3D printing can help to go after low volume niche opportunities
Low volume niche opportunities can usually fetch higher prices. However, they are more expensive to make. So businesses do not go after them. 3D printing can help to level this playing field. It helps companies to go after low volume niche opportunities.
Low volumes in traditional manufacturing
There are several companies that deal in specialty products that have low volumes. Due to the low volumes, niche products have higher costs of manufacture. Let us see how.
The traditional methods of manufacturing focus on large volume bulk manufacturing. Product design, development, tooling, setup and assembly costs are some examples of overhead costs. These costs stay the same at all production levels. So they are also called fixed costs. Direct material costs are variable with the volume of production. They are hence known as variable costs.
It is possible to spread fixed costs across high volumes and still stay profitable. When volumes are low, high fixed costs will result in losses.High product volume means gross profits are higher. (Gross Profit = Selling Price – Variable cost).
The chart below explains the concept.
In this example, the manufacturer employing traditional manufacturing methods needs to make a minimum of 4 1/2 units in order to break even. He will see profits only if he gets an order quantity of 5 units and above.
Traditional manufacturing methods are not suited for low volume runs. Many manufacturers thus tend to not go after low volume niche markets.
Low volumes in additive manufacturing
Fixed costs are lower with additive manufacturing (AM). This is because AM can do away with most tools and patterns. Assembly costs can be lower too. Thus total fixed costs drop to a large extent. So it is possible to make profits even with lower volumes.
In this example, the manufacturer breaks even at 2 1/4 units so he will make profits even if he accepts an order for 3 units.
Implementing AM concepts thus help manufacturers to accept low volume runs from their customers.