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Why Is Manufacturing Difficult?


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Dragon Innovation's, Dr. Anna C. Thornton, reviews the inherent challenges of manufacturing, specifically as it pertains to Hardware/Consumer Electronics products. Planning, production phases, factory selection, quality planning & testing, and much more are included in this overview. This lecture took place as part of MIT's brand new IDM program in February 2016.

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Why Is Manufacturing Difficult?

  1. 1. @dragoninnovate / WHY IS MANUFACTURING DIFFICULT? DR. ANNA C. THORNTON MIT February 17, 2016
  2. 2. LEARNING OBJECTIVES Understand the process of going from a works like/looks like prototype to a saleable unit. Cost, quality, and schedule challenges. Why this isn’t easy.
  4. 4. We are going to make something as insanely complex as manufacturing consumer electronics feel easy. DRAGON’S VISION
  6. 6. What Is The Hardware Revolution? Access to capital (Kickstarter) Barriers to entry have come down…anyone can develop a product CM’s taking on small start ups, small flexible cells Diverse teams that can be dynamically built (Linked in) CAD tools available on the cloud (Sktechup/ Grabcad) Manufacturing expertise productized (Protomold) Rapid prototying, 3D printing, Arduino Online marketing and market validation (Youtube, Videos) Bypass distributors and retail (Web-based) Cloud based operational software (Google docs, Dragon Standard BOM) $
  7. 7. 7 Why is the HW revolution relevant to all companies? The hardware revolution is a collection of disruptive technologies that enable small companies to behave like big ones. Thousands of appropriately sized and capable factories worldwide Thousands of hardware products will launch this year
  8. 8. Operational Changes Quality requirements Regulatory oversight Customization Globalization Speed of product introductions Supply chain complexity Product variants Supply chain depth Technology partners More Complex Products with Fewer Resources Technology Changes Hydraulics Disc brakes Electronic shifters Composite frame Aerodynamic modeling Built in power meters with wireless Advanced manufacturing Tighter tolerances Bikes as Fashion Ti, Al, composite components Weight reduction
  10. 10. Test and refine and mfg. ramp are complex multi-disciplinary activities that can make or break your product PRODUCT DEVELOPMENT PROCESS Concep t System level design Detail design Test and refine Mfg. Ramp up Mfg.
  11. 11. Works-Like Looks-Like What does it take to get to a saleable unit? What else has to be engineered? What tasks need to be done? How long does it take? How much cash will it take?
  12. 12. Manufacturing activities not explicit PRODUCT DEVELOPMENT FROM THE POINT OF VIEW OF THE HARDWARE ENTREPREUR *Ben Einstein’s Blog “Illustrated Guide to Product Development
  13. 13. *Ben Einstein’s Blog “Illustrated Guide to Product Development Three phases of production Pre-manufacturing Production ramp Ongoing Production
  14. 14. The iterations and interactions are too complicated to draw… Multiple critical activities in each phase Pre-mfg Mfg ramp Ongoing Production *Ben Einstein’s Blog “Illustrated Guide to Product Development
  15. 15. DFX Your beautifully designed product probably can’t be built. MANUFACTURING IS A COMPLEX BUSINESS Exactingly detailed process fraught with decisions that cast a long shadow once set • Design for assembly • Design for IM • Design for testing • Design for cost • Design for variability Supplier selection: Choosing a CM is only the first step. • Cost drivers • Trust and capability • MOQ, terms • Tooling cost • Tooling schedule • Quality capability • COTS vs. custom Quality Systems: It won’t work right the first time • Functional testing • Life testing • Certification • Durability testing • Transportation • Safety • Board level tests • Shipment audits Forecasting and planning: You need to order long before you need the product • How to plan a forecast for a product before you understand the market • Tradeoff of MOQ and capital costs • Terms will influence ordering • Risk buys • Long lead items • Spares and replacements • Cash flow (huge amount before you get a check!)
  16. 16. Serious HW chops Best customers Big vision About to stomp on gas COMMON MISTAKES • This will be easy / short • CM is a glorified 3D printer • I can get Apple pricing & quality • I have enough cash • We can do this in 4 months
  17. 17. What variables matter? Keys to a good RFQ Selecting a CM Partner You are going to have to live with them a long time…. Cost of goods Terms Quality Experience Size (small fish big pond vs. bfsp) Equipment Investments NRE terms On-site capability Key suppliers/partners Need to sell yourself The more you detail the RFQ, the better Require an OPEN BOOK RFQ Clear about RASI Define quality requirements Clear warranty targets and AQL CM not signed until all negotiations are finished There is no “best” CM, it is a process of matching their skills to your needs
  18. 18. • Design for X • Manufacture. Produced reliably with a high yield • Assembly. Assembled efficiently with high yield? • Cost. Remove extra parts, combine parts, tooling? • Durability and reliability • Is your PCBA designed for reliability • Is your software reliable? Do you have the right test suites? • Have you thought about mechanical durability and life time performance? • Sourcing • Can you get OTS parts or do you need custom? • Packaging? • What else is included (spares, batteries, install hardware, cables, inserts, etc)? GETTING YOUR PRODUCT READY FOR PRODUCTION
  20. 20. 8 Kickoffproject SelectCMandaward MSA Projectkick-off 4 RFQreleased Clientvisit RFQnegotiations Toolmodscomplete Toolingrelease Toolingstart Firstshots 7 45 EP1/EVTcomplete EP2/DVT1complete FEP/DVT2complete PPcomplete 5 3 2 Productionstart Shipmentaudit/Exfactory ShipmentarrivesUS Inthehandsofcustomer 4 TYPICAL CRITICAL PATH 46 weeks Pre-prod.eng.finished 4 DFMactivities Long MSA negotiations Late design release Custom designed components Certification, MA, Late design changes, Life testing, Packaging Material shortages
  21. 21. PILOT / VALIDATION CYCLES EP/EVT - Engineering pilot / Engineering Validation Test: Build and test several units that function as expected. Learn about new requirements from users. EP/DVT - Design Validation Test: Build and test more units that function as expected and have close to the final aesthetic. Learn what need to be tweaked in the the design. FEP/ PVT - Production Validation Test: Build and test a lot of units that that function as expected, final ID , and can be assembled and tested. Learn what need to be fixed in production system.
  22. 22. What Numbers Matter? PER UNIT COST Cost of ex-factory product Sale price Mark up/profit Consigned/assigned/CM Shipment INVESTMENT NRE Time Capital costs ON GOING Cost down rate Warranty rates CASH FLOW MA – Long lead items Consigned parts Payment terms (CM) Payment terms (retail) PO timing Inventory
  23. 23. Engineering Pilot runs/samples Tooling Testing/testing equipment Production line fixtures and test fixture Certifications Non Recurring Engineering (NRE)
  24. 24. COGS Company gross profit Retailer Gross profit Materials Labor Markup/Profit Scrap Packaging Warranty Customs/Shipping PRICE BREAK DOWN Amazon – 15%, Walmart – 32%. Nieman Marcus 65% Apple ~50% Laptops ~25% 5% of sales $0.3 to $2.00 1.5-3% of Material 9% - 25% of Materials/Labor $0.50-$5 Accessories $0.50-$5 Saleprice 10% of total
  25. 25. SUPPLY CHAIN PLANNING • Consigned vs. non-consigned • You don’t pay the overhead but you need to pay ahead • Material planning overhead • Purchase orders • Inventory vs. lost sales. You need to determine your orders ahead • Terms • Is 15% vs. 20% better or is a $1 better • Impact of long lead parts • Cost down impact
  26. 26. How to tradeoff MSA terms • 12% Markup & 50% at PO 50% at ship • 20% Markup & 20% at PO 30% at production and 50% at ship. Consigned vs. Assigned • $3 part. • Consigned • 3% consigned MVA • 100% due on PO for part if consigned • Normal non-consigned • 15% assigned MVA • 50% / 50%
  27. 27. TYPICAL PRC CM MARGINS (Profit, Scrap, Overhead) PCBA 6-8% TOYS 12% CONSUMER 15% MEDICAL >40%
  28. 28. Dragon provides the fastest, simplest, and safest way to manufacture electronics at scale. From Dragon Certified pre-launch to our Manufacturing Solutions when you move into production, we can help every step of the way as you bring your product to life. We've refined our process by working with hundreds of customers to produce millions of complex, innovative products and provide you with the tools and knowledge to go from prototype to production. THE DRAGON STANDARD BOM Google Sheets Add-on | Easy to Follow Format | Data Validation Utility Flat BOM Function | Pre-Formatted Reports
  29. 29. Did you design the right product? Did you build the product right? What is quality? Does it meet or exceed customer expectations? Is the industrial design done right? Does it meet the needs well? Did you deliver what you promised? Is the “feel” right? Can it be installed and set up easily? Is it designed to hold up to use? …. Are the parts high quality (no flash or sink marks)? Does it have any unexpected behaviors? Do the components perform as expected? Is it durable? Are there intermittent failures? ….. MUST MEET ALL LOCAL, STATE, AND COUNTRY REGULATIONS
  30. 30. • Test early and often. Better you find it than your customers • Planning for quality early will highlight: • What you should be designing for • How long life testing will take • How many samples you need • Testing fixtures can take a long time to design and debug • If quality planning to CM, you limit your control of quality later. • Life testing takes a lot longer than you think • You need to test to a much more rigorous level than you think to ensure low returns (10 units for 4 warranty periods to ensure a low return rate) Quality planning: The earlier the better
  31. 31. Types of testing Development testing • Verification and validation • Transportation • Certification • Durability • Life • ISTA Line testing • ICQ • PCBA • ICT • Optical inspection • Functional testing • 100% functional testing • SPC on critical stations Post production testing • Shipment audits • Ongoing production testing • Warranty tracking
  32. 32. CERTIFICATION What determines certifications • Countries • Volumes • Product category • User profile • Key technology • Distribution Types • Safety certifications. UL, CSA • Environmental. WEEE, Rohs, ErP • Proprietary. Bluetooth, Apple • RF/EMF. FCC, CE • Application specific. Food, building code, medical, child toys, lasers
  33. 33. WHAT IS IN A QUALITY PLAN? • AQL • Functional testing • Durability • Life testing • Verification/Validation • Inspection criteria • Certification • PCB Testing • SPC • Shipment audits • Process control and set up
  34. 34. Life testing Target Rate 6% Non-defective Runs 60% of total return rate (3.6%) Defective runs 40% of Target (2.4%) Unanticipated (1/3 of all returns (0.8%) Factory AQL (0.65%) TARGET (0.95%) Set the sample sizes and warranty periods to get certainty that you haven’t found a problem Example: 10 units for 4 warranty periods to get sufficient confidence
  35. 35. Exercise • Disassemble the packaging. • What are the decisions that need to be made? • Cost, quality, schedule, etc. • Who is involved? • What decisions need to be made about cost? • What are the schedule issues, what are long lead items/critical path? 35
  36. 36. Find us at @dragoninnovate /dragoninnovation