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Hs lab london_150312

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For hardware companies, the journey of going from one to many can be challenging, filled with many unknown unknowns. This presentation reviews the challenges and offers insights into scaling your production.

Published in: Devices & Hardware
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Hs lab london_150312

  1. 1. FROM A WORKING PROTOTYPE TO YOUR FIRST BATCH 101: SCOTT N. MILLER CEO MARCH 12, 2015IMPERIAL COLLEGE LONDON www.dragoninnovation.com @dragoninnovate
  2. 2. No need to take notes HTTP://BIT.LY/HS-LAB-LONDON150312
  3. 3. AGENDA http://en.wikipedia.org •Survey •Our Journey •Cost •Schedule •Quality •Q&A
  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. Roomba and Scooba
  13. 13. We are going to take something as insanely complex as manufacturing consumer electronics and make it feel easy. VISION
  14. 14. BOLT
  15. 15. BOLT
  16. 16. DRAGON INNOVATION HAS HELPED LAUNCH AND SCALE OVER 100 COMPANIES SINCE 2009
  17. 17. Why is Manufacturing Hard?
  18. 18. Hint
  19. 19. 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
  20. 20. STEP 1: Decide Where to Manufacture
  21. 21. EXAMPLES TO TALK THROUGH
  22. 22. CHINA?
  23. 23. YES! MANUFACTURE IN CHINA IF YOUR PRODUCT... Is COGS (Cost of Goods Sold) sensitive
  24. 24. YES! MANUFACTURE IN CHINA IF YOUR PRODUCT... Requires higher production volumes (>10k units)
  25. 25. YES! MANUFACTURE IN CHINA IF YOUR PRODUCT... Requires significant manual labor to manufacture and assemble
  26. 26. YES! MANUFACTURE IN CHINA IF YOUR PRODUCT... Uses existing manufacturing technology (i.e. injection molding, etc) http://berkeleysg.com
  27. 27. YES! MANUFACTURE IN CHINA IF YOUR PRODUCT... Is tolerant of variations in supply chain and logistics http://berkeleysg.com http://kilterpulse.com
  28. 28. YES! MANUFACTURE IN CHINA IF YOUR PRODUCT... Can benefit from low cost Design for Manufacturing (DFM) Non-recurring Engineering (NRE) http://berkeleysg.com http://kilterpulse.com http://plasticstoday.com
  29. 29. YES! MANUFACTURE IN CHINA IF YOUR PRODUCT... Has “physically” protectable IP http://berkeleysg.com http://kilterpulse.com
  30. 30. USA?
  31. 31. YES! MANUFACTURE IN THE US IF YOUR PRODUCT... Requires low volumes
  32. 32. YES! MANUFACTURE IN THE US IF YOUR PRODUCT... Can be manufactured and assembled through automation
  33. 33. YES! MANUFACTURE IN THE US IF YOUR PRODUCT... Is sensitive to shipping time and expense http://berkeleysg.com
  34. 34. YES! MANUFACTURE IN THE US IF YOUR PRODUCT... Has difficult-to-protect IP http://berkeleysg.com http://kilterpulse.com http://www.independent.co.uk
  35. 35. YES! MANUFACTURE IN THE US IF YOUR PRODUCT... Requires non-standard capital equipment
  36. 36. YES! MANUFACTURE IN THE US IF YOUR PRODUCT... Is part of a government contract
  37. 37. STEP 2: Select a Factory (RFQ)
  38. 38. 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. Down select to 3 - 5 factories based on your product category (why?) 4. Create a Request for Quote (RFQ) Package. 5. Visit! 6. Analyze Results. 7. Negotiate Big Items. 8. Talk with the CM’s customers. 9. Select the winner, and leave the others on good terms.
  39. 39. 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
  40. 40. FACTORY VISIT CHECKLIST http://en.wikipedia.org Do you like the team? Are they experienced and friendly? 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 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?
  41. 41. CM COMPARISON (A2A DECISION MATRIX) • Total Material Costs • Labor • Margins/Markup (Std, Special, Consigned) • Pareto of Top 5 Most Expensive Components • Fixed Costs (tooling, fixtures, NRE) • Schedule • Fit Criteria
  42. 42. MANUFACTURING TRIANGLE
  43. 43. 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.
  44. 44. Very Simple Retail Costing Model $ Sell-Through Price (Retail Price) Sell-In Price (Wholesale Price) COGS Retailer Gross Profit Company Gross Profit COGS
  45. 45. 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
  46. 46. CONTROLLING COSTS 1. Deconstruct the BOM. 2. Separate special components. 3. Transparency 4. Compare to standards. 5. Negotiate Inclusions
  47. 47. 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)
  48. 48. 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
  49. 49. • 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
  50. 50. HK Resin Prices (USD/Ton) Reference: http://www.nhh.com.hk/eng/trading/price_trend.asp (you will need to create a login)
  51. 51. 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
  52. 52. 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
  53. 53. Typical PRC CM Margins (Profit, Scrap, Overhead) PCBA 6–8% Toys 12% Consumer 15% Medical >40%
  54. 54. • Deco (Tampo, Paint, etc.) • Labor (PRC $2 – 6 / hr) • Packaging (Gift + Master) Other BOM Costs
  55. 55. Add It Up • Plastic • Purchased Parts • Electrical Components • Consigned Components • Deco • Packaging • Assembly Labor • CM Profit, Overhead and Scrap • Overland Transportation
  56. 56. SCHEDULE
  57. 57. 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. ”
  58. 58. THE ROAD TO PRODUCTION
  59. 59. ‣ 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
  60. 60. QUALITY
  61. 61. • 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
  62. 62. 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.
  63. 63. Questions?

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