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How To Pick A Factory - Y Combinator - 01_15_15

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This presentation covers the hardware journey, why hardware is so hard, and how to select the right factory for your hardware product.

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How To Pick A Factory - Y Combinator - 01_15_15

  1. 1. DRAGON INNOVATION, INC. ! HOW  TO  PICK  A  FACTORY  ! ! Y COMBINATOR JANUARY 15, 2015 ! ! ! ! ! ! ! SCOTT N. MILLER | CEO | @DRAGONINNOVATE | WWW.DRAGONINNOVATION.COM
  2. 2. 2 Presentation Download http://bit.ly/pick-factory-ycombinator
  3. 3. 3 Agenda http://en.wikipedia.org •Quick Survey •Our Hardware Journey •Why HW is Hard •How to Pick a Great Factory •Q & A
  4. 4. Quick Survey 4
  5. 5. Our Journey into HW 5
  6. 6. MIT RoboTuna 6
  7. 7. Agenda 7
  8. 8. Robotic Corvette Powered Dino 8
  9. 9. Agenda 9
  10. 10. Initial iRobot Expertise (Revenue) 10
  11. 11. Journey from $100,000 to $100 Price 11
  12. 12. My Real Baby ~ 100k 12 Velociraptor ~100k +
  13. 13. 13 Roomba and Scooba
  14. 14. Agenda 14
  15. 15. We are going to take something as insanely complex as manufacturing consumer electronics and make it feel easy. VISION
  16. 16. DRAGON INNOVATION HAS HELPED LAUNCH AND SCALE OVER 100 COMPANIES SINCE 2009
  17. 17. Bolt
  18. 18. Bolt
  19. 19. Manufacturing is Complex
  20. 20. Why Delivering Is Hard Getting from prototype to delivery 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)
  21. 21. HOW TO PICK A GREAT FACTORY ! STEP 1: DECIDE WHERE TO BUILD
  22. 22. Examples to Talk Through
  23. 23. China?
  24. 24. 26 Yes! Manufacture in China If Your Product... Is COGS (Cost of Goods Sold) sensitive
  25. 25. 27 Yes! Manufacture in China If Your Product... Requires higher production volumes (>10k units)
  26. 26. 28 Yes! Manufacture in China If Your Product... Requires significant manual labor to manufacture and assemble
  27. 27. 29 Yes! Manufacture in China If Your Product... Uses existing manufacturing technology (i.e. injection molding, etc) http://berkeleysg.com
  28. 28. 30 Yes! Manufacture in China If Your Product... Is tolerant of variations in supply chain and logistics http://berkeleysg.com http://kilterpulse.com
  29. 29. 31 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
  30. 30. 32 Yes! Manufacture in China If Your Product... Has “physically” protectable IP http://berkeleysg.com http://kilterpulse.com
  31. 31. China Drawbacks for Manufacturing
  32. 32. 34 China Drawback Significant Distance from USA http://supplychaindigital.com http://skeptically.orghttp://studentuniverse.com
  33. 33. 35 China Drawback Significant Language Barrier http://supplychaindigital.com http://skeptically.orghttp://studentuniverse.com http://asiasociety.org
  34. 34. 36 China Wages Rising Wages http://en.wikipedia.org
  35. 35. 37 China Concern Rising Exchange Rate http://en.wikipedia.org
  36. 36. USA?
  37. 37. 39 Yes! Manufacture in the US If Your Product... Requires low volumes http://berkeleysg.com http://kilterpulse.com http://www.theguardian.com
  38. 38. 40 Yes! Manufacture in the US If Your Product... Can be manufactured and assembled through automation http://berkeleysg.com http://kilterpulse.com
  39. 39. 41 Yes! Manufacture in the US If Your Product... Is sensitive to shipping time and expense http://berkeleysg.com http://kilterpulse.com
  40. 40. 42 Yes! Manufacture in the US If Your Product... Has difficult-to-protect IP http://berkeleysg.com http://kilterpulse.com http://www.independent.co.uk
  41. 41. 43 Yes! Manufacture in the US If Your Product... Requires non-standard capital equipment http://scientificmachining.com
  42. 42. 44 Yes! Manufacture in the US If Your Product... Is part of a government contract http://en.wikipedia.org
  43. 43. STEP 2: REQUEST FOR QUOTE / CM SELECTION* ! ! ! *THE MOST IMPORTANT MANUFACTURING DECISION YOU’LL MAKE
  44. 44. 46 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.
  45. 45. 47 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
  46. 46. 48 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?
  47. 47. 49 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
  48. 48. 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, "Mr. China", Tim Clissold:  Older Humorous Memoir Of One Of The First Westerners To
  49. 49. 51 Questions? http://en.wikipedia.org Feel free to reach out! www.dragoninnovation.com scott@dragoninnovation.com @dragoninnovate

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