Facing a turning point in how it must engage and serve customers, the ecommerce-based digital manufacturer will rebuild its commerce technology this year and introduce more ecommerce features and manufacturing services. Pictured above: The type of CNC manufacturing machines Protolabs operates.

An innovative digital manufacturer since it launched in 1999, Proto Labs Inc. is ready to overhaul itself, CEO Vicki Holt said today.

Protolabs 2.0 project started with the ecommerce site because this is the most impactful to the customers and will provide the greatest benefit to the business.
Rich Baker, chief technology officer
Proto Labs Inc.
VictoriaHolt-ProtoLabs

Vicki Holt, CEO, Proto Labs

The Maple Plain, Minnesota-based company, which does virtually all of its sales through its ecommerce site, reported a 1% drop in fourth-quarter revenue to $112 million. Coming off several years of consistent revenue gains, the company is facing an evolving market with customers demanding more user-friendly online purchasing features and the ability to order more complicated manufacturing services taken from Protolabs’ stable of on-demand manufacturing methods.

Protolabs, with manufacturing facilities in the United States, Europe and Japan, sells to customers worldwide several types of custom manufacturing that customers can order online: 3D printing, which uses digital blueprints to construct items by adding or removing materials layer by layer; additive manufacturing, a form of 3D printing used to add materials to build products; injection molding, a process by which material is forced into a mold to form a product; and CNC, or computer numerical control, a process by which machining or milling tools operate via computer programming.

“Our unique ecommerce and digital manufacturing solution puts us at the forefront of the manufacturing 4.0 revolution,” Holt said on a conference call with investment analysts today. “However, our customers have been telling us they want more. They want more in terms of services and capabilities, and they want more in terms of the ecommerce experience we offer.”

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‘We knew we had to change and evolve’

She added, “To remain the leading ecommerce digitally-enabled supplier of custom-manufactured parts and services, we knew we had to change and evolve.”

The company’s evolution, she went on, will proceed with “Protolabs 2.0,” the company’s moniker for its strategic plan to relaunch its ecommerce and back-end business-management software systems in the second half of this year.

The new technology platforms, Holt said, will address customers’ demands for an easier ecommerce purchasing experience, with fewer clicks needed to place an order and with the ability to order multiple manufacturing services for complicated production jobs. Since its founding, Protolabs has focused on selling a single type of on-demand manufacturing service at a time, such as injection-molding, mostly for producing small prototype products ordered from entrepreneurs and inventors.

But Protolabs is increasingly seeing demand from larger companies that want to order multiple manufacturing services for multiple parts of their production operations. With its redesigned ecommerce site, which it will build in-house, and new commercially available technology for such operations as content delivery networks, security firewalls and shipping, Protolabs will be better able to handle ecommerce orders from customers “managing multiple parts and different [manufacturing] services, supporting projects from prototype through production,” Rich Baker, chief technology officer, said on the conference call.

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The Protolabs 2.0 project “started with the ecommerce site because this is the most impactful to the customers and will provide the greatest benefit to the business,” Baker said.

For the fourth quarter ended Dec. 31, Protolabs reported:

● Revenue dipped year over year by 0.8% to $111.9 million;

● An increase of 0.9% in the number of unique product developers and engineers the company services to 20,595;

● Gross profit decreased by 4.4% to $56.58 million, resulting in a gross profit margin of 50.6%, down from 52.5%; Protolabs attributed the decline partly to increased sales of 3D printing services, which have a narrower profit margin than other manufacturing services;

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● Net income fell 21.3% to $15.19 million.

For the full year, Protolabs reported:

● Revenue increased by 2.9% to $458.72 million;

● Net income fell 16.9% to $63.66 million.

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