why is manufacturing difficult?
TRANSCRIPT
@dragoninnovate /dragoninnovationwww.dragoninnovation.com
WHY IS MANUFACTURING DIFFICULT?
DR. ANNA C. THORNTON
MIT February 17, 2016
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.
BEFORE DRAGON
We are going to make something as insanely complex as manufacturing consumer electronics feel easy.
DRAGON’S VISION
WHO WE’VE HELPED
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
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
Operational ChangesQuality requirementsRegulatory oversight
CustomizationGlobalization
Speed of product introductionsSupply chain complexity
Product variants Supply chain depthTechnology partners
More Complex Products with Fewer Resources
Technology ChangesHydraulicsDisc brakes
Electronic shiftersComposite frame
Aerodynamic modelingBuilt in power meters with
wirelessAdvanced manufacturing
Tighter tolerancesBikes as FashionTi, Al, composite
componentsWeight reduction
Optimistic but inexperienced teams risk getting ahead of themselves
PERCEIVED VS ACTUAL TIMELINES
IDEA DELIVERCROWDFUND MANUFACTUREPROTO
X Y ZK L M N O P Q R S T U V WG H I J C D E FA B
IDEA DELIVERCROWDFUNDPROTO
W X YR S T U VC D E F G H I J K L M N O P Q A B Z
MANUFACTURE
Test and refine and mfg. ramp are complex multi-disciplinary activities that can make or break your product
PRODUCT DEVELOPMENT PROCESS
Concept
System
level design
Detail design
Test and
refine
Mfg. Ramp
upMfg.
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?
Manufacturing activities not explicit
PRODUCT DEVELOPMENT FROM THE POINT OF VIEW OF THE HARDWARE ENTREPREUR
*Ben Einstein’s Blog “Illustrated Guide to Product Development”
*Ben Einstein’s Blog “Illustrated Guide to Product Development”
Three phases of production
Pre-manufacturing
Production ramp Ongoing Production
The iterations and interactions are too complicated to draw…
Multiple critical activities in each phase
Pre-mfg Mfg ramp Ongoing Production
Part
Sourci
ng
Functi
onal
test d
evelo
pment
Durabilit
y and
Life
testin
g
Producti
on fo
reca
st an
d mate
rial p
lanning
Troub
lesho
oting an
d CA
Shipmen
t audits
Ongoing co
st red
uction
s
Troub
lesho
oting an
d CA
Reneg
otiati
ng M
SA
Quality
impro
vemen
ts
Warran
ty an
alysis
Facto
ry Aud
its
*Ben Einstein’s Blog “Illustrated Guide to Product Development”
Cost e
stimate
s
DFM re
view
Quality
planning
RFQ an
d Facto
ry Sele
ction MSA
Custom part
sour
cing
DFXYour beautifully designed product
probably can’t be built.
MANUFACTURING IS ACOMPLEX 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!)
Serious HW chopsBest customers
Big visionAbout 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
What variables matter? Keys to a good RFQ
Selecting a CM PartnerYou are going to have to live with them a long time….
Cost of goodsTermsQuality
ExperienceSize (small fish big pond vs.
bfsp)Equipment InvestmentsNRE terms
On-site capabilityKey suppliers/partners
Need to sell yourselfThe more you detail the RFQ, the
betterRequire an OPEN BOOK RFQ
Clear about RASIDefine quality requirements
Clear warranty targets and AQLCM not signed until all negotiations
are finished
There is no “best” CM,it is a process of matching their skills to your
needs
• 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
MANUFACTURING TRIANGLE
SCHEDULE
QUALITYCOST
8
Kick
off
proj
ect
Sele
ct C
M a
nd a
ward
MSA
Proj
ect k
ick-o
ff
4
RFQ
rele
ased
Clie
nt v
isit
RFQ
nego
tiatio
ns
Tool
mod
s com
plet
e
Tool
ing
rele
ase
Tool
ing
star
t
First
shot
s
7 45
EP1/
EVT
com
plet
e
EP2/
DVT1
com
plet
e
FEP/
DVT2
com
plet
e
PP c
ompl
ete
5 3 2
Prod
uctio
n st
art
Ship
men
t aud
it/Ex
fact
ory
Ship
men
t arri
ves U
SIn
the
hand
s of c
usto
mer
4
TYPICAL CRITICAL PATH46 weeks
Pre-
prod
. eng
. fini
shed
4
DFM
act
iviti
es
Long MSA negotiations
Late design release
Custom designed
components
Certification, MA, Late design changes, Life testing, Packaging
Material shortages
Many issues can delay schedule
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.
What Numbers Matter?PER UNIT COST
Cost of ex-factory productSale price
Mark up/profitConsigned/assigned/CM
Shipment
INVESTMENT
NRETime
Capital costs
ON GOING
Cost down rateWarranty rates
CASH FLOW
MA – Long lead itemsConsigned parts
Payment terms (CM)Payment terms (retail)
PO timingInventory
Engineering
Pilot runs/samples
Tooling
Testing/testing equipment
Production line fixtures and test fixtureCertifications
Non Recurring Engineering (NRE)
COGS
Company gross profit
Retailer Gross profit
Materials
Labor
Markup/Profit
ScrapPackaging
WarrantyCustoms/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-$5Accessories $0.50-$5
Sale
pric
e
10% of total
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
How to tradeoffMSA 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%
TYPICAL PRC CM MARGINS(Profit, Scrap, Overhead)
PCBA
6-8%
TOYS
12%
CONSUMER
15%
MEDICAL
>40%
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
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
• 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
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
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
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
Life testingTarget 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 problemExample: 10 units for 4 warranty
periods to get sufficient confidence
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
Find us at DragonInnovation.com
@dragoninnovate /dragoninnovation