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COST, QUALITY & SCHEDULE
www.dragoninnovation.com
@dragoninnovate
No Need To Take Notes
HTTP://BIT.LY/DRAGON_COST_QUALITY_SCHEDULE
Http://En.Wikipedia.Org
•Survey
•Our Journey
•Cost
•Schedule
•Quality
•Q&A
AGENDA
Quick Survey
MIT RoboTuna
Agenda
Robotic Corvette Powered Dino
Agenda
Initial iRobot Expertise (Revenue)
Journey from $100,000 to $100 Price
My Real Baby ~ 100kVelociraptor ~100k
+
Rooomba and Scooba
Agenda
We are going to take
something as insanely complex
as manufacturing consumer
electronics and make it feel
easy.
VISION
BOLT
BOLT
DRAGON INNOVATION HAS HELPED LAUNCH AND SCALE OVER 100
COMPANIES SINCE 2009
WHY IS
MANUFACTURING
HARD?
Hint
GOING FROM THE PROTOTYPE TO PRODUCTION IS A LONG
JOURNEY WITH MANY “UNKNOWN UNKNOWNS”
• Cogs, Tooling And Manufacturing Co...
MANUFACTURING TRIANGLE
COST OF GOODS SOLD (COGS)
• Direct costs for goods produced.
• Does NOT include Tooling.
• Actual price depends on where a...
Very Simple Retail
Costing Model
$
Sell-Through Price
(Retail Price)
Sell-In Price
(Wholesale Price)
COGS
Retailer
Gross P...
YOUR DESIGN

• Material And Component Selection
• Fabrication Method
• Manufacturing Efficiency (First Time
Yield, Machine T...
CONTROLLING COSTS
1. Deconstruct the BOM.
2. Separate special components.
3. Transparency
4. Compare to standards.
5. Nego...
ADDITIONAL COGS STRATEGIES
• Bill of Material Transparency: Require factories to provide
an item by item costed BOM. No my...
1
19
34
14
11
1328
20
2217
21
36
30
37
10
24
18
12 23
5
25
29
15
166
8
9
7
2
35
3
4
13
26
33
31
ITEM NO. PART NUMBER DESCR...
• Does it matter that it is a gear???
• Components (3)
1. Material Cost 

= Part Weight * Resin Cost
2. Machine Overhead: ...
HK Resin Prices (USD/Ton)
Reference: http://www.nhh.com.hk/eng/trading/price_trend.asp
(you will need to create a login)
Item Cost (USD)
280 Ton / hr $15.48
220 Ton / hr $10.96
180 Ton / hr $8.38
140 Ton / hr $7.09
100 Ton / hr $5.80
80 Ton / ...
How to Calculate EE Costs
• Cost = Component * Usage
• Separate High Cost Components Over A
Certain Threshold. Apply A Low...
Typical PRC CM Margins

(Profit, Scrap, Overhead)
PCBA
6–8%
Toys
12%
Consumer
15%
Medical
>40%
• Deco (Tampo, Paint, etc.)
• Labor (PRC $2 – 6 / hr)
• Packaging (Gift + Master)
Other BOM Costs
Add It Up
• Plastic
• Purchased Parts
• Electrical Components
• Consigned Components
• Deco
• Packaging
• Assembly Labor
•...
SCHEDULE
SCHEDULE
• Many consumer products are driven by the Christmas
(which has a fixed date).
Plan contingency in your schedule. ...
THE ROAD TO PRODUCTION
‣ Hand Over / Kick-Off
Form CM Team
Contact Lists / Roles and
Responsibilities
ME and EE File transfer
Works Like / Looks L...
QUALITY
• Definitions:
• Quality = Customer Satisfaction = Performance – Expectations
• “Fitness for Use”
Incoming Quality Control:...
RECOMMENDED READING
"Factory Girls",
Leslie Chang:  W.S.J.
Reporter Who Lived
In China
Interviewing
Migrant Factory
Worker...
Questions?
Agenda
dragoninnovation.com
@dragoninnovate
http://www.slideshare.net/dragoninnovation
General Assembly: Cost, Quality & Schedule
General Assembly: Cost, Quality & Schedule
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General Assembly: Cost, Quality & Schedule

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Getting your cost, quality and schedule correct will be the difference between success and failure when it comes to hardware manufacturing.

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General Assembly: Cost, Quality & Schedule

  1. 1. COST, QUALITY & SCHEDULE www.dragoninnovation.com @dragoninnovate
  2. 2. No Need To Take Notes HTTP://BIT.LY/DRAGON_COST_QUALITY_SCHEDULE
  3. 3. Http://En.Wikipedia.Org •Survey •Our Journey •Cost •Schedule •Quality •Q&A AGENDA
  4. 4. Quick Survey
  5. 5. MIT RoboTuna
  6. 6. Agenda
  7. 7. Robotic Corvette Powered Dino
  8. 8. Agenda
  9. 9. Initial iRobot Expertise (Revenue)
  10. 10. Journey from $100,000 to $100 Price
  11. 11. My Real Baby ~ 100kVelociraptor ~100k +
  12. 12. Rooomba and Scooba
  13. 13. Agenda
  14. 14. We are going to take something as insanely complex as manufacturing consumer electronics and make it feel easy. VISION
  15. 15. BOLT
  16. 16. BOLT
  17. 17. DRAGON INNOVATION HAS HELPED LAUNCH AND SCALE OVER 100 COMPANIES SINCE 2009
  18. 18. WHY IS MANUFACTURING HARD?
  19. 19. Hint
  20. 20. GOING FROM THE PROTOTYPE TO PRODUCTION IS A LONG JOURNEY WITH MANY “UNKNOWN UNKNOWNS” • Cogs, Tooling And Manufacturing Costs • Lead Times • Permanence Of Quality • Iteration Cycles • DFMA • Factory Selection And Management • Team Scalability • Schedule & Project Management • Specialized Skills (ME / EE / SW/ Q / SC / Logs) • Retail Channel
  21. 21. MANUFACTURING TRIANGLE
  22. 22. COST OF GOODS SOLD (COGS) • Direct costs for goods produced. • Does NOT include Tooling. • Actual price depends on where a company takes ownership: - Ex-Factory (XF) - FOB (add overland transport to XF) - Landed (add shipping to FOB) - Inventory (add warehousing) • Price will vary by date depending on running changes, transportation costs, currency exchange, commodity costs, etc.
  23. 23. Very Simple Retail Costing Model $ Sell-Through Price (Retail Price) Sell-In Price (Wholesale Price) COGS Retailer Gross Profit Company Gross Profit COGS
  24. 24. YOUR DESIGN
 • Material And Component Selection • Fabrication Method • Manufacturing Efficiency (First Time Yield, Machine Tonnage, Assembly Labor, Number Of Operations, Etc.) • Quality Requirements (Driven By Requirements / Voice Of Customer) • Packout (Replaceable Vs. Rechargeable Batteries; Packaging; Spares, Etc.) MANUFACTURING PARTNER
 • BOM Transparency • Profit Margin • Labor Rate • Currency • Geographic Location (Shipping, Tariffs, Etc.) • Capability (In-House Vs. Outsourced) • Supply Chain (Purchasing Power, Volume (Piggy Back), Consigned Vs Purchased, Etc). COGS DRIVERS
  25. 25. CONTROLLING COSTS 1. Deconstruct the BOM. 2. Separate special components. 3. Transparency 4. Compare to standards. 5. Negotiate Inclusions
  26. 26. ADDITIONAL COGS STRATEGIES • Bill of Material Transparency: Require factories to provide an item by item costed BOM. No mysteries or hidden formulas. • Calculate Labor Rates. Pop Quiz – How??? • Build a “Standard Cost” database. Price out cost reductions. • If time permits, develop relationships with multiple vendors to avoid single source suppliers. Leverage is a beautiful word. • When manufacturing in volume for a CE product, it is critical to understand and control COGS. Focus here! Because of the volume, every penny counts ($10k @ 1M units)
  27. 27. 1 19 34 14 11 1328 20 2217 21 36 30 37 10 24 18 12 23 5 25 29 15 166 8 9 7 2 35 3 4 13 26 33 31 ITEM NO. PART NUMBER DESCRIPTION QTY. 1 100132 Heatsink, Aavid 60520 1 2 PCB 1 100104 Circuit board blank 1 100015 LED, Luxeon LXHL-LW6C 1 3 GATE 1 100110 Film Gate 1 100011 Backgate 1 100024 Film Spacer 1 4 Bottom 1 100144 Bottom Plate 1 100029 Leaf Spring 2 5 Knobreel 2 100106 Cover Bush 1 100151 Dowel .125 dia 2.000 long 1 100009 Driver 1 100153 Gripring .125 dia 1 100149 Knob bush 1 100007 Clutch, one-way, Torrington RC-02 1 100152 Washer, ss .125 id, McMaster 98019A310 1 100017 Knob, plastic McMaster 7354K15 1 100045 Felt washer 1 6 Reel 2 7 condentube 1 100031 Condenser lens, small Fisher Price 1 100105 Condenser Tube 1 100154 O-ring Buna -120 1 100035 Retaining ring, internal 1.062 dia 1 100031b Condenser lens, large, Fisher-Price 2 8 100162 Spacer, condenser lens, short 1 9 100136 Spacer, condenser lens, long 1 10 100163 Spacer, projector, short 1 11 FHMS Phillips M4x20 8 12 PHMS Phillips M4x8 6 13 PHMS Phillips M4x6 5 14 PHMS Phillips M5x16 8 15 FHMS Phillips M4x12 6 16 PHMS Phillips M4x12 1 17 PHMS M4x8 6 18 100150 Endplate, Right 1 19 100160 Endplate, Left 1 20 100100 Front Plate 1 21 100138 Projector Lens Housing 1 22 100148 End Spacer 2 23 100145 Top Plate 1 24 100158 Window Edmund R39-773 1 25 100146 Handle 1 26 100161 M5 Acorn Nut 1 27 100147 Half Bridge 1 28 100012 Focus Screw McMaster 92558A170 1 29 100143 Spacer, .25 dia, .19 long 4 30 100156 Spacer, projector, long 1 31 FHMS Phillips M4x8 2 32 100150 Washer, Nylon, MSC 05401757 1 33 100159 Detent 1 34 100101 Bumper, rubber McMaster 9540K35 8 35 100039 Switch, SPST rocker Carlingswitch 1 36 100155 Projector lens, concave 1 37 100157 Projector lens, plano 1 D C B AA B C D 12345678 8 7 6 5 4 3 2 1 APPLICATION DIMENSIONS ARE IN MILLIMETERS TOLERANCES: 0,1MM ANGULAR: 0 30' MATERIAL FINISH DRAWN APPROVED DATENAME TITLE: SIZE B DWG. NO. REV SCALE 2:5 UNLESS OTHERWISE SPECIFIED: KINKAJOU DELTA 100141 DO NOT SCALE DRAWING REMOVE ALL BURRS AND SHARP EDGES allen 21july04 ANATOMY OF A BOM • Plastic • Purchased Parts • Electrical Components • Consigned Components • Deco • Packaging • Assembly Labor • CM Profit, Overhead And Scrap • Overland Transportation
  28. 28. • Does it matter that it is a gear??? • Components (3) 1. Material Cost 
 = Part Weight * Resin Cost 2. Machine Overhead: 
 = Hourly Cost * Cycle Time (sec) / (3,600 sec / hr) 3. Factory Mark-up, Scrap and Overhead (%) • Total Part Cost: = (Material Cost + Overhead Cost) * (1+Factory M/U) How To Calculate Plastic Costs
  29. 29. HK Resin Prices (USD/Ton) Reference: http://www.nhh.com.hk/eng/trading/price_trend.asp (you will need to create a login)
  30. 30. Item Cost (USD) 280 Ton / hr $15.48 220 Ton / hr $10.96 180 Ton / hr $8.38 140 Ton / hr $7.09 100 Ton / hr $5.80 80 Ton / hr $5.16 EXAMPLE PRC MOLDING RATES
  31. 31. How to Calculate EE Costs • Cost = Component * Usage • Separate High Cost Components Over A Certain Threshold. Apply A Lower Mark-Up. • Apply Factory M/U
  32. 32. Typical PRC CM Margins
 (Profit, Scrap, Overhead) PCBA 6–8% Toys 12% Consumer 15% Medical >40%
  33. 33. • Deco (Tampo, Paint, etc.) • Labor (PRC $2 – 6 / hr) • Packaging (Gift + Master) Other BOM Costs
  34. 34. Add It Up • Plastic • Purchased Parts • Electrical Components • Consigned Components • Deco • Packaging • Assembly Labor • CM Profit, Overhead and Scrap • Overland Transportation
  35. 35. SCHEDULE
  36. 36. SCHEDULE • Many consumer products are driven by the Christmas (which has a fixed date). Plan contingency in your schedule. Things never go according to plan. Have an onsite presence. Track schedule carefully and take corrective actions early. Avoid: “There is never time to do it right the first time, but there is always time to do it again. ”
  37. 37. THE ROAD TO PRODUCTION
  38. 38. ‣ Hand Over / Kick-Off Form CM Team Contact Lists / Roles and Responsibilities ME and EE File transfer Works Like / Looks Like Samples CM trip to the US if possible (access to models and team, relationship building). Factory Input Components Engineering Quality Production Planning (interface with Sales) Sourcing / MA / Costing Logistics Process / Procedure Financial (modeling and payments) Pre-Production Milestones Tool Release Tool Start (TS) First Shots (FS) Engineering Pilot 1 (EP1) EP2 EP3 Final Engineering Pilot (FEP) Production Pilot (PP) Production Production Start (PS) Ramp Engineering Change Notice (ECN) Sustaining (Quality Up / Cost Down) Sunset DETAILED MILESTONES
  39. 39. QUALITY
  40. 40. • Definitions: • Quality = Customer Satisfaction = Performance – Expectations • “Fitness for Use” Incoming Quality Control: Use good ingredients. Build and test along the way. Use sub-components. Statistical Process Control (SPC) / Yield. Find out now, not later. Sample Testing: Temp/Humidity; Transportation; Drop; T/T; Small Parts; Heavy Metals; Compliance; Functional; Life. How do tests match reality? ISTA-3A. Final Inspection / Acceptable Quality Levels (AQL) Walk the line. Get your hands dirty. It is much easier (and less expensive) to make changes before Production Start. What happens if something fails? Will make or break a product … and a Company! Quality is rarely considered in the engineering phase by startups due to schedule, cost and technical pressures. Watch out for the Unknown Unknowns. Strong indicator of long term success, etc. Can you answer the question “How do you know the product is good”? QUALITY
  41. 41. RECOMMENDED READING "Factory Girls", Leslie Chang:  W.S.J. Reporter Who Lived In China Interviewing Migrant Factory Workers In The Pearl River Delta.  Great Insight Into The Workforce.
 "Poorly Made In China", Paul Midler:  Light, Humorous, And Scary.
 "Mr. China", Tim Clissold:  Older Humorous Memoir Of One Of The First Westerners To Do Modern Work In China After Mao.

  42. 42. Questions?
  43. 43. Agenda dragoninnovation.com @dragoninnovate http://www.slideshare.net/dragoninnovation

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