EMS@C-Level, Episode #34, with Bram de Zwart of 3D Hubs

Yeah, thanks for having me. I'm Bram, I'm the co-founder and CEO of 3D Hubs. Background in industrial design and engineering, where I was already machining and 3D printing parts back in 2003 based off my CAD designs. They got me very excited about these more automated, computer-controlled manufacturing technologies. So I wrote a master's thesis in 2009 on how this automated manufacturing could lead to a future of decentralization, where you have all these automated factories around the world and you make parts when and where they are needed. After that, I joined the first company in the world to use 3D printing to create not just prototypes but actual consumer products. The name was Freedom of Creation, and our big success story was 3D printed iPhone cases that Apple decided to sell on many of their stores globally. This was around 2010. Then the company got acquired by 3D Systems, where I worked another two years as a product manager, their leader in industrial 3D printing. Then in 2013, you started seeing these online platforms come up like Uber, Airbnb. For me and my co-founder Brian, that was quite incredible because we had this vision that manufacturing will decentralize, and with the online platform model you can accelerate that future. So we started very much on the peer-to-peer 3D printing site. You may remember there was a lot of hype around 3D printing in 2013, so there were a lot of people buying these desktop 3D printers, then they sat idle after a few weeks 95% of the time. We allowed these individuals from their living room or their garage to offer 3D prints to people in their neighborhood. In the few years we had 30,000 of these printer owners connected, we did 10,000 orders a month, so we became the world's largest in peer-to-peer 3D printing. But it was around 2017 that we realized the market for kind of hobbyist 3D printing wasn't that large. So on the same vision but with a different strategy, we continued and we basically pivoted towards the industrial route. We really focused on professional factories in the supplier network and getting industrial customers who need prototypes and small series production done, not just in 3D printing but also CNC machining, and since last year sheet metal fabrication and injection molding. So what 3D Hubs does today is basically connect industrial companies, engineers, to a global network of factories.

Yeah, that's right. So it's typically an engineer who has a CAD file. They upload it on our platform, and then within seconds we calculate a price for production, which we do through machine learning and the data of six million parts that we've already produced. So each part that we've produced, we have the CAD file, so we have all the geometric data, we have the manufacturing specs of the customer such as the material, the quantity, the tolerance, and then we know historically what the suppliers in our network are willing to produce for. All of the data we use to basically, when we see a new CAD file and when we see the manufacturing specs of the client, basically predict the price of production in our supplier network and then instantly show price. In 96% of projects we can do that, and we guarantee the price, so we take the pricing risk. So that is the first part of the value of our platform. Historically, you would go to factories, spend days to weeks, and then email and phone call back and forth with the factory in order to get the design and manufacturing specs agreed on and get to a quote. This all happens instantly on our platform, also because we have developed our own in-house DFM software, design for manufacturability software. So we check if the customer design is actually physically manufacturable in the specifications that they want. That's done on the fly as the thing is uploaded in the quoting process, also within seconds. And in the 3D viewing environment, we show to the customer which parts of their design will need to be adjusted in order to make the design manufacturable, or they can switch to another manufacturing technology or material that can handle that particular geometry.

Yeah, so what we're seeing is that on average we drive about 20% of their total volume. So I think we're quite an important customer for most manufacturing partners in our network. We also want to make sure that our customers are getting a standardized experience independent of which manufacturing partner produces the order. In order to achieve that, we need to bring and drive enough volume to each partner for them to read and follow our global standards. But of course we help them to make sure that they get to almost 100% of their capacity filled over time, because the way we route orders in our supplier network is that we show the order to multiple matching manufacturing partners. So when you get an order on the portal as a factory, you're not obliged to take it. You can just take it whenever you have capacity and you feel that the order is right for your capabilities.

Yeah, absolutely. So when we onboard a new manufacturing partner, we can do partly on-site audits. Right now due to COVID, we do actually have people on the ground in India, China, Mexico, so they can do it for us. But we have a very extensive onboarding and audit process to make sure that they meet the standards that we want. Over time we've also learned which manufacturing partners are more successful on our platform than others. Not for every factory around the world it's a good fit, so we know quite well by now what we need to look for in a partner and that's something that we can audit on. And then actually, all the orders for our customers, at least the non-3D printing ones, so that's machining, injection molding, sheet metal, are actually inspected by our team. They're not directly shipped to the customer. So there's an additional step where we do QC. That's another measure for the customer to make sure they really get a good experience.

Yes. When COVID hit, we quite quickly realized that geographic diversification of the manufacturing partner network is very critical in order to have a continued service to our customers. We saw suddenly China go into lockdown, not long after India and other regions around the world. So if you're too dependent on a single region, that can mean you can no longer deliver to your customers. I think there are also other factors in the world such as escalating trade wars, Chinese New Year is a big event where their factories close for a few weeks. So we said, okay, we're going to geographically diversify and make sure we can always deliver to our customers, basically building a very resilient supply chain. So this year we doubled the number of regions where we have manufacturing partners around the globe. No other company is as distributed as us in terms of supplier footprint or manufacturing.

It does come up in conversations with our key account management team, for example. But in the end, I think it should also show in the reliability of our service, right? So us always being able to deliver on time is a result of building that geographic diversification. I think as we continue to see more of these dynamics with COVID, trade wars, etc., we just need to continue to prove that it has value. So I think that's the most important.

Well, honestly, when COVID first hit, we were surprised. So I think there were definitely orders that were late and we needed to quickly reroute orders as well as we could. That was a great learning experience for us around March, like okay, we need to do something about this. So the honest answer was in spring we did have issues with our reliability. But since then we started building that geographic diversification, and now we're much better prepared for new lockdowns and also for Chinese New Year, which is the recurring annual challenge for many companies in manufacturing. And the next disruption, which might be politically based, might be health, could be a natural disaster, it could be anything. So resilience to those disruptions in the supply chain is huge.

I think that's happening. I think that's also reflected in our growth even this year, where the output from many manufacturers around the globe has seen a very strong decline. We're doubling our net revenue this year despite COVID. So I think that is a sign that the industry is moving more and more online, where maybe historically it was relying more on local relationships and then visiting your local supplier. That has become more challenging with COVID. We started so especially the younger generation, the younger engineers, are expecting that on-demand platform in manufacturing just like they were used to with Uber or Airbnb. Now they're expecting that in manufacturing as well, and I think now maybe due to COVID, every generation is trying it out and seeing the benefits.

I think our platform can definitely grow into that. At the moment, when volumes are very large, we have done orders of a few hundred thousand dollars already, but it's not something that we would instantly quote on the platform and then guarantee the price on. It's too risky, as you can imagine. So there's a mix of the features of our online platform but also supported by our sales and engineering team, who basically then get quotes from our global supplier network. The benefit is that we really have long relationships with these suppliers. We drive a lot of volume, so it's easy for us to get quotes from them, whereas for SME customers it might not always be that easy to get quotes from a global network of suppliers and compare prices and lead times.

Yes, interesting times. I think one of the benefits or advantages we had when COVID hit was that we already had four offices globally, we allowed people to work from home one day per week. So I think we already had all the systems in place to work with a globally distributed team that worked well together, including a certain cadence of meetings, all-hands meetings. So when COVID hit, one of the things I started doing was giving a weekly update to the team on how we as a management team were thinking about all the developments and what it means for our business. We actually immediately updated our strategy with a strong focus on that supply chain resilience and geographic diversification that I already talked about, and communicated that to the team. So we adjusted strategy immediately. I think people got used to it. I think it's actually going quite well. We did a survey amongst our team and 94% said that they feel equally or even more productive than before. So that is something we have to take very seriously, and we're currently thinking about what that means for the future of work. If most people feel equally or more productive than going to the office every day, that's fascinating.

Yeah, I think so. Of course, for me it's hard to see because everyone, you have 140 people just sitting at home and sometimes you see them on the video. But I think so. The way we try to measure that as well, our most recent employee net promoter score was plus 59, which is very high. So I think that is a sign that in general it's going quite well and there's a good team spirit. Most people are doing well, I think. For me, it's probably easier because I have a family, wife and children, so when I have to work from home I'm not just by myself. I'm very glad that the children are still allowed to go to school and daycare. But that's of course not for everyone the case, especially the younger people on our team. So I hope this second lockdown here doesn't take too long.

Honestly, when you are running a company of this size and you have young children, you don't have that much free time anyway. But I do enjoy Netflix sometimes too before I go to bed, to get all the work stuff out of my head, a bit of relaxation time.

I think many peers already realized this and have probably done it, but I think it's very important to immediately reassess your strategy. Is this really what's going to work in this new environment for us? I'm glad we quickly saw the severity of the impact and that it's going to be long-lasting, so we adjusted our direction quickly. I think that is important. And secondly, very frequent communications to the team. You can almost not over-communicate. So me having that weekly cadence of presenting to the team, especially at the start of the crisis, sending a weekly email and a weekly presentation, I think that's very important. Actually, something that we also are doing is that our people team organizes these coffee meetings with four random people from the team. They just put it in everyone's calendar. Normally in the office you have this unexpected chitchat at the coffee machine, which is very valuable both to learn something you didn't know about another part of the business and also for the social interaction. So we're now doing that virtually, facilitated by our people team.