The Total Cost of Ownership: the invisible part highlighted by AM

Technical Focus | 16 April 2018

Paving the way of the Industry 4.0, Additive manufacturing is joining digital technologies to transform the way companies are producing to be more flexible to their environment, more efficient and more profitable.

On-demand manufacturing is leading this revolution, producing components quickly and cost-effectively. On low-volume injection moulding parts and tooling, it can drastically reduce the Total cost of Ownership (TCO).

What is the TCO?

In the traditional industry, supply chain costs are often underestimated, reaching until 20% of the overall cost according to the U.S. Commerce Department’s Manufacturing Extension Partnership.

TCO encompasses all the direct and indirect costs all over its life cycle (purchase, shipping, logistic; inventory, operation, maintenance, scrap rate, obsolescence…), revealing the hidden costs and giving a better understanding of the product value than only the purchase price. A TCO also integrates lead time, ability to scale up production and quality of relationship with suppliers

More and more companies start to use TCO to evaluate their supply chain, highlighting concepts of quality, reliability and time-flexibility, often considered as the invisible part of the iceberg.

How on-demand manufacturing improve supply chain efficiency and TCO?

At the junction between just-in-time manufacturing and lean manufacturing principles, on-demand manufacturing perfectly integrates the current production trends: shorter life cycles and mass customization. Let’s see how the mechanism is influenced by additive manufacturing:

A single supplier for prototyping, low-volume production, and ramping up the production if necessary to fit the need of the demand accurately, will decrease the cost which would have been related to a multiplicity of manufacturer.

Reduction of inventory costs, due to a production quantity directly linked to the demand. No more loss of sales opportunity due to a lack of goods. The resulting flexibility avoids the company to be misleaded by wrong forecast.

– Benefits are better if the technology is used for low to mid-range volume production. Even if the purchase price may be more expensive, savings in tooling makes the TCO lower than using a traditional injection moulding for small batches of products.