The key to RP success is a strategic plan for the future while acquiring the people, processes and skills necessary to support the plan.
"Perspectives" is a column co-authored by Terry Wohlers. The
following was published
in the October/November 2003 issue of Time-Compression Technologies magazine.
The heyday of rapid prototyping (RP) service providers (SP) is undoubtedly over. Gone forever are the fast paced, can do no wrong, money-making days of the early and mid-1990s. For years, the service provider segment of the RP industry has struggled. While change is on the horizon, it may not bring welcome news for those that do not plan for it.
In preparing Wohlers Report 2003, more than twenty-five SPs from around the world were contacted. The informal surveys had one goal: to take the market's pulse. It was discovered that there is little consistency from one company to the next. Some had strong years, others steep decline. Some relied on stereolithography (SL) as a primary source of revenue, others found selective laser sintering (SLS) to be the breadwinner. Some anticipated positive change; others feared that they could not hang on much longer. There were only two areas of agreement amongst the companies surveyed: results have been inconsistent and unpredictable.
With the evolution of the RP industry, these SPs must find new ways to add value and differentiate. With the dynamics of the industry, it is impossible to predict if SPs will follow in the footsteps of scanning and plotting bureaus, machine shops or commercial printers. The future is undecided. However, the hundreds of SPs around the world have time on their side. The industry will not change overnight. Change will come over many years, and this offers each SP the opportunity to plan for the future.
Change in the RP industry is not new. SPs have faced these changes since the mid-1990s. Throughout the past seven years, these companies have seen prices plummet, competition grow and clients buy their own RP systems. Forever hopeful, many of these companies hung their hopes on a turnaround in the coming year. When this did not occur, they hoped for the turnaround in the next year, and the next and the year after that. Positive change is not coming, at least not in the traditional sense of the RP SP.
For the past five years, the annual Wohlers Report publication has likened SPs to the scanning and plotting service bureau market. At its high point, more than two thousand of these bureaus existed in the U.S. Today, there are only a few hundred left in operation. For these companies, the decline in price and operational overhead of scanning and plotting equipment eroded the value offered to their clients. Rather than outsourcing these services, companies brought them in-house. There also was diminished demand for scanning and plotting with the advances in CAD solid modeling. The few bureaus that remain have realigned their operations to address areas of continued demand—high-volume, high-throughput scanning and documentation, and products and services such as engineering and supplies.
In light of the continuing decline, it is somewhat surprising to find that the number of RP SPs is relatively constant. For every company that leaves, a new one replaces it. The lure of the technology and a desire to be entrepreneurial acts as a siren song, calling individuals to join this challenged industry.
RP services are not a commodity, but the market treats it as such. To truly be a commodity, a product or service must be fully mature. The industry has to reach the point on the life cycle curve where the demand has crested and is moving toward stagnant growth or decline. Additionally, a commodity is indistinguishable from its competition in all areas but price. These are not characteristics of the SP market. However, the industry treats RP work as a commodity because of the laws of supply and demand. SPs have created an oversupply condition, outstripping the demand in the industry. When this happens, prices tumble and competition gets fierce.
In the 1990s, the oversupply condition existed because the industry was slow to adopt RP. The attraction of setting up shop led to growth in the service market that exceeded the growth in demand. While this continues to be a factor, it is no longer the primary reason. Changes in the RP industry and in design and manufacturing are now the most influential factors.
In the early days, SPs offered real value to their clients. Outsourcing RP work eliminated the large expenditures of acquiring RP systems and the substantial risk of purchasing new technology. The SP also overcame the challenge of acquiring the expertise to operate systems that required a blend of art, science and intuition. The SPs also rode the wave of time-to-market reduction. In the boom times of the 1990s, corporations operated on the tenet that first to market wins and all others languish. This drove the demand for RP. That business climate is gone.
The SP has competitive forces acting against it from all sides. Technology is cheaper and easier to operate. Time-to-market, while it is still a fundamental tenet of business, is no longer the key initiative. At many companies, cost reduction is more important than time-to-market.
As the survey of SPs indicated, the number of prototypes per project has decreased. In the past, four or five iterations of a part were commonly prototyped. Today, one, two and sometimes no prototypes, seem to be the norm. The middle ground of form, fit and functional analysis is being squeezed by more iterations in the concept modeling phase, an application suited to 3-D printers. Later in the design cycle, high-end rapid prototypes are giving way to molding and casting operations that deliver accurate and functional models in larger quantities.
CAD solid modeling and 3-D printing are becoming tools of choice for rapid design iterations. Each offers a fast, low-cost alternative that is more than suitable for the early conceptualization of a product design. In the past few years, both 3-D printing and CAD solid modeling have advanced to satisfy the early design review needs. The SP is left with only the final, full-featured, high-end prototype that is used to validate the nearly finalized design.
The SP does not service the concept modeling application well. When using an in-house 3-D printer or CAD visualization tool, the response time is measured in hours. These tools prove to be extremely efficient and convenient for the design engineer. Also, they provide more immediate feedback than the RP models from an SP that often demand time allowances for shipping. Also, the perceived cost of an in-house 3-D printed model or CAD visualization is near zero. There is little direct cash outlay.
The 3-D printer market is growing at a much greater rate than that for high-end RP systems. 3-D printers have finally proven that they are a powerful, affordable and easy to use solution. For the foreseeable future, the internal use of 3-D printers and CAD visualization will grow. And with this growth, the demand for outsourced RP services will further decline.
The changing RP market does not signal the death of all service providers. Instead, it is an indicator that the role of the SP must change. For long-term success, the SPs must define new services and new business models that offer value to the targeted market. As the surveyed companies have shown, most recognize this and are actively working to reinvent their value propositions. There are numerous ways that the SPs can differentiate themselves and renew the value offered to their clients. Yet, each will demand fundamental changes to the business model. Some companies may elect to shift their efforts towards the growing 3-D printer market. While there may be little value in offering 3-D printing as a service, there are other roles that could be played, such as becoming a value-added reseller or providing service and support. On the opposite end of the spectrum, SPs may extend their services with CNC machined tooling or rapid tooling. Others may position themselves as contract manufacturers where they apply their RP skills to the promising market of rapid manufacturing.
Other possibilities include one-stop (full-service) shopping and specialization. Realizing that RP is one small aspect of the design to manufacturing process, many have already added services that address client needs, both before and after the RP process. Some have elected to offer product design and analysis, while others offer short-run tooling. This strategy may prove powerful if the target market is seeking a sole source solution that makes the product development process simpler and more cost-effective. However, the opposite of this strategy is also promising. Specialization is a powerful way to differentiate a company while adding value. Specialization could come in the form of industries served or type of products that are prototyped. With so many SPs trying to be everything to everyone, the specialist will stand out from the crowd.
Following the lead of the service arm of the copier market, an SP could shift the business to the implementation and operation of RP service centers within their clients' facilities. The value in this business model is that the SP takes on all the burdens of evaluation and operation while offering the client the benefit of convenience and years of experience.
These are just a sampling of the new roles that SPs can play to ensure long-term success through added value and differentiation.
There will be SP casualties that result from the changes in the RP industry. Some will result from a resistance to change. Others will fail because of poorly conceived changes to their businesses; while still others will lose due to poor marketing and sales efforts. However, the successes will exceed the failures. SPs have already demonstrated their resiliency and adaptability through the changing and challenging times of the past few years. The SPs will continue to leverage these traits to ensure their long-term success.
The SPs, either individually or as a whole, cannot direct or affect the coming changes in the RP industry. The customers, through their purchases and buying habits, will create the new reality. To change with the times, the SPs will need a generous blend of foresight and intuition that is complemented by flexibility and adaptability.
For some, the writing is on the wall and the end is near. For the majority of others, however, it will take five, ten or maybe twenty years for the full impact of change to be realized. This offers each SP a good deal of time to change its business practices. The key to success will be using this time to strategize for the future and begin to acquire the people, processes and skills necessary to support the plan.