiveness. The factors of expansion must be carefully weighed. 

[Editor’s Note: The author is Managing Director of Consilia Vektor. He has been named an Associate at Wohlers Associates powered by ASTM International, the world’s leading Additive Manufacturing (AM) advisor and market intelligence consultancy. He will occasionally comment here on important AM topics and trends.]

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