How To Select A Factory - Hardware Workshop Toronto - May 2, 2014

DRAGON INNOVATION, INC. !

HOW TO SELECT A FACTORY !

MAY 2ND, 2014 HW WORKSHOP | TORONTO

!!!!!

WILLIAM DRISLANE | VP ENGINEERING | @DRAGONINNOVATE | WWW.DRAGONINNOVATION.COM

mailto:[email protected]

Overview• Please Interrupt with Questions / Comments. • Quick Survey • Dragon Background • Where to Build • CM Selection Process (RFQ) • Q&A

SURVEY

Why Does It Matters What Factory You Pick?

Agenda

5

Selected Companies We’ve HelpedWHO WE’VE HELPED

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

Agenda

8

Dragon Crowdfunding

9

•COGS & Tooling Estimation •DFMA •Funding Threshold Calculation •Production Strategy & Scheduling •Marketing Strategy •Connections

STEP 1: DECIDE WHERE TO BUILD

Examples to Talk Through

China?

13

Current Chinese Landscape 1. Low Labor Costs

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Current Chinese Landscape 2. Local, Robust, Highly Concentrated Supply Chain

http://supplychaindigital.com


15

Current Chinese Landscape 3. Expert Domain Knowledge



16

Current Chinese Landscape 4. Great Manufacturing Infrastructure


http://skeptically.org



17

Current Chinese Landscape 5. Great Transportation Infrastructure


http://skeptically.org



18

Current Chinese Landscape 6. Its Very Far Away


http://skeptically.orghttp://studentuniverse.com




19

Current Chinese Landscape 7. Significant Language / Cultural Barrier


http://skeptically.orghttp://studentuniverse.com

http://asiasociety.org





20

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 to manufacture and assemble

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Yes! Manufacture in China If Your Product... 3. Requires high production volumes (>5k units per order)

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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 of variations in 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://plasticstoday.com




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Yes! Manufacture in China If Your Product... 7. Has “physically” protectable IP




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Upcoming Concerns in China 1. Rising Exchange Rate

http://en.wikipedia.org

http://en.wikipedia.org/wiki/M4_Sherman

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Upcoming Concerns in China 2. Rising Wages



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Upcoming Concerns in China 4. Political Relationships



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Upcoming Concerns in China 5. X-Factor Concerns



USA?

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Yes! Manufacture in the US If Your Product... 1. Can be manufactured and assembled through automation




33

Yes! Manufacture in the US If Your Product... 2. Is sensitive to shipping time and expense




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Yes! Manufacture in the US If Your Product... 4. Requires low volumes


http://www.theguardian.com



http://www.theguardian.com/business/2013/may/05/rolls-royce-clear-air-executive-resigns

35

Yes! Manufacture in the US If Your Product... 4. Has difficult-to-protect IP


http://www.independent.co.uk



http://www.independent.co.uk/news/business/analysis-and-features/the-art-of-industrial-espionage-7782482.html

36

Yes! Manufacture in the US If Your Product... 5. Requires non-standard capital equipment

http://scientificmachining.com

http://scientificmachining.com/laserwelding.html

37

Yes! Manufacture in the US If Your Product... 6. Is part of a government contract



STEP 2: REQUEST FOR QUOTE / CM SELECTION*

!

!

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*THE MOST IMPORTANT MANUFACTURING DECISION YOU’LL MAKE

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Overview of the CM Selection Process


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 following 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


•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


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RFQ Release


•Down select to 3-5 CM’s (why?) •NDA •RFQ Release & Follow up •Factory Visit


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Factory Visit Checklist


Do you like the team? Are they experienced and friendly? Do they make similar products? Competitor’s are a no-no. 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)


•Total Material Costs •Labor •Margins/Markup (Std, Special, Consigned) •Pareto of Top 5 Most Expensive Components •Fixed Costs (tooling, fixtures, NRE) •Schedule •Fit Criteria


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CM Selection


•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


"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?

Technology

How To Select A Factory - Hardware Workshop Toronto - May 2, 2014