DRAGON INNOVATION, INC. !

DESIGN  FOR  MANUFACTURING  !

COURSE 2: MANUFACTURING TRIANGLE !!!!!!!

SCOTT N. MILLER | CEO | @DRAGONINNOVATE | WWW.DRAGONINNOVATION.COM

POP QUIZ

• Question: What is the biggest challenge in manufacturing ?

Hint

POP QUIZ

• Question: What is the biggest challenge in manufacturing?

• Answer: Communication! • You cannot design in a vacuum (even if you design

vacuums). Strong communication and teamwork skills are critical to success. Engineering is team sport. It’s all about the people. “Us” and “Them” won’t work.

Communication At Work

Bi-Directional Knowledge Flow

Product Designed In U.S.A. Database Sent To Cm Tooling Manufactured

Parts Molded Product Assembled Final Inspection & Shipping

Manufacturing Management Triangle

Quality

Cost

Schedule

Cost of Goods Sold

(COGS)

• 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

Very Simple Retail Costing Model

$

Sell-Through Price (Retail Price)

Sell-In Price (Wholesale Price)

COGS

Retailer Gross Profit

Company Gross Profit

COGS

COGS 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.)

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).

Controlling Costs

1.Deconstruct  the  BOM.  2.Separate  special  components.  3.Transparency  4.Compare  to  standards.  5.NegoHate  Inclusions

Additional COGS Strategies

Cost

•Bill of Material Transparency: Require factories to provide an item by item costed BOM. No mysteries or hidden formulas. •Calculate labor rates. Pop Quiz – How??? •Build a “Standard Cost” database. Price out cost reductions. •If time permits, develop relationships with multiple vendors to avoid single source suppliers. Leverage is a beautiful word. •When manufacturing in volume for a CE product, it is critical to understand and control COGS. Focus here! Because of the volume, every penny counts ($10k @ 1M units)

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2915

166

897

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26

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ITEM NO. PART NUMBER DESCRIPTION QTY.

1 100132 Heatsink, Aavid 60520 12 PCB 1

100104 Circuit board blank 1 100015 LED, Luxeon LXHL-LW6C 1

3 GATE 1 100110 Film Gate 1 100011 Backgate 1 100024 Film Spacer 1

4 Bottom 1 100144 Bottom Plate 1 100029 Leaf Spring 2

5 Knobreel 2 100106 Cover Bush 1 100151 Dowel .125 dia 2.000 long 1 100009 Driver 1 100153 Gripring .125 dia 1 100149 Knob bush 1 100007 Clutch, one-way, Torrington RC-02 1 100152 Washer, ss .125 id, McMaster 98019A310 1 100017 Knob, plastic McMaster 7354K15 1 100045 Felt washer 1

6 Reel 27 condentube 1

100031 Condenser lens, small Fisher Price 1 100105 Condenser Tube 1 100154 O-ring Buna -120 1 100035 Retaining ring, internal 1.062 dia 1 100031b Condenser lens, large, Fisher-Price 2

8 100162 Spacer, condenser lens, short 19 100136 Spacer, condenser lens, long 1

10 100163 Spacer, projector, short 111 FHMS Phillips M4x20 812 PHMS Phillips M4x8 613 PHMS Phillips M4x6 514 PHMS Phillips M5x16 815 FHMS Phillips M4x12 616 PHMS Phillips M4x12 117 PHMS M4x8 618 100150 Endplate, Right 119 100160 Endplate, Left 120 100100 Front Plate 121 100138 Projector Lens Housing 122 100148 End Spacer 223 100145 Top Plate 124 100158 Window Edmund R39-773 125 100146 Handle 126 100161 M5 Acorn Nut 127 100147 Half Bridge 128 100012 Focus Screw McMaster 92558A170 129 100143 Spacer, .25 dia, .19 long 430 100156 Spacer, projector, long 131 FHMS Phillips M4x8 232 100150 Washer, Nylon, MSC 05401757 133 100159 Detent 134 100101 Bumper, rubber McMaster 9540K35 835 100039 Switch, SPST rocker Carlingswitch 136 100155 Projector lens, concave 137 100157 Projector lens, plano 1

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APPLICATION

DIMENSIONS ARE IN MILLIMETERSTOLERANCES: 0,1MM ANGULAR: 0 30'

MATERIAL

FINISH

DRAWN

APPROVED

DATENAME

TITLE:

SIZE

BDWG. NO. REV

SCALE 2:5

UNLESS OTHERWISE SPECIFIED:

KINKAJOU DELTA100141

DO NOT SCALE DRAWING

REMOVE ALL BURRS AND SHARP EDGES

allen 21july04

Anatomy of a BOM• Plastic • Purchased Parts • Electrical Components • Consigned Components • Deco • Packaging • Assembly Labor • CM Profit, Overhead and Scrap • Overland Transportation

• 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)

How to Calculate Plastic

HK Resin Prices (USD/Ton)

Reference: http://www.nhh.com.hk/eng/trading/price_trend.asp (you will need to create a login)

Item Cost (USD)

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 $5.16

Example PRC

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

Typical PRC CM Margins (Profit, Scrap, Overhead)

PCBA 6–8%

Toys 12%

Consumer 15%

Medical >40%

Other BOM Costs

• Deco (Tampo, Paint, etc.) • Labor (PRC $2 – 6 / hr) • Packaging (Gift + Master)

Add It Up

• Plastic • Purchased Parts • Electrical Components • Consigned Components • Deco • Packaging • Assembly Labor • CM Profit, Overhead and Scrap • Overland Transportation

Schedule

Schedule

•Many consumer products are driven by the Christmas (which has a fixed date).

Plan contingency in your schedule. Things never go according to plan. Have an onsite presence. Track schedule carefully and take corrective actions early. Avoid: “There is never time to do it right the first time, but there is always time to do it again. ”

The Road to Production

Detailed Milestones‣Hand Over / Kick-Off

Form CM Team Contact Lists / Roles and Responsibilities ME and EE File transfer Works Like / Looks Like Samples CM trip to the US if possible (access to models and team, relationship building). Factory Input Components Engineering Quality Production Planning (interface with Sales) Sourcing / MA / Costing Logistics Process / Procedure

Financial (modeling and payments) Pre-Production Milestones Tool Release Tool Start (TS) First Shots (FS) Engineering Pilot 1 (EP1) EP2 EP3 Final Engineering Pilot (FEP) Production Pilot (PP) Production Production Start (PS) Ramp Engineering Change Notice (ECN) Sustaining (Quality Up / Cost Down) Sunset

Quality

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”?

dragon@dragoninnovation.com