Formlabs Uses Supplier Development to Outpace Competitors
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3D Printing technologies are quickly evolving? How did Formlabs outpace competitors? They used supplier development techniques to build and orchestrate a network to drive differentiation.
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Formlabs Uses Supplier Development to Outpace Competitors
- 1. Improving Supplier Relationships Head of Manufacturing Formlabs Supply Chain Insights Global Summit 2019
- 2. Supplier Development as a Competitive Advantage Supply Chain Insights 2019.09.05
- 3. Mission - Vision Formlabs is expanding access to digital fabrication, so anyone can make anything.
- 4. Product Lines Formlabs designs and manufactures professional 3D printing hardware, software, and materials for prototyping and production. Form 2 Fuse 1Form Wash + Cure Form 3 + Form 3L
- 6. Competitive Levers from Supplier Development 1. Sharing production data 2. Negotiating marginal rates 3. Fixed <-> Variable costs 4. Fix it in software
- 7. 1. Sharing Production Data Raw Materials Component Subassembl y Final Assembly Distribution center Customer Forecasts, specifications, OQC data, shipping requests Production data, Production plans, shipment trackers Drawings Work Instructions, ECO/DEV, QBRs RMA status, POs Audit Reports. Yields, Inventory status Open issue reports, time studies, headcount, MRB PIs, invoices
- 8. 1. Sharing Production Data Raw Materials Component Subassembl y Final Assembly Distribution center Customer Forecasts, specifications, OQC data, shipping requests Production data, Production plans, shipment trackers Drawings Work Instructions, ECO/DEV, QBRs RMA status, POs Audit Reports. Yields, Inventory status Open issue reports, time studies, headcount, MRB PIs, invoices Safety stock: σdemand + σsupply + σtransportation + σforecast Second sourcing: capacity, risk
- 9. 2. Negotiating Marginal Rates CM Inputs: Space Equipment Indirect Labor Hours Direct Labor Hours Landed BoM Typical Quote Structure: Inbound Freight, Customs, Working Capital Materials Materials Markup Direct Labor Labor Markup Sales, General and Administrative Profit Top-down view Inbound Freight, Customs, Working Capital Materials Materials Markup Direct Labor Labor Markup Sales, General and Administrative Profit Materials Operating Costs (from which leftover is profit) Direct Labor
- 10. 3. Exchanging Fixed and Variable costs ● Quality control closer to the source ● Renegotiations: ○ EAU milestones for price reductions from component purchases ○ Production rate milestones for price reductions from utilization ○ Total unit milestones for price reductions from NRE/fixed costs amortization
- 11. 4. Fix it in Software
- 12. Business Model Choices Low-cost suppliers Calibration focus Lower price Larger user base Higher volumes Production Efficiencies Lower BoM Focused engineering Printer performance data In-house consumables Less mature technology Higher service needs Higher variability Tuned printers
- 13. 3D Printing in the Supply Chain Prototyping / Fit / Form / Cost-effective Mass customization Last mile?Jigs & Fixtures 1 – 10,000 Unit Production Rapid Prototyping
Notes de l'éditeur
- Smaller compnay, SLA technology, grown fast. Move fast between printer iterations
- Scalability, embedded deep into our supply chains, we are that annoying customer, production / yield / price
- Cost, speed, flexibility Competitive advantage System that flows, automatic decisions
- We share everything, production data / engineering data / logistics data What this allows you to do What decisions are automatic Share forecast across the chain Supplier, supplier’s supplier and so fort Whose responsibility situation Formlabs trap We were nice, didn’t pay, now you pay Vecco Capacity allocation “Visibility” what it’s for This needs to be a system, it happens automatically - Mapped data sources: quality categories Derisking, buffer stock, capacity allocation AQL goes out the window if your line is going to be down
- We share everything, production data / engineering data / logistics data What this allows you to do What decisions are automatic Share forecast across the chain Supplier, supplier’s supplier and so fort Whose responsibility situation Formlabs trap We were nice, didn’t pay, now you pay Vecco “Visibility” what it’s for This needs to be a system, it happens automatically - Mapped data sources: quality categories Derisking, buffer stock, capacity allocation AQL goes out the window if your line is going to be down
- Know you’ll need more, no yield, rework plan for new suppliers No surprises Dispute: start charging for something ont before If you’re evaluating two suppliers If you’re renegotiating with one supplier
- Contract manufacturer, 3pl is exchanging fixed for variable costs, that’s outsourcing Insourcing and equipment Quality control earlier on the line
- Yields Too much data RMA Barcodes Fix it in sw Supplier quality Many software options, made our own
- Reinforcing choices One of the big ways in which we keep costs low is by manufacturing the printers fairly cheaply. Some of the things we do that are relevant to RMAs: We buy low cost components, and “calibrate out” all the variability that comes with that. About half of the labor in the printer is in calibration and testing, whereas for a similarly priced consumer product, it’s usually in the 2% or less range. We choose to buy cheaper components, which fail more often, and pay instead for lower yield and more work on the line. We can handle this because, well, our engineers are pretty good We focus on what matters: MFG makes choices about what to make and not to make that are in line with Formlabs strengths. We stopped making build platforms and outsourced that, once we figured out how to make them consistently. On the other hand, we decided to start making galvos, at a higher cost, to have better control over the quality and push performance We try not to waste money in logistics: shipping is consolidated as much as possible in order not to spend money on, well, shipping. A commonly touted figure is that ~50% of the cost of anything is in shipping. Not sure I believe that, but we try to keep that low anyway. Note that this isn’t the only way manufcturing creates value: delivery and quality are other things that we get measured on These operating choices we make have some pretty important consequences that are now inherent to the business model. Two key ones to highlight: - The competition made printers with similar technology to ours and sold them for between $20k and $30k before we were on the market. This means that they’d sell way fewer of them every year. WAAAY fewer. Which also means that that technology is much less mature: there aren’t clear specs and failure modes for what we make, customers have a steeper learning curve and we’re still rolling down the production learning curves. This is also one of the main reasons that the Services team has as much work as it does. - Low cost components are cheaper for a reason. Manufacturing pays less, but deals with the following as a result: - Variable supply: sometimes things just don’t ship/don’t ship on time. We try to build buffer inventory when we can - Batches have varying quality: batch to batch, our parts can swing from one end of the tolerance spectrum to the other. This makes parts have negative interactions with each other. We do careful inspections where we can, and our calibration process is constantly updated to deal with these variations - Individual components have quality issues. We handle this with incoming inspections for stuff that’s testable - Components have variable lifetimes Main take away: our business model leads to a lot of variability in components, this is one of the key reasons the mfg team exists