how to pick a factory - y combinator - 01_15_15
TRANSCRIPT
DRAGON INNOVATION, INC. !
HOW TO PICK A FACTORY !!
JANUARY 15, 2015 !!!!!!!
SCOTT N. MILLER | CEO | @DRAGONINNOVATE | WWW.DRAGONINNOVATION.COM
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Agenda
http://en.wikipedia.org
•Quick Survey
•Our Hardware Journey
•Why HW is Hard
•How to Pick a Great Factory
•Q & A
Quick Survey
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Our Journey into HW
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MIT RoboTuna
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Agenda
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Robotic Corvette Powered Dino
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Agenda
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Initial iRobot Expertise (Revenue)
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Journey from $100,000 to $100 Price
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My Real Baby ~ 100k
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Velociraptor ~100k
+
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Roomba and Scooba
Agenda
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We are going to take something as insanely
complex as manufacturing consumer electronics and
make it feel easy.
VISION
DRAGON INNOVATION HAS HELPED LAUNCH AND SCALE OVER 100 COMPANIES SINCE 2009
Bolt
Bolt
Manufacturing is Complex
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)
HOW TO PICK A GREAT FACTORY
!
STEP 1: DECIDE WHERE TO BUILD
Examples to Talk Through
China?
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Yes! Manufacture in China If Your Product... Is COGS (Cost of Goods Sold) sensitive
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Yes! Manufacture in China If Your Product... Requires higher production volumes (>10k units)
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Yes! Manufacture in China If Your Product... Requires significant manual labor to manufacture and assemble
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Yes! Manufacture in China If Your Product... Uses existing manufacturing technology (i.e. injection molding, etc)
http://berkeleysg.com
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Yes! Manufacture in China If Your Product... 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... Can benefit from low cost Design for Manufacturing (DFM) Non-recurring Engineering (NRE)
http://berkeleysg.comhttp://kilterpulse.com
http://plasticstoday.com
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Yes! Manufacture in China If Your Product... Has “physically” protectable IP
http://berkeleysg.comhttp://kilterpulse.com
China Drawbacks for Manufacturing
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China Drawback Significant Distance from USA
http://supplychaindigital.com
http://skeptically.orghttp://studentuniverse.com
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China Drawback Significant Language Barrier
http://supplychaindigital.com
http://skeptically.orghttp://studentuniverse.com
http://asiasociety.org
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China Concern Rising Exchange Rate
http://en.wikipedia.org
USA?
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Yes! Manufacture in the US If Your Product... Requires low volumes
http://berkeleysg.comhttp://kilterpulse.com
http://www.theguardian.com
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Yes! Manufacture in the US If Your Product... Can be manufactured and assembled through automation
http://berkeleysg.comhttp://kilterpulse.com
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Yes! Manufacture in the US If Your Product... Is sensitive to shipping time and expense
http://berkeleysg.comhttp://kilterpulse.com
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Yes! Manufacture in the US If Your Product... 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... Requires non-standard capital equipment
http://scientificmachining.com
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Yes! Manufacture in the US If Your Product... 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. 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.
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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/Markups -Include all costs to Ex-Factory -Fill in the blanks
•Schedule -Gantt chart (Cloud) -Fill in the blanks
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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?
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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
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
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Questions?
http://en.wikipedia.org
Feel free to reach out!
www.dragoninnovation.com
@dragoninnovate