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@dragoninnovate /dragoninnovationwww.dragoninnovation.com
Getting Ready for ManufacturingCreative Decisions and Design
SCOTT N. MILLER
DRAGON INNOVATION CEOBOLT CO-FOUNDER
Georgia Tech September 25, 2019
1. Review Manufacturing Process2. Understand Power of a well structured Bill of Materials (BOM) 3. Deep Dive on the Manufacturing Triangle
• Cost• Schedule• Quality
4. Unlock Manufacturing Insights
Learning Objectives
The Journey to Dragon
● Provide transparency and education on how the process works● Reduce costs and increase efficiency via a manufacturing platform● Simplify communications and bridge gaps● Create high value connections throughout the ecosystem
Dragon’s Approach
DFM Videos on blog Factory RFQ App Factory Selector
Some of our Customers
“Dragon helped us take our crowdfunding success and translate it into shipping more than 100,000 Pebbles in just over a year.”
ERIC MIGICOVSKY FOUNDER of PEBBLE
“Dragon’s depth of institutional knowledge about manufacturing accelerated our planning efforts.”
STEVE CHAMBERSCEO of JIBO
“We've been working with Dragon from the moment we had a prototype and wanted to begin the manufacturing process”
JONATHAN FRANKELFOUNDER & CEO of NUCLEUS
AND MANY MORE
Why is Manufacturing Hard?
Manufacturing is Continually Evolving
● New TechnologiesNew Locations
● New Tariffs● New Competitors
In manufacturing there are many “Unknown Unknows”
● 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)● Retail Channel
Bi-Directional Information Flow
Design Product Send Data to CM Build Tooling
Mold Parts Assemble Product Inspect & Ship
Communication is a Big Deal
1 10 100 1K 10K 100K 1M 10M
Mech
EE/SW
Prod
Tools/BOM
COGS
Quality Plan
Schedule
Hand CNCRubber Mold
3D ProtoLabCNC
Arduino/PI Pre-Certified Module
Local Shop
Optimized for speed & Ease of development
Primitive or Absent
Blind Spots
Domestic CM PRC-CM Owned Factory
Optimized for cost & stability
Mature
Mature
New HW starts here Apple starts here
OEM
Existing RelationshipNeed to find & Vet & Match
Tool(1) Tool(N)
ASICChip w/ Cert
EnterpriseExcel
How the Process Works from 1 to 1MIf you’re not Apple
1 10 100 1k 10k 100k 1M 10M
Mech
EE/SW
Prod
Tools/BOM
COGS
Quality Plan
Schedule
Hand CNCRubber Mold
3D ProtoLab CNC
Arduino/PI Pre-Certified Module
Local Shop
Optimized for speed & Ease of development
Primitive or Absent
Blind Spots
Domestic CM PRC-CM Owned Factory
Optimized for cost & stability
Mature
Mature
New HW starts here Apple starts here
OEM
Existing RelationshipNeed to find & Vet & Match
Tool(1) Tool(N)
ASICChip w/ Cert
EnterpriseExcel
Scaling is Complicated and Dangerous
Spend
Risk
1 10 100 1k 10k 100k 1M 10M
Mech
EE/SW
Prod
Tools/BOM
COGS
Quality Plan
Schedule
Hand CNCRubber Mold
3D ProtoLab CNC
Arduino/PI Pre-Certified Module
Local Shop
Optimized for speed & Ease of development
Primitive or Absent
Blind Spots
Domestic CM PRC-CM Owned Factory
Optimized for cost & stability
Mature
Mature
New HW starts here Apple starts here
OEM
Existing RelationshipNeed to find & Vet & Match
Tool(1) Tool(N)
ASICChip w/ Cert
EnterpriseExcel
Simplify and De-risk Manufacturing
Spend
Risk
The Manufacturing Triangle
Manufacturing Triangle
The Thing you Designed
The Thing People are Going to Buy
What’s a BOM
● Complete, detailed precise list of ingredients required to build finished product
● Organized hierarchically into sub-assemblies● Includes fabricated & purchased parts, electrical components, manual &
packaging
What to Include?
1. Generala. Part Nameb. Internal Part Numberc. Vendord. Vendor Part Numbere. Usage (Quantity per Unit)f. MOQg. Lead-Timeh. Pricei. Extended Price
2. Mechanical Partsa. Fabrication Method (and
relevant specifics)b. Materialc. Part Geometric Volumed. Bounding Box Dimensions
3. Purchased Partsa. Specs
4. Electrical Partsa. Toleranceb. Packagec. Ref Desd. Sourcing Requirement
(Consigned, Assigned, AVL, Open)
e. Compliance (RoHS)5. Manual and Packaging
a. Giftboxb. Trayc. Manuald. Polybagse. Master Cartonf. Tapeg. Shipping Label
Why a BOM is Important
FACTORY SELECTION
PRODUCTONPLAN
COGS
SCHEDULE
CASH FLOW
VENDORSELECTION
VERSIONCONTROL
OVERAGES
SUPPLYROBUSTNESS
SYSTEM OFRECORD / IP
BOM
Hierarchical Structure for Manufacturing
Flat BOM for Supply Chain
Costs (Fixed & COGS)
CO
GS
Company gross profit
Distribution Costs
Materials
Labor
Markup/Profit
Scrap
Packaging
Warranty
Customs/Shipping
Model Price Break Down
Retail markup, factoring, 3PL logistics, etc.
Apple ~50%Laptops ~25%
5% of sales
$0.3 to $2.00
1.5-3% of Material
9% - 25% of Materials/Labor
$0.50-$5
Accessories $0.50-$5
Sale
pric
e
10% of total
Engineering
Pilot runs/samples
Tooling
Testing/testing equipment
Production line fixtures and test fixture
Certifications
Non-Recurring Engineering (NRE)
TOOLS TO ANALYZE & ITERATE WITH FUZZY DATACOGS Estimates, Cash Flow Planning, Supply Chain Robustness Analysis, etc.
Scenario 1: Baseline
Initial Tooling
Long-LeadComponents at MA
ProfitableRevenue
Working Capital Required
100% at MAR
COMPONENT TERMS
XF (Net 0)
CM TERMS
Net 30 from Delivery
CUSTOMER TERMS
Sea (5 Weeks)
SHIPPING
WORKING CAPITAL: $250k
Scenario 2: Improve Component Payment Terms
0% at MAR
COMPONENT TERMS
XF (Net 0)
CM TERMS
Net 30 from Delivery
CUSTOMER TERMS
Sea (5 Weeks)
SHIPPING
WORKING CAPITAL: $250k
Scenario 3: Improve Factory Payment Terms
0% at MAR
COMPONENT TERMS
Net 30 Days
CM TERMS
Net 30 from Delivery
CUSTOMER TERMS
Sea (5 Weeks)
SHIPPING
WORKING CAPITAL: $232k
Scenario 4: Improve Customer Payment Terms
0% at MAR
COMPONENT TERMS
Net 30 Days
CM TERMS
On Delivery
CUSTOMER TERMS
Sea (5 Weeks)
SHIPPING
WORKING CAPITAL: $123k
Scenario 5: Air Ship
0% at MAR
COMPONENT TERMS
Net 30 Days
CM TERMS
On Delivery
CUSTOMER TERMS
Air (2 Weeks)
SHIPPING
WORKING CAPITAL: $96k
Cash Flow Comparison
SCENARIO 1: BASELINE
SCENARIO 5: AIR SHIP
WORKING CAPITAL DIFFERENCE: $154k
Schedule
Product Development from PoV of Entrepreneur
Ideation
Design
Engineering
Design Validation
Star
t of m
ass
prod
uctio
n
CM
eng
agem
ent
Cost estimate & cash flow DFM review RFQ and factory selection MSA Quality planning Custom part sourcing
DFM and tooling Part sourcing Test equipment/plan Durability and life
testing Production forecast Material planning Packaging
development
Shipment audits Cost reductions Renegotiating MSA Quality
improvements Warranty analysis Factory audits
Star
t of m
ass
prod
uctio
n
Planning
Pre-Production
On going production
CM
eng
agem
ent
Three Phases of Manufacturing Activities
Manufacturing Phases
EP1/EVT - Engineering Pilot / Engineering Validation Test:• Build and test several units that function as expected• Learn about new requirements from users
EP2 -> FEP / DVT - Design Validation Test:• Fix items from prior phase• More testing• Achieve final aesthetic
PP / PVT - Production Validation Test:• Build and test a lot of units that that function as expected• Final ID• Move from engineering to production floor
8
Kick
off
proj
ect
Sele
ct C
M a
nd a
war
d
MSA
Proj
ect k
ick-
off
4
RFQ
rele
ased
Fact
ory
Visi
t
RFQ
neg
otia
tions
Tool
mod
s co
mpl
ete
Tool
ing
rele
ase
Tool
ing
star
t
Firs
t sho
ts
7 45
EP1
/ EVT
com
plet
e
EP2
/ DVT
1 co
mpl
ete
FEP
/ D
VT2
com
plet
e
PVT
/ PP
com
plet
e
5 3 2
Prod
uctio
n st
art
Ship
men
t aud
it/Ex
fact
ory
Ship
men
t arri
ves
US
In th
e ha
nds
of c
usto
mer
4
Typical Manufacturing Schedule
46 weeks
Com
plet
e Pr
e-Pr
od E
ng
4
DFM
act
iviti
es
Long MSA negotiations
Late design release
Custom designed components
Certification, MA, Late design changes, Life testing, Packaging
Material shortages
Quality
Types of Quality
Use/abuse
• Dropped• Vibrated• Tension / Torque• Pressed• Actuated• Heated• Frozen• Rubbed• Handled• Spilled coffee• Used in new & unique
ways
Production
• Miss-assembled• Failed parts• Programmed wrong• Packaged wrong• Wrong color• Old parts• Testing equipment failures• Obsolete parts
Legal
• Shipping• EMF• Safety• ITAR• Rohs• California Prop 65• CE• UL• Recall risk
Quality
• Definitions:• Quality = Customer Satisfaction = Performance –
Expectations• “Fitness for Use”
• Incoming Quality Control: Use good ingredients.• Build and test along the way. Use sub-components.• Statistical Process Control (SPC) / Yield. Find out now,
not later.• Sample Testing: Temp/Humidity; Transportation; Drop;
T/T; Small Parts; Heavy Metals; Compliance; Functional; Life. How do tests match reality? ISTA-3A.
• Final Inspection / Acceptable Quality Levels (AQL)• Walk the line. Get your hands dirty.• It is much easier (and less expensive) to make changes
before Production 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 question “How do you know the
product is good”?
The Birth of Roomba(and iRobot)
EARLY TIMELINE
• “IS Robotics”• $5M Revenue from 13 Business Units• No idea what we wanted to be when we grew up.
• IS Robotics -> Modem? -> Robot to get Beer | Clean floor• SC Johnson “Clean” Project ($$$)• Paul & Joe -> Sheet metal Dust Puppy• Hasbro JV in parallel• Launched first version in 2002 (2 years late)
ENGINEERING
• Small & close team in Somerville.• State of the art - bare metal + Masked ROM.• Set $50 COGS -> $200 Retail.
• Stuck to it.• Battery $13, so had $37 for 5 motors.• Zero sum game.
• ID’d key tech challenges as mobility and efficient cleaning.
TEAR DOWN
• Mobility (Wheels, Virtual Walls, and coverage algorithms / navigation)
• Cleaning (Brushes, Bins, etc)• Power (Battery, Charging, Docking)• UX (How to specify room size)• Safety (Wheel drop, cliff sensor, etc)
Roomba Sub-Systems
• Cleaning / Cheerios• Side Brush• Lift mechanism / battery (progression)• Brush cleaning / hair• Vacuum / redirector / hidden compartment• Safety: Wheel drops, CG.• Mobility: Wheels on diameter.• Navigation / systematic neglect. Odometry• Battery
Teardown
• Wheel encoder dust• Blue light special• R1B Fly paper
Disasters
How We Enabled Luck
• Didn’t know how hard it would be (neither did our VCs).• Early and people loved it (5x returns).• Based in China and embedded in the CM. • GNT / Fri mold change.• Always Nimble.• Worked ridiculously hard. Belief in team and product.
Q&A
@DragonInnovate /DragonInnovationDragonInnovation.com
