How to Select a Factory - Bolt Boston Hardware Bootcamp - March 2014
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Transcript of How to Select a Factory - Bolt Boston Hardware Bootcamp - March 2014
DRAGON INNOVATION, INC. !
HOW TO SELECT A FACTORY !
MARCH 28, 2014 BOLT | BOSTON
!!!!!
SCOTT N. MILLER | CEO | @DRAGONINNOVATE | WWW.DRAGONINNOVATION.COM
Overview• Please Interrupt with Questions / Comments. • Quick Survey • Dragon Background • Where to Build • CM Selection Process (RFQ) • Q&A
SURVEY
Why It Matters What Factory You Pick
Agenda
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Selected Companies We’ve Helped
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•COGS & Tooling Estimation •DFMA •Funding Threshold Calculation •Production Strategy & Scheduling •Marketing Strategy •Connections
Agenda
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Dragon Crowdfunding
DRAGON MANUFACTURING SERVICES Focus on what you do best. Benefit from real-time responses, improved
quality, higher efficiencies and easier communications.
•Factory Selection & Vetting •Preparation of Request for Quote(RFQ)
package •Quote comparison / Apples-to-Apples
analysis •Far East and US location support
FACTORY SELECTION SERVICES
• Factory contract negotiation •On-site support with dedicated Project
Management •Schedule and budget planning •Independent inspections and factory oversight •Certification process coordination and
assistance •Iterative design reviews •Component sourcing assistance •Total product lifecycle cost reduction •Creation and implementation of quality plan •Schedule negotiation / acceleration •Sustaining engineering strategies •Rapid response / “fire fighting” •Factory relationship management
PROJECT MANAGEMENT
STEP 1: DECIDE WHERE TO BUILD
Examples to Talk Through
China?
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Current Chinese Landscape 1. Low Labor Costs
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Current Chinese Landscape 2. Local, Robust, Highly Concentrated Supply Chain
http://supplychaindigital.com
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Current Chinese Landscape 3. Expert Domain Knowledge
http://supplychaindigital.com
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Current Chinese Landscape 4. Great Manufacturing Infrastructure
http://supplychaindigital.com
http://skeptically.org
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Current Chinese Landscape 5. Great Transportation Infrastructure
http://supplychaindigital.com
http://skeptically.org
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Current Chinese Landscape 6. Its Very Far Away
http://supplychaindigital.com
http://skeptically.orghttp://studentuniverse.com
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Current Chinese Landscape 7. Significant Language / Cultural Barrier
http://supplychaindigital.com
http://skeptically.orghttp://studentuniverse.com
http://asiasociety.org
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Yes! Manufacture in China If Your Product... 1. is COGS (Cost of Goods Sold) sensitive
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Yes! Manufacture in China If Your Product... 2. Requires significant manual labor manufacture and assemble
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Yes! Manufacture in China If Your Product... 3. Requires high production volumes (>5k units)
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Yes! Manufacture in China If Your Product... 4. Uses existing manufacturing technology (i.e. injection molding, etc)
http://berkeleysg.com
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Yes! Manufacture in China If Your Product... 5. Is tolerant to supply chain and logistics
http://berkeleysg.comhttp://kilterpulse.com
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Yes! Manufacture in China If Your Product... 6. Can benefit from low or no cost Design for Manufacturing and Assembly (DFMA) Non-recurring Engineering (NRE)
http://berkeleysg.comhttp://kilterpulse.com
http://plasticstoday.com
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Yes! Manufacture in China If Your Product... 7. Has “physically” protectable IP
http://berkeleysg.comhttp://kilterpulse.com
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Upcoming Concerns in China 1. Rising Exchange Rate
http://en.wikipedia.org
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Upcoming Concerns in China 2. Rising Wages
http://en.wikipedia.org
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Upcoming Concerns in China 4. Political Relationships
http://en.wikipedia.org
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Upcoming Concerns in China 5. X-Factor Concerns
http://en.wikipedia.org
USA?
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Yes! Manufacture in the US If Your Product... 1. Can be manufactured and assembled through automation
http://berkeleysg.comhttp://kilterpulse.com
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Yes! Manufacture in the US If Your Product... 2. Is sensitive to shipping time and expense
http://berkeleysg.comhttp://kilterpulse.com
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Yes! Manufacture in the US If Your Product... 4. Requires low volumes
http://berkeleysg.comhttp://kilterpulse.com
http://www.theguardian.com
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Yes! Manufacture in the US If Your Product... 4. Has difficult-to-protect IP
http://berkeleysg.comhttp://kilterpulse.com
http://www.independent.co.uk
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Yes! Manufacture in the US If Your Product... 5. Requires non-standard capital equipment
http://scientificmachining.com
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Yes! Manufacture in the US If Your Product... 6. Is part of a government contract
http://en.wikipedia.org
STEP 2: REQUEST FOR QUOTE / CM SELECTION*
!
!
!
*THE MOST IMPORTANT MANUFACTURING DECISION YOU’LL MAKE
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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.Create a Request for Quote (RFQ) Package. 4.Down select to 3 - 5 factories based on your product category. 5.Visit! (See checklist on next slide) 6.Talk with the CM’s customers. 7.Negotiate. 8.Select the winner, and leave the others on good terms.
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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 -Include all costs to Ex-Factory -Fill in the blanks
•Schedule -Gantt chart (Cloud) -Fill in the blanks
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RFQ Release
http://en.wikipedia.org
•Down select to 3-5 CM’s (why?) •NDA •RFQ Release & Follow up •Factory Visit
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Factory Visit Checklist
http://en.wikipedia.org
Do you like the team? Are they experienced and friendly? Do they make similar products? 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 ties to the central government (if in PRC)? 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? !!!!
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CM Comparison (A2A Decision Matrix)
http://en.wikipedia.org
•Margins (Std, Special, Consigned) •Labor •Pareto of Top 5 Most Expensive Components •Schedule •Fit Criteria
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CM Selection
http://en.wikipedia.org
•Select Top 2-3 CM’s •Negotiate A2A category by category •Award Project to Winner •Update Others
NEXT STEPS
The Road to Production
Detailed Milestones‣Hand Over / Kick-‐Off
Form CM Team Contact Lists / Roles and Responsibili>es
ME and EE File transfer Works Like / Looks Like Samples CM trip to the US if possible (access to models and team, rela>onship building).
Factory Input Components
Engineering Quality Produc>on Planning (interface with Sales)
Sourcing / MA / Cos>ng Logis>cs Process / Procedure
Financial (modeling and payments)
Pre-‐Produc>on Milestones Tool Release Tool Start (TS) First Shots (FS) Engineering Pilot 1 (EP1) EP2 EP3 Final Engineering Pilot (FEP) Produc>on Pilot (PP)
Produc>on Produc>on Start (PS) Ramp
Engineering Change No>ce (ECN) Sustaining (Quality Up / Cost Down) Sunset
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Suggested Reading for Background on China
http://en.wikipedia.org
"Factory Girls", Leslie Chang !WSJ 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. !!
Questions?