Dialexa hosted Dragon Innovation's Co-Founder and CEO Scott Miller in Dallas to give an overview on how to scale hardware companies. This is the presentation from the event February 5, 2014 at Dialexa's headquarters in Dallas.
11. •
•
Unprecedented Global Technology
Innovation
•
Fearless and Connected Entrepreneurs
& Consumers
•
Available Capital
•
Inexpensive Devices, Access & Apps
•
Hardware Wave
Enablers
Nearly Ubiquitous High-Speed Wireless
Access
Ability to Reach Millions of New Users
in Record Time
KPCB DECEMBER 2012
Thursday, February 6, 2014
12
13. PROTOTYPING HAS
NEVER BEEN EASIER
• 3D Printing
• Arduino, Raspberry Pi, Beagle Bone
• TechShop
• GrabCAD, Upverter, GitHub
• SparkFund, Adafruit
• Easier Access to Capital
Thursday, February 6, 2014
14
14. 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)
Thursday, February 6, 2014
15
16. The Product Development Paradigm is Changing
OLD WAY
Build then Sell
NEW WAY
Pre-Sell then Build
Thursday, February 6, 2014
17
17. PRE-SALES ARE
PERFECT FOR HW
• Raise capital
• Validate product / market fit
• Create engaged and passionate
community
• Access media and investors
• Understand build volumes
Thursday, February 6, 2014
18
19. Products Are Raising Serious Amounts Of Capital
Lockitron
$1.3M
$1.4M
$1.96M
$2.3M
$2.3M
$2.4M
$2.7M
$2.9M
$8.5M
$10.4M
LIFX
Elevation
Dock
Canary
Lockitron
WobbleWorks
Oculus Rift
Tile
Formlabs
Ouya
Pebble
EXISTING DRAGON CLIENT
Thursday, February 6, 2014
20
20. But … It Can Go Terribly
Wrong Without:
•
•
•
•
•
Thursday, February 6, 2014
Analysis of COGS and Fixed Costs
Designed for Manufacture and Assembly
Manufacturing Strategy & Schedule
Threshold Analysis
Marketing Strategy
21
21. There Is A Better Way: The Dragon Integrated Approach
DFMA Review, COGS Analysis, Cost
Estimation, Manufacturing Strategy
Platform Optimized For Hardware,
Campaign Strategy, Marketing Execution
Factory RFQ and Selection, Production
Startup, Certifications, On-the-Ground
Far East Project Management
Thursday, February 6, 2014
22
25. Cost of Goods
Sold (COGS)
Thursday, February 6, 2014
• Direct costs for goods produced.
• Does NOT include Tooling.
• Actual price depends on where a
company takes ownership:
- Ex-Factory (XF)
- FOB (add overland transport to
XF)
- Landed (add shipping to FOB)
- Inventory (add warehousing)
• Price will vary by date depending
on running changes,
transportation costs, currency
exchange, commodity costs, etc.
26
26. Very Simple Retail
Costing Model
Sell-Through Price
(Retail Price)
$
Retailer
Gross Profit
Company
Gross Profit
Sell-In Price
(Wholesale Price)
COGS
COGS
Thursday, February 6, 2014
27
27. COGS Drivers
YOUR DESIGN
• Material and Component Selection
• Fabrication Method
Manufacturing Efficiency (First
Time Yield, machine tonnage,
assembly labor, number of
operations, etc.)
• Quality Requirements (driven by
requirements / Voice of Customer)
• Packout (replaceable vs.
rechargeable batteries; packaging;
spares, etc.)
•
Thursday, February 6, 2014
MANUFACTURING PARTNER
•BOM Transparency
•Profit Margin
•Labor Rate
•Currency
•Geographic Location (shipping,
tariffs, etc.)
•Capability (in-house vs.
outsourced)
•Supply Chain (Purchasing Power,
volume (piggy back), Consigned vs
Purchased, etc).
28
28. Controlling Costs
1.Deconstruct
the
BOM.
2.Separate
special
components.
3.Transparency
4.Compare
to
standards.
5.NegoAate
Inclusions
Thursday, February 6, 2014
29
29. COGS Strategies
•When
manufacturing
in
volume
for
a
CE
product,
it
is
cri8cal
to
understand
and
control
COGS.
Focus
here!
Because
of
the
volume,
every
penny
counts
($10k
@
1M
units)
•Calculate
labor
rates.
Pop
Quiz
–
How???
•Bill
of
Material
Transparency:
Require
factories
to
provide
an
item
by
item
costed
BOM.
No
mysteries
or
hidden
formulas.
•Build
a
“Standard
Cost”
database.
Price
out
cost
reduc8ons.
•If
8me
permits,
develop
rela8onships
with
mul8ple
vendors
to
avoid
single
source
suppliers.
Leverage
is
a
beau8ful
word.
Thursday, February 6, 2014
30
31. How to Calculate Plastic Costs
• Does it matter that it is a gear???
• Components (3)
1. Material Cost
= Part Weight * Resin Cost
2. Machine Overhead:
= Hourly Cost * Cycle Time (sec) / (3,600 sec / hr)
3. Factory Mark-up, Scrap and Overhead (%)
• Total Part Cost:
= (Material Cost + Overhead Cost) * (1+Factory M/U)
Thursday, February 6, 2014
32
32. HK Resin Prices (USD/Ton)
Reference: http://www.nhh.com.hk/eng/trading/price_trend.asp
(you will need to create a login)
Thursday, February 6, 2014
33
33. Typ. PRC Molding Rates
Item
280 Ton / hr
$15.48
220 Ton / hr
$10.96
180 Ton / hr
$8.38
140 Ton / hr
$7.09
100 Ton / hr
$5.80
80 Ton / hr
Thursday, February 6, 2014
Cost (USD)
$5.16
34
34. How to Calculate EE Costs
• Cost = Component * Usage
• Separate high cost components over a certain
threshold. Apply a lower mark-up.
• Apply Factory M/U
Thursday, February 6, 2014
35
35. Typical PRC CM Margins
(Profit, Scrap, Overhead)
PCBA
6–8%
Thursday, February 6, 2014
Toys
12%
Consumer
Medical
15%
>40%
36
39. Quality
Defini&ons:
•Quality
=
Customer
Sa&sfac&on
=
Performance
–
Expecta&ons
•“Fitness
for
Use”
•Incoming
Quality
Control:
Use
good
ingredients.
•Build
and
test
along
the
way.
Use
sub-‐components.
•Sta&s&cal
Process
Control
(SPC)
/
Yield.
Find
out
now,
not
later.
•Sample
Tes&ng:
Temp/Humidity;
Transporta&on;
Drop;
T/T;
Small
Parts;
Heavy
Metals;
Compliance;
Func&onal;
Life.
How
do
tests
match
reality?
ISTA-‐2A.
•Final
Inspec&on
/
Acceptable
Quality
Levels
(AQL)
•Walk
the
line.
Get
your
hands
dirty.
•It
is
much
easier
(and
less
expensive)
to
make
changes
before
Produc&on
Start.
•What
happens
if
something
fails?
•Will
make
or
break
a
product
…
and
a
Company!
•Quality
is
rarely
considered
in
the
engineering
phase
by
startups
due
to
schedule,
cost
and
technical
pressures.
•Watch
out
for
the
Unknown
Unknowns.
•Strong
indicator
of
long
term
success,
etc.
•Can
you
answer
the
ques/on
“How
do
you
know
the
product
is
good”?
Thursday, February 6, 2014
40
41. Schedule
•Many
consumer
products
are
driven
by
the
Christmas
(which
has
a
fixed
date).
•Plan
con&ngency
in
your
schedule.
Things
never
go
according
to
plan.
•Have
an
onsite
presence.
•Track
schedule
carefully
and
take
correc&ve
ac&ons
early.
•Avoid:
“There
is
never
&me
to
do
it
right
the
first
&me,
but
there
is
always
&me
to
do
it
again.
”
Thursday, February 6, 2014
42
42. The Road to Production
Thursday, February 6, 2014
43
43. 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)
Thursday, February 6, 2014
‣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
44