You know the value and need for a rapid prototyping system. But it is often less clear to management and accounting. To improve the odds of gaining approval, here are tips and guidelines for creating a compelling business case for the acquisition of additive manufacturing equipment for prototyping.

1. MAKING THE CASE
How to Justify the Cost of a Rapid
Prototyping System

2. Who is Stratasys
FDM Technology

3. Today’s Event
Host
 Kim Killoran, Stratasys, Inc.
Presenter
 Todd Grimm, founder and president,
T. A. Grimm & Associates, Inc.

4. 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

5. 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

6. Executive Summary
Executive summary
 Will make (or break) the case
State:
Tip:
 Be succinct
Tip:
 Be compelling
 Challenge, solution, investment and return
 2 or 3 paragraphs
Highlight the highlights
 Emphasis on the numbers

7. 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
Sales
R&D
Prototypes +
ECOs
$50M
$2.5M (5%)
$80K/year
$50K/year
TELCO

8. Situational Analysis
Proposed solution(the treatment)
 Describe the additive manufacturing
proposal
• What is being proposed
• Total investment
• Implementation time
Tip:
 State end result
Tip:
 Lead with hard
numbers
 Detail the benefits
• Stress the hard numbers
• Reference the softer gains
AM System
On-Going
Savings
$105K
$34K/year
$75K/year
TELCO

9. 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

10. Financial Justification
Two alternatives
 Cost reduction
 Revenue increase
Two parts
 Capital expenditure
• And on-going costs
 Return (value)

11. Investment
Initial investment






System
Ancillary equipment & licenses
Installation & training
Shipping
IT expenditures
Facility modifications
AM System
Equip/License
Install/Train
$90K
$8K
$7K
TELCO

12. Investment
On-going expenses





Maintenance contract
Routine maintenance
Materials/consumables
Labor
Facility charges
Input needed
 Estimated part count
 Operational estimates
Maintenance
Consumables
Labor
$15K
$12K
$7K
TELCO

13. Financial Justification
ANALYSIS SUMMARY
--
RETURN ON INVESTMENT (ROI) (5 year)
TELCO
--
Simple annual ROI
INTERNAL RATE OF RETURN (IRR)
NET PRESENT VALUE (15% cost of capital
Year 1
--
PAYBACK PERIOD
Year 0
---
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)
--
--
--
--
--
--
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)
Return

14. Return
Challenge: hard numbers
 2 weeks = $________ ?
Recommended approach
 Three-tiered
• Hardest to softest
 Iterative
• Realistic yet compelling

15. 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

16. Return
Outsourced costs
Tips:
 Create buckets
 Use averages
 Document
everything
 Part, engineering, labor
 Expedite fees, shipping, taxes
In-house
 Internal cross charges
 Seek cost accounting assistance
Prototypes
Patterns
Total
$60K
$5K
$65K
TELCO

17. Financial Justification
ANALYSIS SUMMARY
RETURN ON INVESTMENT (ROI) (5 year)
TELCO
10%
Simple annual ROI
INTERNAL RATE OF RETURN (IRR)
NET PRESENT VALUE (15% cost of capital)
Year 1
Year 2
Year 3
15%
-$1,100
46 months
PAYBACK PERIOD
Year 0
48%
Year 4
Year 5
Investment
- CapEx
($105,000)
- On-going
expense
($34,000)
($34,000)
($34,000)
($34,000)
($34,000)
$65,000
$65,000
$65,000
$65,000
$65,000
Return
- Outsourced
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

18. Returns
Tier 2
 Increasing prototyping activity
 Due to speed, ease, convenience & cost
Leverage
 Generally accepted values
Concept
P
P
Design
P
Test
P
Produce
Pilot
P

19. Project
 Increased prototype activity
 Resulting return
ECOs
TELCO
$10K

20. Financial Justification
ANALYSIS SUMMARY
RETURN ON INVESTMENT (ROI) (5 year)
TELCO
19%
Simple annual ROI
INTERNAL RATE OF RETURN (IRR)
NET PRESENT VALUE (15% cost of capital)
Year 1
Year 2
Year 3
27%
$32,400
31 months
PAYBACK PERIOD
Year 0
95%
Year 4
Year 5
Investment
- CapEx
($105,000)
- On-going
expense
($34,000)
($34,000)
($34,000)
($34,000)
($34,000)
- Outsourced
$65,000
$65,000
$65,000
$65,000
$65,000
- ECOs
$10,000
$10,000
$10,000
$10,000
$10,000
Return
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

21. 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

22. Financial Justification
ANALYSIS SUMMARY
RETURN ON INVESTMENT (ROI) (5 year)
TELCO
19%
Simple annual ROI
INTERNAL RATE OF RETURN (IRR)
NET PRESENT VALUE (15% cost of capital)
PAYBACK PERIOD
Year 0
Year 1
Year 2
Year 3
95%
Year 4
27%
$32,400
31 months
Year 5
Investment
- CapEx
($105,000)
- On-going
expense
($34,000)
($34,000)
($34,000)
($34,000)
($34,000)
- Outsourced
$65,000
$65,000
$65,000
$65,000
$65,000
- ECOs
$10,000
$10,000
$10,000
$10,000
$10,000
Return
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

23. Recap
Business case
 Financials
 Situational analysis
 Executive summary
Recommendations
 Concise & compelling
 Compelling & realistic
 Realistic & tangible

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

25. More Information
More information: www.stratasys.com/CostJustification
 Request a free sample part, download White Paper, presentation &
more
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
Method
Cost
Time
Injection
molding
$60,000
70 days
In-house
FDM
prototyping
$1,200
2 days
Savings
$58,800
(98%)
68 days
(97%)

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