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

Who is Stratasys FDM Technology

Todays Event Host Kim Killoran, Stratasys, Inc. Presenter Todd Grimm, founder and president, T. A. Grimm & Associates, Inc.

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

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 Tip: Seek help & guidance

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

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 TELCOTELCO SalesR&DPrototypes +ECOs $50M$2.5M (5%)$80K/year$50K/year

Situational Analysis Proposed solution(the treatment) Describe the additive manufacturing proposal What is being proposed Total investment Implementation time Detail the benefits Stress the hard numbers Reference the softer gains TELCOTELCO AM SystemOn-GoingSavings $105K$34K/year$75K/year Tip: State end result Tip: State end result Tip: Lead with hard numbers Tip: Lead with hard numbers

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 Tip: List only the obvious

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

Investment Initial investment System Ancillary equipment & licenses Installation & training Shipping IT expenditures Facility modifications TELCOTELCO AM SystemEquip/LicenseInstall/Train $90K$8K$7K

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

Financial Justification Year 0Year 1Year 2Year 3Year 4Year 5 Investment - CapEx($105,000) - On-going expense($34,000) Return - Total($105,000)($34,000) CUM. TOTAL($105,000)($139,000)($173,000)($207,000)($241,000)($275,000) TELCOTELCO ANALYSIS SUMMARY RETURN ON INVESTMENT (ROI) (5 year) - Simple annual ROI - INTERNAL RATE OF RETURN (IRR) - NET PRESENT VALUE (15% cost of capital - PAYBACK PERIOD -

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

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

Return Outsourced costs Part, engineering, labor Expedite fees, shipping, taxes In-house Internal cross charges Seek cost accounting assistance TELCOTELCO PrototypesPatternsTotal $60K$5K$65K Tips: Create buckets Use averages Document everything Tips: Create buckets Use averages Document everything

Financial Justification Year 0Year 1Year 2Year 3Year 4Year 5 Investment - CapEx($105,000) - On-going expense($34,000) Return - Outsourced$65,000 Total($105,000)$31,000 CUM. TOTAL($105,000)($74,000)($43,000)($12,000)$19,000$50,000 TELCOTELCO ANALYSIS SUMMARY RETURN ON INVESTMENT (ROI) (5 year) 48% Simple annual ROI 10% INTERNAL RATE OF RETURN (IRR) 15% NET PRESENT VALUE (15% cost of capital) -$1,100 PAYBACK PERIOD 46 months

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

Project Increased prototype activity Resulting return TELCOTELCO ECOs $10K

Financial Justification Year 0Year 1Year 2Year 3Year 4Year 5 Investment - CapEx($105,000) - On-going expense($34,000) Return - Outsourced$65,000 - ECOs$10,000 Total($105,000)$41,000 CUM. TOTAL($105,000)($64,000)($23,000)$18,000$59,000$100,000 TELCOTELCO ANALYSIS SUMMARY RETURN ON INVESTMENT (ROI) (5 year) 95% Simple annual ROI 19% INTERNAL RATE OF RETURN (IRR) 27% NET PRESENT VALUE (15% cost of capital) $32,400 PAYBACK PERIOD 31 months

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

Financial Justification Year 0Year 1Year 2Year 3Year 4Year 5 Investment - CapEx($105,000) - On-going expense($34,000) Return - Outsourced$65,000 - ECOs$10,000 Total($105,000)$41,000 CUM. TOTAL($105,000)($64,000)($23,000)$18,000$59,000$100,000 ANALYSIS SUMMARY RETURN ON INVESTMENT (ROI) (5 year) 95% Simple annual ROI 19% INTERNAL RATE OF RETURN (IRR) 27% NET PRESENT VALUE (15% cost of capital) $32,400 PAYBACK PERIOD 31 months TELCOTELCO

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

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

More Information More information: Request a free sample part, download White Paper, presentation & more MethodCostTime Injection molding $60,00070 days In-house FDM prototyping $1,2002 days Savings$58,800 (98%) 68 days (97%) 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

Questions? More information: Request a free sample part, download White Paper & presentation