Fast Things 4: Profit Velocity and Design for Profitability in 3D Printing

If we consider a world where fast things will become the predominant arena of profitability in retail, then we will need appropriate metrics to judge our performance by. If we look at 3D printing for production, one thing that I’ve been using for years is profit velocity. To me, profit velocity is the right metric to determine product mix in 3D printing and to decide on the types of things that you will design, manufacture, and make. With 3D printing, the total production time of different parts varies enormously due to their geometry, the technology they are made in, and specific design constraints. Likewise, there is a significant variance between production times of different technologies for different parts. FDM may be much quicker than SLS for one doohickey while SLS could manufacture 10,000 faster. Meanwhile, if we redesigned that doohickey for SLA, then this could be the fastest technology.

Because we are now at the cusp of manufacturing at scale with 3D printing, we have a tremendous opportunity to fundamentally design for cost advantages. We know of course that if we printed a wine glass shape standing up with FDM, it would have 1000 layers while laying down the same part would have only 250. In many cases, fewer layers would mean that the shape would be much cheaper to produce laying down. But, if we would need support material for the laying down shape, then this would take as long or longer perhaps, If we factor in the removal of this material then the standing up shape may be much faster overall. But what if we were printing a 100 glasses at the same time? Depending on the size of the machine, this could mean that one or the other orientation could be much more advantageous.

If David would commercialize this lovely knife stand should he design for 3D printing from the first sketch? Reduce material, shorten it, optimize angels for better support removal and less errors, reduce length so more can fit in the printer, change shape so it is quicker to post process?

Nesting, or optimally placing items into a build volume for 3D printing is, therefore, an essential part of 3D printing operations. Usually done through one person’s specific experience, nesting takes into account the finish of parts in different orientations, success rates, and more. We can, however, go beyond this process and put a number to different builds, different nestings, and various parts. Because we are early in getting parts made in their millions, we can now begin to redesign parts for profitability.

The Return on Equity, called the DuPont System or DuPont Model

The tool we can use to determine how profitable our designs, our 3D printers, and our production processes are is profit velocity. Stemming from the DuPont model this profit analysis tool to me provides us with the best model of determining what products are the best to print. What’s more, we can, uniquely, use the data from this model to decide how to design more profitable parts and focus on those possible applications that would be the most profitable to explore with 3D printing. In other words: we can redesign a bracket not for the engineering folks but for the board, and we can not look at “how to engage the car market with 3D printed parts.” Instead, we can determine which shapes, at which sizes and which geometries would make the most sense for us to explore as applications. Perhaps we can find that frisbee like shapes make the most sense for our technologies so then we focus on where we can find parts like these in the enterprise.

The DuPont Model Explained Graphically

A theory of constraints approach to looking at manufacturing and profitability profit velocity takes from the DuPont model its way of looking at how an asset generates cash per amount of time. In profit velocity, you are looking at how much cash flow is made by each 3D printer per minute, for example. Similar to looking at flow, throughput, or machine hours, we are now looking at how much cash a machine/process/factory/unit/product generates per minute. Typically in a corporate setting profit velocity is used in exploring product mix or as part of a balanced scorecard process. It differs from other ways of looking at profitability. If one looks at margin, then one product could seem much more attractive than another. If we look at net contribution margin, then a particular thing may seem like a winner. But, if we do not take into account how long it takes to produce this thing, then we are missing a critical dimension. As a business, we only have so much cash to invest, only have so many machines and only have so much time to generate cash. By looking at time and machine closely, we take a critical look at the fundamental constraints of our business.

A simplified example is this; you are a bakery that sells only cookies and muffins. Both cost precisely the same to produce per batch with the raw material, investment, production costs all exactly the same. You make the same number per batch as well. So if the production costs are $3 per batch and you sell cookies for $5 and muffins for $6 per batch, the muffins look much more attractive. Through the lens of margin and net contribution margin ($2 versus $3), the muffins are the better product. But, if we look closer at the machine time, the picture changes radically. If cookies bake in one hour and muffins take two, the cookies look like the better product. If we have a ten-hour shift (and changeover and set up is a minute) we can make 9 batches of cookies, which at $2 per batch generate $18 in cash for that day. We could make only 4 batches of muffins per day, which would generate only $12 in cash.

Of course, the picture is rarely this simple, but generally, we can say that if we look at profit per machine per hour, we can determine how to produce the most profit per 3D printer per hour. What’s more, we can, later on, determine what designs, what types of parts, or what geometries are the most advantageous for us. We can also do this by taking into account all set up times, post-processing, and handling.

Rather than looking at overall cash flow generated by a business or just seeing the world through the lens of revenue or margin; profit velocity gives us a more granular picture. This can then be used to optimize 3D printing engagements, applications, 3D printed designs, or nesting for higher profitability. I really believe that profit velocity should be a central metric for 3D printing operations, machines and in determining 3D printing business cases. I’ve had repeated success with this in the past in 3D printing and believe that this is an approach that you should try for your business. Forget design for additive manufacturing, design for profitability. 

This article is a part of a series: Fast Things. The first installment Fast Things, Faster Products and Profits Through 3D Printing is Here while the Desire Engine is here.