How to Reduce Total Cost of Ownership with AM?

Technical Focus | 16 April 2018 | Last updated: 25 February 2020

Paving the way to 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 Total Cost of Ownership?

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

Total cost of ownership (TCO) encompasses all the direct and indirect costs throughout  the life cycle of a product or spare part (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 the invisible part of the iceberg.

How does 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 being misled  by inaccurate forecasts.

–  Benefits are better if the technology is used for low to mid-range volume production. Even if the purchase price of 3D-printed part may be more expensive, savings in tooling make the TCO lower than parts produced by traditional injection moulding for small batches of products.

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