How To Select A Factory - Hardware Workshop Toronto - May 2, 2014

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In this presentation, Dragon Innovation will provide an overview on how to select a factory. This presentation was given at the Hardware Workshop Toronto in May 2014. Topics will include:

- Dragon Innovation Background
- Where to Build
- Contract Manufacturer Selection Process (RFQ)

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About Dragon Innovation

Dragon Innovation works with entrepreneurs to launch hardware products and scale companies. Founded by a team of hardware experts, Dragon provides a clear path from prototype through production with unmatched manufacturing expertise and trusted connections. Dragon's client roster includes Coin, MakerBot, LIFX, Scout, Romotive, Sifteo, Orbotix, FormLabs and over 100 more companies paving the road for how new technology gets made.

Connect with Dragon Innovation

Website: http://www.dragoninnovation.com
Blog: http://blog.dragoninnovation.com
Twitter: http://twitter.com/dragoninnovate
Slideshare: http://www.slideshare.net/dragoninnovation/

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How To Select A Factory - Hardware Workshop Toronto - May 2, 2014

  1. 1. DRAGON INNOVATION, INC. ! HOW TO SELECT A FACTORY ! MAY 2ND, 2014 HW WORKSHOP | TORONTO ! ! ! ! ! WILLIAM DRISLANE | VP ENGINEERING | @DRAGONINNOVATE | WWW.DRAGONINNOVATION.COM
  2. 2. Overview • Please Interrupt with Questions / Comments. • Quick Survey • Dragon Background • Where to Build • CM Selection Process (RFQ) • Q&A
  3. 3. SURVEY
  4. 4. Why Does It Matters What Factory You Pick?
  5. 5. Agenda 5
  6. 6. Selected Companies We’ve HelpedWHO WE’VE HELPED
  7. 7. DRAGON MANUFACTURING SERVICES Focus on what you do best. Benefit from real-time responses, improved quality, higher efficiencies and easier communications. •Factory Selection & Vetting •Preparation of Request for Quote(RFQ) package •Quote comparison / Apples-to-Apples analysis •Far East and US location support FACTORY SELECTION SERVICES • Factory contract negotiation •On-site support with dedicated Project Management •Schedule and budget planning •Independent inspections and factory oversight •Certification process coordination and assistance •Iterative design reviews •Component sourcing assistance •Total product lifecycle cost reduction •Creation and implementation of quality plan •Schedule negotiation / acceleration •Sustaining engineering strategies •Rapid response / “fire fighting” •Factory relationship management PROJECT MANAGEMENT
  8. 8. Agenda 8 Dragon Crowdfunding
  9. 9. 9 •COGS & Tooling Estimation •DFMA •Funding Threshold Calculation •Production Strategy & Scheduling •Marketing Strategy •Connections
  10. 10. STEP 1: DECIDE WHERE TO BUILD
  11. 11. Examples to Talk Through
  12. 12. China?
  13. 13. 13 Current Chinese Landscape 1. Low Labor Costs
  14. 14. 14 Current Chinese Landscape 2. Local, Robust, Highly Concentrated Supply Chain http://supplychaindigital.com
  15. 15. 15 Current Chinese Landscape 3. Expert Domain Knowledge http://supplychaindigital.com
  16. 16. 16 Current Chinese Landscape 4. Great Manufacturing Infrastructure http://supplychaindigital.com http://skeptically.org
  17. 17. 17 Current Chinese Landscape 5. Great Transportation Infrastructure http://supplychaindigital.com http://skeptically.org
  18. 18. 18 Current Chinese Landscape 6. Its Very Far Away http://supplychaindigital.com http://skeptically.orghttp://studentuniverse.com
  19. 19. 19 Current Chinese Landscape 7. Significant Language / Cultural Barrier http://supplychaindigital.com http://skeptically.orghttp://studentuniverse.com http://asiasociety.org
  20. 20. 20 Yes! Manufacture in China If Your Product... 1. is COGS (Cost of Goods Sold) sensitive
  21. 21. 21 Yes! Manufacture in China If Your Product... 2. Requires significant manual labor to manufacture and assemble
  22. 22. 22 Yes! Manufacture in China If Your Product... 3. Requires high production volumes (>5k units per order)
  23. 23. 23 Yes! Manufacture in China If Your Product... 4. Uses existing manufacturing technology (i.e. injection molding, etc) http://berkeleysg.com
  24. 24. 24 Yes! Manufacture in China If Your Product... 5. Is tolerant of variations in supply chain and logistics http://berkeleysg.com http://kilterpulse.com
  25. 25. 25 Yes! Manufacture in China If Your Product... 6. Can benefit from low or no cost Design for Manufacturing and Assembly (DFMA) Non-recurring Engineering (NRE) http://berkeleysg.com http://kilterpulse.com http://plasticstoday.com
  26. 26. 26 Yes! Manufacture in China If Your Product... 7. Has “physically” protectable IP http://berkeleysg.com http://kilterpulse.com
  27. 27. 27 Upcoming Concerns in China 1. Rising Exchange Rate http://en.wikipedia.org
  28. 28. 28 Upcoming Concerns in China 2. Rising Wages http://en.wikipedia.org
  29. 29. 29 Upcoming Concerns in China 4. Political Relationships http://en.wikipedia.org
  30. 30. 30 Upcoming Concerns in China 5. X-Factor Concerns http://en.wikipedia.org
  31. 31. USA?
  32. 32. 32 Yes! Manufacture in the US If Your Product... 1. Can be manufactured and assembled through automation http://berkeleysg.com http://kilterpulse.com
  33. 33. 33 Yes! Manufacture in the US If Your Product... 2. Is sensitive to shipping time and expense http://berkeleysg.com http://kilterpulse.com
  34. 34. 34 Yes! Manufacture in the US If Your Product... 4. Requires low volumes http://berkeleysg.com http://kilterpulse.com http://www.theguardian.com
  35. 35. 35 Yes! Manufacture in the US If Your Product... 4. Has difficult-to-protect IP http://berkeleysg.com http://kilterpulse.com http://www.independent.co.uk
  36. 36. 36 Yes! Manufacture in the US If Your Product... 5. Requires non-standard capital equipment http://scientificmachining.com
  37. 37. 37 Yes! Manufacture in the US If Your Product... 6. Is part of a government contract http://en.wikipedia.org
  38. 38. STEP 2: REQUEST FOR QUOTE / CM SELECTION* ! ! ! *THE MOST IMPORTANT MANUFACTURING DECISION YOU’LL MAKE
  39. 39. 39 Overview of the CM Selection Process http://en.wikipedia.org 1.Talk with trusted network connections who have manufacturing experience. 2.Create a differentiated list of 5 - 10 CMs. 3.Create a Request for Quote (RFQ) Package. 4.Down select to 3 - 5 factories based on your product category. 5.Visit! (See checklist on following slide) 6.Talk with the CM’s customers. 7.Negotiate. 8.Select the winner, and leave the others on good terms.
  40. 40. 40 RFQ Package http://en.wikipedia.org •Company Overview -Team overview -Funding -Product -What’s done -What needs to be done -Factory Criteria •BOM -Canonical format (A2A) in Excel -Transparent and Formula Driven -Separate Std, Special and Consigned Margins/Markups -Include all costs to Ex-Factory -Fill in the blanks •Schedule -Gantt chart (Cloud) -Fill in the blanks
  41. 41. 41 RFQ Release http://en.wikipedia.org •Down select to 3-5 CM’s (why?) •NDA •RFQ Release & Follow up •Factory Visit
  42. 42. 42 Factory Visit Checklist http://en.wikipedia.org Do you like the team? Are they experienced and friendly? Do they make similar products? Competitor’s are a no-no. Do they have the right manufacturing capabilities? Does your intended volume match their volume capabilities? Are they financially stable? Do they have enough working capital to get going? Do they have ties to the central government (if in PRC)? Do they have favorable payment terms? Are they transparent in their costing? Do they take IP seriously? Did they show you something they shouldn’t have? Are they ethical in their treatment of their workers and otherwise? Do you have access to upper management? Are they excited about working on your product? ! ! !
  43. 43. 43 CM Comparison (A2A Decision Matrix) http://en.wikipedia.org •Total Material Costs •Labor •Margins/Markup (Std, Special, Consigned) •Pareto of Top 5 Most Expensive Components •Fixed Costs (tooling, fixtures, NRE) •Schedule •Fit Criteria
  44. 44. 44 CM Selection http://en.wikipedia.org •Select Top 2-3 CM’s •Negotiate A2A category by category •Award Project to Winner •Update Others
  45. 45. NEXT STEPS
  46. 46. The Road to Production
  47. 47. Detailed Milestones ‣Hand  Over  /  Kick-­‐Off   Form  CM  Team   Contact  Lists  /  Roles  and   Responsibili>es   ME  and  EE  File  transfer   Works  Like  /  Looks  Like  Samples   CM  trip  to  the  US  if  possible   (access  to  models  and  team,   rela>onship  building).   Factory  Input   Components   Engineering   Quality   Produc>on  Planning  (interface   with  Sales)   Sourcing  /  MA  /  Cos>ng   Logis>cs   Process  /  Procedure   Financial  (modeling  and   payments)   Pre-­‐Produc>on  Milestones   Tool  Release   Tool  Start  (TS)   First  Shots  (FS)   Engineering  Pilot  1  (EP1)   EP2   EP3   Final  Engineering  Pilot  (FEP)   Produc>on  Pilot  (PP)   Produc>on   Produc>on  Start  (PS)   Ramp   Engineering  Change  No>ce  (ECN)   Sustaining  (Quality  Up  /  Cost  Down)   Sunset
  48. 48. 48 Suggested Reading for Background on China http://en.wikipedia.org "Factory Girls", Leslie Chang ! WSJ 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. ! !
  49. 49. Questions?

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