Keith
Very well put!
I don't know Terry Wohlers personally but have listened to him and read much of
his insights on the RP industries. As I read much of his material I can usually
detect some of his connections to certain RP service businesses (normally done
in the consulting arena) so perhaps his insights on this topic are only the
solidification of the rumors about several large service bureaus having
problems.
Quite on the contrary, our business has seen steady growth. We have been
picking up additional machines at a rate of nearly (1) one every (9) nine
months. Perhaps some of the larger SB's are loosing sight on what is critical
to survive and realizing that they can no longer live in the past. Our industry
is changing and it is critical to be nimble enough to adjust to those changes.
Look at the printing industry and see what happened to it over time, who's
going to be the next Kinko's of the development world? This is where the
service business is headed, it's not about capacity and size but about
capability and service.
My hat's off to those who started the industry, but "times are a changin".
Drew Brown
Conceptual Reality L.L.C.
3141 Old Farm Lane
Walled Lake, MI 48390
Phone:(248)926-8820
Fax:(248)926-8830
http://www.conceptual-reality.com
Keith Nybakke wrote:
> > To all on the list.
> As most of us know, on Tuesday at the RP&M Conference, Terry Wholers gave a
> presentation about the state of the RP industry. In that presentation he
> said one thing that I just can not understand.
>
> I quote "THERE ARE TO MANY SERVICE BUREAUS" and "WE NEED TO LIMIT THE
> NUMBER OF SERVICE BUREAUS".
>
> [snip]
>
> I generally wouldn't respond to a quote out of context as the two above
> are. I've known Terry for several years and have a hard time believing
> there isn't something we're missing in his message by looking only at these
> two quotes. But, as the owner of a small service bureau, I think I must
> respond first and hope Terry's context will be clarified soon.
> ____________________________________
>
> "There are too many Service Bureaus"
>
> Well...yes...but...
>
> I am sure that this is true if you are speaking of the SBs built on the
> business model from 1989 - 1993. This was a time when rapid prototyping was
> limited in availability and at the same time had captured the attention of
> most early adopters in the mechanical design field. Prices were high;
> quality was variable. The business model from this time had two components
> in it that are essentially gone today. One was the conversion of data from
> 2D to 3D (as a profit center, it is "easy money"). The other was the use of
> pure R&D funds to pay for a lot of the prototypes (funds earmarked for
> technological exploration, not project specific money). These two factors
> combined to skew the business model in a way that led some SB owners to
> think that how it was in 1992 was how it should always be.
>
> As with many things where there is an apparent advantage for a few, the few
> became many. All that was required to join the few was an RP machine. RP
> machines sold via the 1992 business model were priced accordingly and the
> prices per hour for a pure RP service bureau operation were set by the
> revenue projections from the 1992 business experience. However, the law of
> supply and demand required that obscenely high prices could not hold up
> when the commodification of RP began.
>
> The change of RP from a technological marvel into a commodity began the day
> the second machine was installed and continues to this day. We are still
> discovering the market price for RP services. We are looking for the
> pricing that keeps our SB doors open and at the same time fits into the
> customer's product development budget. That price is never a fixed target,
> even if our costs are. This commodification of RP can easily lead one to
> state, "There are too many Service Bureaus."
>
> It is logical to think that fewer SBs would allow existing SBs to maintain
> their operations according to 1992 business plans. Limiting the supply
> would drive up prices. But, who is in favor of that approach, even if it
> would be remotely possible? I can think of only one group, maybe two.
>
> First, old-style stand-alone RP services bureaus, who want to return to the
> pricing structure of 5 years ago. Sorry, we cannot turn back the clock.
> End of story.
>
> Secondly, RP machine manufacturers who want to sell over-priced new
> machines based on inflated per-hour charges. Of course, ther's no logic in
> this example. More machines = more SBs = lower per-hour pricing = lower
> machine prices = more machine sales = more SBs, etc.
>
> As a stand-alone service, buyers are looking at our price first. Secondly,
> they look at our differentiating characteristics. If what differentiates us
> from the low-ball bidder is not valuable enough to justify our higer cost,
> then the low price gets the job -- every time. It is my job, and that of my
> partners and colleagues, to make those differentiating factors so
> compelling that our prospective customer goes with us. It's always been
> this way in an open market. The seller has to help the buyer understand
> that the price being charged contains the appropriate amount of value to
> the buyer. Even with a pure commodity, such as oats, if the buyer believes
> it has a higher value (preventing heart disease) the price can go up.
>
> If my company fails or succeeds, it won't be because our SLA3500 made us
> into a profitable or unprofitable firm. It will be because we either did or
> didn't convince our prospective customers that we offer a great value at
> the prices they pay for all our services, rapid prototyping included.
>
> More SBs, fewer SBs -- what's the difference? There will always be some
> opening up; there will always be a few closing down. None should get a free
> pass.
>
> Regards,
> Keith Nybakke
>
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