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How to Manage a Supplier - Dragon Innovation


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In this presentation, Dragon Innovation will provide an overview on how to manage a supplier. Topics will include:

- Dragon Innovation / Adam
- Contract / Manufacturing Services Agreement
- Schedule
- Testing / Quality
- Overall Supplier Metrics

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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.

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Published in: Technology

How to Manage a Supplier - Dragon Innovation

  1. 1. How to Manage a Supplier Adam Craft VP Manufacturing & Project Management
  2. 2. No Need to Take Notes:
  3. 3. §  Informal! Please interrupt with questions & comments. §  Background: Dragon Innovation / Adam §  Contract / Manufacturing Services Agreement §  Schedule §  Testing / Quality §  Overall Supplier Metrics §  Other Thoughts OVERVIEW
  4. 4. PREPARATION SERVICES Design Review, Cost Estimation & Crowdfunding Campaign Prep CROWDFUNDING A home for the best hardware projects on the planet MANUFACTURING SERVICES Factory Selection Process & On Site Project Management DRAGON INNOVATION HAS HELPED LAUNCH AND SCALE OVER 100 COMPANIES SINCE 2009
  6. 6. The Contract Protecting yourself
  7. 7. The contract, sometimes known as the Manufacturing Services Agreement (MSA), is a legal document spelling out the details of the arrangement with your supplier. Manufacturing Services Agreement Quiz What do you think is important to have in this document?
  8. 8. MSA Sections / Topics Manufacturing Services: §  Defines who is doing what §  Materials: Vendors, procurement, consigned materials §  Subcontractor agreement Forecasts and Purchase Orders: §  Forecast planning §  PO procedures, lead times, cancellation Fees and Payment: §  Pricing (what’s included / not – VAT, taxes, fees, etc.) §  Margins / Markup (standard vs. consigned vs. “special”)
  9. 9. Shipments, Samples, Quality Testing: §  Shipping requirements, schedule §  Samples: quantity, timing, who pays §  Quality Testing: Who does it, who pays for it, how it is done §  Epidemic failures §  Audit: Record keeping §  Final Inspection Product Acceptance & Warranty: §  You can return product that doesn’t meet the specified warranties §  Warranties: Professionally made, original work, tested as specified, manufactured as specified §  You’re allowed to visit and audit at any time MSA Sections / Topics
  10. 10. Representations & Covenants: §  This is a legal document, no conflicts of interest §  Manufacturing in a safe environment, no child labor, ethical, etc. Intellectual Property Ownership: §  Definitions §  Who owns what Confidentiality: §  Mutual Non-Disclosure Agreement Term & Termination: §  Defines the term of the agreement §  How you terminate the agreement MSA Sections / Topics
  11. 11. Indemnification & Liability Limitation: §  General protection for everyone involved & related procedures Miscellaneous: §  Terms of agreement, use of name §  Successors / assignment – new agreement §  Controlling law, jurisdiction, venue MSA Sections / Topics
  12. 12. Schedule How long does it really take?
  13. 13. You have a working prototype and you’ve chosen a factory. Now you “just” have to start making thousands of identical and robust production versions of your prototype. What could possibly go wrong? Production Schedule Quiz How long should you budget from supplier selection until you ship your first production units?
  14. 14. Scheduling Tips When creating a production schedule, consider the following: §  Many consumer schedules are driven by Christmas, which doesn’t move. However, you need to be realistic. §  Plan contingency in your schedule. Things never go according to plan. §  Allow several prototype cycles and allow enough time between prototype cycles so you can fix issues that are found during testing. §  Your manufacturing partner is unlikely to be as optimistic or aggressive as you (and this is good).
  15. 15. Scheduling Tips Scheduling considerations (continued): §  Have an onsite presence in the factory. §  Track schedule closely and take corrective actions early. Don’t expect to make up the time in the end. §  In almost all cases, shipping known bad product is worse than shipping late product. Large numbers of returns can kill your business and reputation. §  Avoid: “There’s never enough time to do it right the first time, but always enough time to do it again.”
  16. 16. 8 wks 8 wks 8 wks 2 wks 2 mths 1.5 mths DFM / Mold Drawing 6 -10wks 1st OBS 1 wks 2 wks 2-5 wks* 2-5 wks* * Depends on Complexity 2-5wks* 2-5 wks* 1 year Critical Components Selection e.g. Motors Magnetic Encoder Wheel Life testing… Oct 2004 Prototype 1st Round Nov 2005 Jan 2006 2nd Round Apr 2006 3rd Round Jun 2006 Finished Prototype VQP Project Hand Over Quotation Finished Factory Selected Aug 2006 First Shot Dec 2006 Tool Start Oct 2006 MEP Jan 2007 EP1 Feb 2007 EP2 A-B Mar/Apr 2007 FEP Apr 2007 PP May 2007 PS Jun 2007 2-5wks* * Product Complexity Lead Time Between Each Milestone New Accessory 2 weeks New Version with some minor changes 3 weeks New Generation or Simpler New Product 4 weeks New Product Line – Complicated 4-5 weeks New Product Line – Very Complicated 5 weeks The Road to Production Reference example: Roomba 3
  17. 17. Testing / Quality How do know what you re shipping is good?
  18. 18. Manufacturing quality can only live up to design quality, but not beyond. What you design is as good as the product will ever be. It’s “easy” to make one widget. Making 100K widgets that perform similarly is another story…. Quality / Testing in Production Quiz What sorts of tests do you think you should run during production?
  19. 19. Production Testing Printed Circuit Board Assembly Tests: §  In-circuit tests (ICT) – bed of nails §  Automatic Optical Inspection - AOI §  Functional / Built-in tests Overall / Mechanical Assembly: §  Subassembly functional testing §  Overall functional / Built-in tests Ongoing: §  Torque / Tension / Drop §  HALT / HASS – accelerated life / environmental §  Life test
  20. 20. Production Testing / Final Inspection The design has been verified, and the purpose now is to ensure that it is built correctly. §  The object is that as much testing as possible is performed on 100% of the product. §  Normal function testing can usually be tested 100% §  Abnormal function testing sometimes can and sometimes cannot. §  Abuse testing cannot. §  When testing damages the product so it cannot be shipped, then it must be tested on a sample basis.
  21. 21. Resources: §  MIL-STD-105E – Officially canceled, but still widely in use in industry. §  Officially replaced by MIL-STD-1916 for military use and ANSI/ASQ Z1.4 for civilian use. §  Still used throughout industry, especially in China. Key parameters: §  Acceptable Quality Level (AQL) Largest allowable defect rate in inspected product §  Lot Size Typically not a matter of choice – determined by other factors. A shipment of goods to one customer may be a lot, as could production from one shift or day, or a batch of parts delivered from a vendor. Sampling Plans
  22. 22. Quality Test Plan Quiz Where are all of these tests and criteria defined?
  23. 23. Quality Test Plan Important Sections: §  Mold qualification process / criteria §  Pre-Control of Production Process (SPC) §  Variable sample inspection: Molded parts, Incoming parts, Critical parts §  Attribute inspection (interim production) §  Static Discharge Test §  Aging Test §  Humidity Exposure Test §  Environmental Test §  Life Test §  Regulatory and Safety Requirements
  24. 24. Quality Test Plan Important Sections (continued): §  Final Inspection §  Sampling plan §  Defect Definition (Critical , Major, Minor) §  Date Code §  Transportation Test §  Aesthetic Inspection §  Functional Test §  Disassembly Check §  Critical Measurements §  Drop Test §  Torque / Tension Test §  Compression Test §  Paint Abrasion Test
  25. 25. Documentation Control THIS IS VERY IMPORTANT!!! How: §  Use ECN’s for every change §  Tie to date code / production revision Why: §  You need to know what you’re building §  Sometimes required by regulatory agencies (FDA) §  Helps tie production and/or field failures with potential causes
  26. 26. Overall Supplier Metrics How do know your supplier is doing a good job?
  27. 27. There are many things you could track, but some key metrics to watch over time could be: §  Key subassembly test yield(s) §  Final functional test yield §  Final inspection data / trends §  Ongoing life test results §  On-time shipment record Watch for trends, but also watch for stepwise changes. What should I track?
  28. 28. Other things to watch: §  Customer returns §  Defective vs. non-defective §  Specific failure analysis – design issue or production issue? §  PO lead time §  Long lead parts – shortening lead times can help with inventory management / production forecast shifts §  Keep an eye out for component substitutions, vendor changes, and worker changes. All could be approved, but may have unexpected results. What should I track?
  29. 29. Other Thoughts
  30. 30. Bug Tracking In the course of development of any complex project, the number of bugs that will be found will be a large number. The iRobot Scooba had to eliminate > 1,100 bugs in the last six weeks before production start. If you miss even one significant bug, then you can fail to meet your quality requirements, and could cause a significant safety problem
  31. 31. Key Points: §  Test thoroughly Emphasize functionality and robustness §  Track *all* bugs You can’t afford to even let one slip through §  Fix everything In the vast majority of cases, any test you can afford to do (as constrained by cost and time), will generate a short enough list of bugs that you have to fix all of them in order to meet your targets. Bug Tracking
  32. 32. No product is perfect, and you will have failures before and after the product is in the field. Allocate allowed failure rates to different components and systems, within economic and safety constraints. Allow for unanticipated failures. Tangent: Failure Budgeting Quiz What is a realistic expected failure rate for a product headed for retail?
  33. 33. Example: Typical consumer product (vacuum cleaner) §  The allowed rate of retail returns is 4% - how is this broken down? §  Non-defective returns are estimated to be 2.4% (60%) §  Defective returns are estimated to be 1.6% (40%) §  0.55% is budgeted for unanticipated problems §  0.65% is budgeted for factory quality, per AQL levels §  0.40% is left over for actual defects that occur during the warranty Failure Budgeting
  34. 34. Failure Budgeting Component Budgeted Warranty Failure Rate Suction Motor 0.05% Brush Motor 0.10% Belt 0.05% AC Cord 0.10% Switch 0.05% Hose 0.05% Total 0.40%
  35. 35. Ques%ons?  
  36. 36. Find us at @dragoninnovate /dragoninnovation