Archive for Operations

Dear CEO – You Need Operations Help

Image result for image of hikingThe feeling is like climbing up a hill only to realize that the much bigger mountain is up ahead of the rise you just climbed.  You thought that all was well. The engineering team has working prototypes. Sure, they were made in the lab with machined parts and tape and glue, but they work. Customers are anxious to get their hands on units. Investors want to see the numbers. There is pressure to show revenue and to talk through the path to profitability. Reality hits. The questions start to pour in:

  • Who will build in volume? Do we start in China? Can we start locally and move later? Should we build in-house?
  • How much will it cost? Really? That much? Why didn’t I know about those adders?
  • How do they know what to build? Why isn’t our spreadsheet good enough?
  • How do we get our mechanical parts for much less? Tooling cycle times are how long?
  • What are the processes we should use to keep labor costs in check? Oh, we are not designed for automation?
  • How do we ship this product? Will our box withstand global shipment? How do we know?
  • Should we differentiate for different geographies? How many assemblies will that be? How do we structure? What about documentation?
  • Who will service our customers? Can we handle the volume of calls in-house?
  • Where do we hold our inventory? Who will fulfill? Who will export? What are the cost implications?

If these questions are coming up, you should have hired operations expertise already. If they haven’t yet come up, then act now. Ideally, the operations problems are solved in parallel with the design and both sides are influenced by the other. If done in serial there will be some rework. What are the options for a CEO?

  1. Hire a full time operations expert. In order to have the right breath of expertise the hire needs to be hands on and at a high enough level to have experienced all of the key elements of product launch. If this person is your first ops hire it will be a challenge to attract the right person who will remain the right person as you scale. This alternative might be the most expensive but the benefit is that you have a team player on board who is part of the company story and will provide continuity.
  2. Hire a consultant. Bring in someone(s) who has exactly what you need at exactly the right time. If you partner with the right consulting group you will be able to tap into a breadth of experiences and levels and can dial up and down the resources as needed. Ideally there should be a lead person who has the depth and breadth of experience. Bringing in experts will save you more money than you spend. Consider this an investment and an accelerator to volume.
  3. Hire a buyer and manufacturing engineer who have the experience and willingness to wear many hats. Supplement with your own operations leadership or with leadership from your VP of Finance or Engineering. The leadership can’t be taken lightly and you must honestly assess those skills. Don’t kid yourself. Launching a product into a supply chain is complicated and requires time and experience or costly mistakes can be made. You can delay hiring a VP or Director of Operations only if another senior leader has the time, experience and interest to lead. Or you can hire a consultant to act in this interim role.

Warning! Blatant promotion coming:  You should hire me as an operations consultant. I’ve worked in and with many start-up companies. I’ve seen costly mistakes made because the operations tasks were overlooked. I know what to look for and avoid. I would much rather help you avoid than help you fix and clean-up. I am a doer. I like owning things and delivering to the bottom line. I am a firm believer in understanding enough about the problem to ask the right questions. And I can smell discontinuities. I know how to proceed with gnarly tasks because I’ve had the experiences and possess the intuition to make this work instinctual. I know others in the field and can bring in the right person at the right time to solve the problem most effectively. Yes, you should hire me or someone like me if you have started to notice that there is a mountain of work ahead and you don’t have on good hiking shoes!

I don’t spend my time pontificating about high-concept things; I spend my time solving engineering and manufacturing problems.       Elon Musk

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OpsTrak Consulting      925-437-4125

 

Deciding Which Way…

In Rotwo-roads-diverged1bert Frost’s poem, The Road Not Taken, a choice is laid out in the form of two diverging roads. While many interpret this poem as an encouragement to take a less traveled road, the poem doesn’t say this. Frost presents us with two paths that really look about the same. While he would like to have tried both ways, he had to decide and then “way leads on to way”. He won’t return to try the other path. A choice is made and then Frost tells us how he will describe this decision in the future.  He admits that he will likely point to this decision as one that made a difference. “Telling this with a sigh”, how can we make good decisions and then how do we live with decisions we have made?

  • Gather the facts: It is best to start out in an analytical mode. Understand the financial implications of a decision. Learn about the players already involved. Get information on the product if this is a career decision. Put information about an offer in writing and solicit input from experts on what is fair and appropriate. If you are deciding about a more personal matter the same concepts apply. What is the personal cost of proceeding? What will change in your life and does it matter? Size up the pluses and minuses. Write them down if that helps you get organized.
  • Consider the “way leading on to way”: Many choices we make will lead us down a path. Usually we can tell if the path is a good one. A degree in education will likely lead to a teaching job at lower pay but at great personal reward if this is your calling. A degree in engineering will open up many doors but will likely lead you to a desk job with less freedom to take blocks of time off or to work at home. Deciding to join a more established company could lead you to a number of job possibilities within the company but you will be a small fish in a large pond. Picking a smaller company will give you more chance to lead but you will not learn as much from others as you will likely be the only expert in your area. As you consider how the way will lead to another step, think about whether that path is where you want to be.
  • Heart check: While an analytical approach is a good backdrop for any decision and should shape how you feel, the tie-breaker is almost always the heart. More often than not there are two paths that both look pretty good. Perhaps like Frost one of the paths looks a bit more worn than the other but it is hard to see very far down the path and really there are few paths that haven’t been trod. What alternative feels right to you? Where is your passion. What do you wake up thinking about? Even if the direction you are leaning is the least understood, it might be the best for you if your heart is there.
  • Be brave: When you have weighed facts and honestly reviewed your heart’s desire, it is important to be brave with the decision. Have confidence in your abilities to do a job or make a move or change a career or launch a project. There is little that can’t be figured out with the right attitude and some passion. If we are not brave in our decisions they get made for us. Sometimes the options go away. Sometimes time and resources force our hand. So, when there is a decision to be made, make it and move.
  • Move forward knowing that you will spin the tale: This truth is a bit of a relief. We pick a path and it makes us who we are. When we look back we usually tell the story that our wise decisions got us to where we are. And honestly, we are right in part. If we make our decisions with the facts coupled with the heart and we bravely move forward we are likely to lead a life of adventure and learning. We are likely to be satisfied with what we have become. We are likely to be happy with our choices.

We all have choices to make. Be thoughtful, heart-full and brave and then pick your road. And God bless you on your journey!

The Road Not Taken by Robert Frost

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;

Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,

And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.

I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I—

I took the one less traveled by,
And that has made all the difference.

Hardware Is The New Killer App

lunarmodulediagramI built a model of the Lunar Module when I was 12. I still remember how building it made me want to climb inside the real one and land on the moon. I was channeling Neil Armstrong and was certain that being an astronaut was my calling. Years later I graduated from Neil’s University, Purdue. I was not bound for space but I was bound for a career in making things. Taking great ideas and transforming them into a real shipping product is a pleasure that, for me, far surpassed bits and bytes or blurbs and spiel.

I’m in love with making things. Even here in Silicon Valley, the home of “dot-com”, there are big and small companies designing and building hardware products to sell to other businesses and to consumers. HW start-ups are the new “killer apps”. Funding for HW start-up companies has taken off over the last five years. Granted the number was low to start with but with this enthusiasm for hardware product companies, we are putting the Silicon back in Silicon Valley.  HW accelerators like Hax Accelerator and Highway 1 give these start-ups a home and help with the challenges of funding, building, importing and distributing products.  Kickstarter campaigns and companies like Bolt have given life to companies that otherwise would have languished waiting for friends and family to help with funding. Companies like Box Clever and MindTribe help these companies with the design itself. Companies like Dragon Innovation and OpsTrak Consulting help companies productize and launch into the market.

Building a hardware company is more complex than a SW only company but shouldn’t be feared. In fact ramping up a HW product is a blast and I highly recommend the ride.  Below are some of the key aspects to consider when building a HW company:

  • Connected: While I’m focusing on HW companies, no HW is independent of firmware, software and/or user interface. As a matter of fact the reason for HW’s resurgence is all about the internet of things. Everything is connected these days. We have moved from connecting on our computers to being connected in our cars, our homes, our clothing and in almost every industrial device. Bring in expertise or contract with the experts to be sure your HW product connects.
  • Concurrent: Small company or large, there is value to designing for manufacturing and the supply chain. Often referred to as DFM, the idea is to think about the manufacturing processes while you are designing the product. Sometimes the best way to get that perspective is to bring people in with the expertise. An easy partnership is with a contract manufacturer (CM) who is lined up to build your product. It is in their best interest to help you design your product so that it can easily be molded, assembled, fabricated, tested, labeled and shipped. If you don’t have a CM in mind yet or if you can’t get their attention due to your volume or company size, you can get the expertise from consultants or companies who have decades of this very type of experience. Bring your expert in before the design is locked in. Hold a design review and take into account the time it will take to make modifications to the design to make it more build-able. Don’t wait until you are on a critical path to release and then consider the ease of building the product.
  • Cost: Cost consideration often goes hand in hand with DFM although they are slightly different ideas. When designing a product you likely have a cost target in mind at which you will make enough money when selling your product to propel your company to success. But if you are off in your estimate by a factor of two or even off 20%, that can be a company showstopper. It is possible to iterate a design to get to a targeted cost but each change in the product costs money and the installed base needs to be considered. Ideally you know what your design will cost and you have taken into consideration the material, processes, labor and OH required to build and ship. If you have some margin in your plan you can survive a decision to quick-turn a PCBA or expedite components as you begin your ramp. Consider your cost of goods sold (COGS) budget. Get real quotes. Estimate labor time and cost. Don’t forget SG&A, material mark-up and profit from the manufacturers. Finally, if there are internal resources assigned to ramping the product their costs should be assigned as well. It is best to have a margin of safety in your model as you start so that the first product out the door can cost more without breaking your business model. That gives you some wiggle room and those costs can be whittled down later as you ramp.
  • Cash: One of the challenges to building a company that ships a product is that you have to invest in inventory, labor, space and sometimes machines to build the product. If you choose to build in-house you will need use your cash to set up a manufacturing process complete with quality and inventory control. You will likely need an MRP system to manage material and control inventory and ship orders. If your demand has its ups and downs you will want to add temporary labor and will need to train prior to the up cycles. With today’s infrastructure both in the US and in Asia, there is no need to develop a manufacturing process in-house. It is possible to entirely outsource your product build, distribution and even return and service process. Outsourcing isn’t free from costs and challenges. A clearly worded Manufacturing Services Agreement (MSA) and a solid relationship with executive management is the first step in solidifying your success. Staying involved in the process is the second step. Be there during builds and participate in the development of the assembly and test processes. The CM partner might be the expert in manufacturing but the product knowledge is in the OEM’s court.
  • Collaboration: This last attribute is wise advice for any kind of company but especially if you are a hardware company. The strength of your company is rooted in the brilliance of your design of course but the other factors that add to longevity, resilience and profitability are the supply chain, distribution channels, customer service capabilities, first customer’s adoption and marketing of your successes. All of these require relationship management. Even larger companies need to partner. A smaller company can be made by its success in partnering. Sometimes the product you are shipping needs to play in an environment that isn’t in your control. System integrators, plant managers, final customers need to be trained to use your product successfully. In the consumer market you are dependent on distribution and visibility of your product to the end customer. Creating a network of partners is a key element to success.

As children, we enjoy making things. Watch a five-year old with clay or legos.  Many who are makers inherently like to cook or sew or build furniture or design products. We like to fix things and build things. This same joy can be found in a company that builds product. I highly recommend it.

We don’t value craftsmanship anymore! All we value is ruthless efficiency, and I say we deny our own humanity that way! Without appreciation for grace and beauty, there’s no pleasure in creating things and no pleasure in having them! Our lives are made drearier, rather than richer! How can a person take pride in his work when skill and care are considered luxuries! We’re not machines! We have a human need for craftsmanship!
― Bill Watterson, Calvin and Hobbes author

The Logistics of Giving Back

2013-05-30_10-12-03_844“Bridging the gap between surplus and need”   This is a compelling value proposition for any supply chain professional. It happens every day at MedShare.

On a Thursday morning in May I arrived at the MedShare warehouse in San Leandro, California. This is one of two warehouses filled with medical supplies and equipment. The second one is in Decatur, Georgia. What I’m looking at is material that would otherwise be in landfills across the country.  As a manufacturing geek, I feel right at home in this warehouse with racking, forklifts, bar coding, computer entry, shipping docks and a container poised for loading. After the tour and instructions, I get to work sorting and re-boxing.

MedShare has been operating since 1999 and diverts on average 2000 pounds of medical surplus each week.  They have shipped over 900 containers to 93 medically underserved countries including Kenya, Haiti, Costa Rica and Ecuador. They also provision hundreds of medical teams who serve in these countries and provide free supplies to safety-net clinics in California and Georgia. This web of suppliers, volunteers, bio-medical experts and logistics professionals works to lessen the medical disparity around the world.

Our medical system in the US is, on its own, very wasteful. A surgical procedure will draw in pounds of material in kit form in the name of hospital efficiency, and then whatever is not used, will be tossed. The piles of waste include, masks, needles, surgical instruments, gowns, bottles, bandages, and gloves. MedShare is a non-profit that will accept that waste material, sort it, repackage it when necessary, label it accurately, store it and then ship it to order. Hospitals from developing countries are able to look online at MedShare’s database to determine what is available. They “shop” to fill up a container. Assuming that there are funds available to pay for the shipment, they get what they need. This is in contrast to other charities that ship what they have, when they have it. Often what is shipped does not meet the needs of the people and sits unused. Not so for MedShare shipments.

In addition to excess medical supplies, MedShare takes in, refurbishes and ships out medical equipment such as surgical tables, ultrasound machines, scales, lights. Again, in the US medical world these items are obsolete but for a developing country they are seldom seen luxuries. There are wonderful stories of medical intervention that would not have been possible without MedShare equipment and supplies.

But what does MedShare NOT have readily flowing?

  1. Cardboard boxes – Volunteers bring in boxes from home. MedShare has to buy boxes that they can’t get donated.
  2. Sponsored containers – It costs about $20,000 to ship a container to its destination. Companies can sponsor a shipment and can advertise this donation both in the US and in the receiving country. For a company expanding in the developing world or even partnering with suppliers in that region, it is a very inexpensive way to build positive brand awareness.
  3. Volunteers – They welcome volunteer groups from companies, churches and youth groups. You can show up as an interested individual and they will put you to work.
  4. Funding –  Money is very efficiently put to good use either to fund the very low administrative costs or to pay for the container shipments.
  5. Regional expansion – MedShare plans to expand this year by adding another warehouse location in the east. The numbers make it clear that this is a good strategy. Healthcare Without Harm claims that U.S. hospitals generate more than two million tons of medical waste each year, most of which is medical supplies and equipment. The World Health Organization estimates that more than 10 million children under the age of five die in the developing world due to inadequate medical care. MedShare is serving a critical need and is only scratching the surface with its fifty plus tons a year.

The efficiency of this charity has been celebrated with awards and recognition. MedShare is a four star charity in Charity Navigator. They have been featured on TV and in print. There are numerous testimonials online. However, for all of its success, it should be better known than it is. Maybe, for some, it is not so glamorous. After all, this is a process of matching supply and demand. It is a non-profit that deals with inventory management, transportation costs and material handling. The demand fluctuation has a lot to do with global forces such as economics, natural disaster and incoming funds. In short, the job done at MedShare is a job that many of us in supply chain management will recognize. The supply chain community should resonate with this charity and its work.

My morning was spent sorting, labeling and boxing and having a blast. The volunteers I worked alongside were smiling, chatting and one even burst into song. Halfway through, we took a break and watched a container load finish up. This one was funded by the MedShare’s own Western Regional Council. The stories told by Chuck Haupt, the Executive Director for the Western Region, were stirring and motivating. In fact, the volunteers themselves are raising money to ship a container, just going to show how compelling the work really is.

A sign up on the wall said it all for me: 2013-05-30_10-40-21_667

Learning from Crisis Leadership

tornadoMonday, May 20th started out as a normal day for people in Moore, Oklahoma, a community of about 56,000 people about 10 miles south of Oklahoma City. By late afternoon the world had turned into rubble and ruin for many in this town. Rescuers worked through the night to pull people out from under destroyed homes, businesses and schools. 29 people died including 9 children. Clean up will take months. Recovery will take years.

Immediately after the tornado passed, the local police, firefighters and EMTs took action. Within hours, the Oklahoma National Guard arrived at the scene with fully rehearsed rescue teams. They had the tools, skills and communication processes in place to call in more help. The additional help was triggered based on what they saw when they got there. By nightfall the Red Cross had shelters set up. The nearby medical facilities were ready for an emergency and all hands showed up to help the wounded. Now, neighbors are showing up to cook, find pets, deliver gloves and generally serve. The town is mobilized.

What kind of leadership is required to get a community through a crisis like this? What can we, as students of leadership, observe and thus learn and apply in our areas of influence?

  • Act quickly – There is no time to hesitate when a crisis occurs. Decisive action is important in triage. Even in a business context this remains true. Get moving on the critical issues of life, safety, continuity, sustenance. Know where your staff is. Get the facts. Gather your resources. Assess the damages. Send out the first responders. If the problem is with a supplier, fly there. If the issue is in your own manufacturing plant, visit and evaluate. If the problem is with a new product launch, get to where the action is and gather the information at the source.
  • Ask for help – There is no virtue in going it alone. If the problem is really a crisis, call in others. Get suppliers, partners and other functional groups involved in solving the problems. Tell the boss.
  • Communicate regularly – Perhaps the information will not be precise. Perhaps you will have to revise after more is known. But getting information out to those impacted will serve two purposes. First, you will calm those impacted. You and your team know what is happening and action is being taken. Second, you will get everyone on the same page. When should updates be expected? Who is doing what?  What are the near term instructions?
  • Create structure – Put together a war room with a steering team. Put people in charge of different parts of the problem. Ask for a cadence of information flow. Meet regularly.
  • Be visible – If you are running a local team, be there. If you are running a global team, be there virtually by calling into team meetings or even creating video updates. Be accessible. Talk with the team casually to understand mood and to get facts from all levels. Your ears are the most important tools you have during a crisis. Listen.
  • Be a servant leader – Pick up the symbolic shovel. Contribute at multiple levels even if just a little. Your job is to show others that you are in the situation with them. If you are seen as above it all, the team will not hit its full potential.
  • Have a plan prepared beforehand – Of course, this is wise. But many companies, families, small businesses are not thinking about the possibilities of a game changing emergency. Thinking through an action plan before the crisis can save crucial minutes when something happens. Put the plan in writing. Practice with a staged crisis situation. Involve your immediate organization and those throughout your value chain. Business Continuity Plans can make all the difference when a crisis occurs in your company or supply chain.

News of the tornado in Oklahoma struck a nerve for me. There is no way to predict when a crisis will occur in communities and similarly, there is no way to predict crisis in business or supply chains. The only certainty is that crisis of some sort will show up in the future. Be ready and be a leader when it happens.

In  preparing for battle I have always found that plans are useless, but planning is  indispensable.

Dwight  D. Eisenhower

Increasing the Odds of a Successful Launch

ski-jump-lake-placidSilicon Valley is filled with launches. We are a hotbed of new ways of thinking, new forms of work, new technologies and new products. Entrepreneurs flock to this area to take advantage of a diverse, intellectual and risk-taking labor pool. The Valley has start-up think tanks and incubators around every corner. If you want to launch something, bring your ideas and sweat equity to the Bay Area. But, when you get here don’t assume you have all it takes with just a mighty good idea.

Launching is not equal to success. One out of every ten products are successful and even that success is defined quite narrowly. How can a company increase its odds of not only launching a product that makes money but also ramping a product that grows rapidly in revenue and profitability? Much of the success of course is due to the product idea itself. That, in turn has everything to do with the brilliance of the invention and the knowledge of the market. But marketing and innovation are like a two-legged stool. The third leg that is often shorter than the others is execution. The saying that “God is in the details” holds true when it comes to getting a new product out of the door in a state that will allow for a high quality ramp. Let’s get practical about what this means in a product development setting.

1. Start with the end in mind – When a product development effort begins it is often centered around getting two or three prototypes to work. That of course is necessary but not sufficient. Shortly after a concept is built the team should be considering the implications of scale. Handy tickler questions are:

  • What is the volume expectation? Tooling decisions should be made early. Tooling is typically on the critical path. Designing for plastic/metal molding or sheet metal fabrication processes early will save time and money.
  • What does this product need to cost in order to get to the volumes anticipated? Targeting cost at an early stage will aim you at the right supply chain, material and packaging choices.
  • How will this product be used? And therefore what design margin should be used to be certain that quality expectations are met? This drives design verification test (DVT) and highly accelerated life test (HALT) decisions and likely drives material choices.
  • Given the volume and cost requirements, how will this product be built? How quickly do cost targets need to be met? This drives supplier and tooling decisions.
  • Where is the market? Is this a product for a global market or will the customers be concentrated locally? Could this change over time? This drives supplier and distribution channel decisions.

2.  Engage a cross-functional team –  Bring in an expert in manufacturing processes to work alongside the development team.  While a great product is the foundation for success, the house is built with cross-functional cooperation. Bringing a quality product to the customer at the right price point with predictability takes a team. Putting the full monty in place early sounds expensive but it doesn’t have to be. A very small team of experienced operations leaders can connect you with an array of outside services that will offer early fabrication, tooling, design for manufacturing and test (DFM/DFT), logistics and packaging expertise. These leaders should be practical, hands on people who will engage in the day-to-day problem solving. At the same time the right people will be well-connected and will know what they don’t know. They will find the experts using contract manufacturers or consultants. Paying for services amortized into part cost or paying for help by the hour will keep costs down while getting you the help you need.

3. Build fast and frequently – The idea of rapid prototyping has been around for a while but it isn’t used regularly in new product ramps often enough. Especially with additive manufacturing processes, FPGAs and quick turn proto houses available, it is possible to build a few to try out a concept prior to building many. Once you commit to a tool, whether it is a plastic mold, sheet metal punches or ASIC design, you are locking in cost and tweaking is expensive. A common mistake with the fast turn processes is to do the work independently of the final manufacturing process. Then the transition to the volume process is a major undertaking. Work with the manufacturing partners you have chosen to use rapid turn processes that best match what the final process will be.

4. Put together a diverse team – While this isn’t specifically related to execution it is related to performance. Often start-up companies are initially staffed with people who know each other well because they have worked together successfully in the past. Since we feel most comfortable with people like ourselves teams look homogeneous without some conscious intervention.  A recent study showed that start-up companies with at least one women executive made more successful exits and for every 10 percent increase in women executive and director employment, the business’s probability of success increased by six and three percent, respectively. Diversity is more than a gender thing. The highest functioning teams have different types of people. Mix up race, ethnicity, gender, age, thinking styles, life experiences. If this team is managed well the performance will be outstanding. Your output will be stronger and your risks will be lower.

5. Use checkpoints meetings…seriously – When asked, most development managers will insist that their company uses a new product introduction checkpoint process. This is a process that is defined upfront and usually consists of at least five phases: concept, proto, pilot, ramp, end of life. At the end of the phases are checkpoints that serve a purpose of bringing that diverse, cross-functional team together to talk quantitatively and qualitatively about the readiness to move to the next phase. These reviews serve as a kick in the rear for those who are behind. They keep the team accountable and they show the leaders where there are vulnerabilities. Taking these meetings seriously is one way to keep the end in mind and to get full cross-functional attention. These checkpoints are also a serious opportunity to stop the presses. Blindly moving forward when key elements are not ready will cost money at the least and will derail a company at the extreme. Ideally an honest evaluation complete with a review of the warts will allow for a course correction while the project continues. Adjustment is less expensive than redo later and much less expensive than a launch that fizzles due to quality or availability issues.

These five points, if followed, will increase your odds of launching a successful product. None of them are hugely taxing but surprisingly, most companies do not comply with all of these points. There is a resistance, especially in the start-up space, to overlaying processes. Process without purpose is a weight. Process that serves as a support to execution will be flexible and light weight and will save time, reduce risk and help a company launch a winning product.

“Excellence is never an accident. It is always the result of high intention, sincere effort, and intelligent execution; it represents the wise choice of many alternatives – choice, not chance, determines your destiny.”
―    Aristotle

Manufacturing for Dummies

Acmestartup has a breakthrough security product. The software bits have lovingly been stuffed in a white box server platform and volumes have been manufactured at a reputable contract manufacturer who just so happens to have designed the basic server. These initial beta boxes will be sent to early adopters of this new breakthrough product. First impressions are everything. It matters what they think. These first users will be the evangelists and the potential investors of this nascent company. Alas, when the product arrives it doesn’t work. What could possibly go wrong? How hard is it to customize an off-the-shelf server and load software and firmware. Apparently it is hard enough that the CEO of Acmestartup has made the resolution of this manufacturing problem his number one priority. When he should be worrying about the next great security algorithm, he is losing sleep over why the box shows up dead on arrival.

Startups and small companies are all about the product and customer and should be. In the same way that these small companies should get professional public relations, accounting and legal advice, these companies should be getting professional manufacturing advice. Some engineers have both development and manufacturing experience but not many of them have ramped products to volume nor have they had to choose partners, negotiate contracts or set up manufacturing processes.  And even if these engineers have had manufacturing experience is it good to divert attention away from the critical path of product development and maturity? When in doubt, hire a professional. Here are a few key pointers for those not in the field.

1. Pick the right manufacturing partner – The right partner has a focus on small companies and they have a good reputation. Ask for references. Talk with your start-up peers with similar products. Make sure that they have some local presence. Don’t rely on a company that is only in asia. You need help close to your development team. Ideally your partner should have some local manufacturing, not just reps close by.

2. Put together a cracker-jack virtual ops team – You probably can’t afford to hire all of the elements of a dynamite operations team but you can piece together experts through consultants and through your contract manufacturing partner. Make sure your collective team is thinking about purchasing, planning (and the systems that go along with the purchasing and planning), customer service, assembly and test, quality, metrics. Yes, you are small and volumes are small but all of these elements could stop you dead as you are ramping.

3. Put a manufacturing geek on the team – Do this early. Embed them with the engineers. Think about the component suppliers and final assembly process early. If possible, have your contract manufacturer supply someone to sit on your team. It is not too early to design for manufacturing if your intention is to supply a quality product to the customer as quickly as possible. Don’t design, build, ship crap, recover or try to recover.

4. Kick the hell out of the product before you ship to a customer –  HALT is Highly Accelerated Life Testing. This test will vary temperature, vibration, voltage levels until the unit fails. In other words, add variation to the process ahead of shipping. If you plan to ship your product any distance, make sure that you know what the product can withstand in terms of temperature and vibration. In addition to HALT testing, if you have multiple suppliers for a component, vary what you load on the board or use in the product and see if you can make the product fail. Ship the product across the country to your mother. See if it arrives ok and have her set it up. This works less well if the product is for the enterprise or for the construction industry but find the analogy (ship to your buddy in an IT department).

5. The devil is in the details – The small things are what get you. This is true for all companies but is particularly dangerous for smaller companies without the resources to recover. Don’t forget about customs, import taxes and regulations. Don’t ignore documentation, labeling, packaging. Watch out for long lead times for components…all it takes is one part that you can’t get fast enough. And finally, consider how you will repair and/or upgrade your product. What is your “reverse supply chain”?

While all of these considerations could seem obnoxious when you are working on a product that solves man’s or woman’s most pressing problems, they can stop you in your tracks or at the least will slow you down enough for the competition to catch up. So, consider manufacturing as a competitive weapon when launching your business. Seamless ramp coupled with highest quality at no cost to time to market should be the goal. It can be done. You aren’t a dummy!

Time for Robots!

At the end of the last century (I love saying that) I worked for a robot company, Adept Technology, Inc.: www.adept.com. We manufactured and sold SCARA (Selective Compliant Assembly Robot Arm) robots, linear modules and dang incredible vision and motion controllers.  This company employed some of the very best and brightest in the field of robotics. The business and stock took off as dot-com web use heated up and the need for automation of fiber optic component assembly expanded. Then the dot-com bubble burst and the company shrank to a shadow of its former self which frankly was never that big. But while working there and even now I have to say that I love automation. How could I not? Automation, robots, manufacturing, mechanical engineering, systems…..this is the intersection of all things geeky for an ops girl like me. But alas, it was not meant to be. I left Adept behind after about 5 years and went on to the world of computers, storage, printers and outsourced supply chains.

Is change a-comin? Is it possible that now is the time to ramp up automation around the world? I think so and here is why:

1. Labor is more expensive now than ever. “Cheap labor” in China is no longer available as the wage rates have increased 5X over the last decade.  If you move manufacturing to follow the cheap labor you are moving to a riskier region with less infrastructure thus inflating other costs and even in those lower labor cost regions, the labor cost coupled with inflation is increasing.

Source: Accenture

2. Product is getting smaller and/or harder to handle. This has been true for a while but with new nano, solar and bio technologies it is impossible or at the least, not smart to handle product with hands.

3. The world is riskier. Is it time to bring some manufacturing back home? If labor is expensive but automation is available it is possible to pay once and then maintain with higher skills that we want and need to develop closer to home. Can we reduce the risk of our WW supply chains by being less dependent on labor in region with the associated political and social issues driving unrest?

4. Labor is scarce. In just about every developed or even most developing countries the birth rates are dropping.  U.S. manufacturers will be hit hard in the coming years by the absence of retiring Baby Boomers who make up much of their skilled workforce. There will come a time when companies are praised for eliminating jobs, instead of adding them.

5. Automation technology is more capable. With improvements in memory density, compute speed and material technology, automation products are able to move, see, manipulate, handle, even feel components, products and packaging more efficiently and effectively.

But here is my rule for automation. Don’t automate first. First, make your process “automatable”. Use lean sigma techniques to take waste out. Consider Poke-Yoke techniques to make your assembly processes fool-proof. Design for assembly and test. Think about both even if the product is low volume. All of these best practices will increase quality, decrease cost and get you ready for automation if the math works out.

Bring in the robots. Accelerate automation. Super-charge the process of building stuff. Make it a core competency. It will be fun. I promise.

Bring (Some) Manufacturing Back

Yesterday a riot in a Foxconn plant in Taiyuan, China got out of control and police were called in to stop the violence. The reason for the unrest is unclear. The news articles coming out of China are stating that there was a disagreement in a dormitory between guards and employees. The articles are saying that 1000 workers were involved (out of the 79,000 in this facility)…and yet 5000 police were called in. This conjures up a disquieting image.

Warning: the following numbers are my guesstimates and are just a way of framing the problem. I have read that if Apple were to build the iPhone in the USA the cost would increase by $50 which is about 2 hours of fully loaded labor. Since that is just too much time to assemble, test and package the phone I am going to assume that the $50 includes space, logistics and even a tax differential so it is an “all in” number. The consumer price of the phone is about $650. If the gross margin is 50% (surely Apple doesn’t get all of this but it is spread amongst distributors/carriers) then the total cost of goods sold (COGS) is about $325 for material, logistics, overhead, depreciation, labor, etc. Adding $50 to this is an increase of over 15% to COGS which isn’t small change. What if that increase in cost could be offset with benefits that either manifest now or in the future? Could we find a way to bring some manufacturing back to the USA? What is the tipping point?

1. Grow your own workers – There is value in having access to trained and local electronic assembly and test technicians, engineers, manufacturing leaders. We have lost the training grounds for good manufacturing prowess in the USA. The last of us “hands on manufacturing nerds” are going to leave the workforce eventually and the next generation will not have experience on an actual manufacturing line.

2. “Next bench” experience for development engineers – The engineers who are developing the next big thing can walk down the line, ask questions, observe and learn from the people doing the assembly work.

3. Faster quality resolution – If a problem is found it is easier to be all over it if manufacturing is close at hand. Thus, faster resolution.

4. Faster ramp – Once the manufacturing expertise is solidified near the development and marketing arm it is easier to take ideas and ramp them to market. Less travel is needed. Less translation and more cooperation is possible.

5. Disruption insurance – Spreading out risk is a good idea. If all of a company’s manufacturing is in China and there is a labor strike, natural disaster, logistics event, fuel crisis you have a longer and more expensive recovery. Put your eggs in multiple baskets if you have the volume.

6. Good will and free advertising – Surely it is worth something to a company to get the good will associated with “made in America”. I know people who won’t buy an iPhone because of the “slave labor” association and noise. That is an unreasonable response since all phones and frankly almost all electronics are made in China. But there has to be some consumer value to “made in the USA”.  Maybe it would just be a willingness to buy the brand but not a willingness to pay more. But even that has value. Volume helps a company get to lower costs and more margin dollars associated with that volume helps cover more operating expense even if the margin per unit is lower.

7. Wild card government help – Maybe it is coming at the federal level. Surely there is help to be found at the state level. Look for it. Find a deal. Make a splash in the news. Start some momentum.

It is certainly time to take some manufacturing out of China and to spread it across the world. The risks are just too high in China to put all of your manufacturing in that one country. I believe it is time to bring some manufacturing back to the US. If the differential to bring work back is about a 15% hike in COGS with no mitigation let’s chunk the problem. Find a way for government to mitigate 5% with tax breaks or deals on land or capital. Be willing to eat 5% in the company if margins are good and if the future benefits can justify the investment. Pass on 5% to the consumer. Since this is 5% of COGS it is a smaller percent of the price to the consumer. Perhaps the impact shows up as a 2-3% increase. I think it would fly.

But what do you think?

Top Ten Global Supply Chain Mistakes

A global supply chain is the norm for almost any company in business today. In order to take advantage of the capabilities throughout the world and in order to reach markets around the world it is important to create a system that reaches across borders. Creating that system is a difficult process especially for smaller companies focused on technology and marketing as first priority. How do you build a robust supply chain that is a competitive weapon rather than a necessary evil? Below is a summary of mistakes commonly made.

1. All eggs in one basket: It is risky to partner with only one contract manufacturer, logistics partner or key component supplier. Comparing price, quality, locations and practices can give you the information you need to drive your supply chain toward best in class. Having some tension in the relationship will also give your partners a good reason to offer you the best prices, quality, technology and lead times. But if you don’t have the volume to support more than one supplier without compromising cost or attention, put your eggs in one basket…and watch that basket very closely. Even with one partner you can quote annually to keep the tension in the relationship and to give you additional information. Ask for a transparent cost model so that you know what you are paying for and can more easily disaggregate the work to look for the best combination of suppliers. Even if your volume won’t support multiple production suppliers of key components, qualify more than one supplier ahead of time to give you options if there is a problem later.

2. Out of sight, out of mind: Once a global supply chain is set up and running it is a mistake to assume that the job is done. Weekly conversations should be held with your partners either in person or on the phone or via video-conference. Virtual meetings can be set up to review metrics, current action items and future work. Monthly visits should be made to meet with the key players eye to eye. Walk the production floor. Talk with the people on the production line even if they don’t speak your language. Use a translator and convey your thanks and interest in their work. That will help you later when fast action is needed and you are not there to oversee. Observe and ask questions. Make sure that you are getting what you expect. Remember, people respect what you inspect.

3. Too little, too late: It is unwise to assume that a verbal contract or purchase order with legal sounding words on the back is good enough. Draw up a contract and negotiate the details. While you are unlikely to ever sue your supplier, the value of a solid contract is that you have talked over the problems before they occur. Don’t wait until you have a field quality issue to decide who will take lead and drive to root cause. Don’t wait until there is a sub-tier issue to decide who is liable for the resolution and cost. There are templates available for supplier contracts and it is okay to start there but don’t stop there. Think about what is important in the relationship and write it down. Even if it doesn’t end up in the final draft at least the conversation has been held and documented and there is some understanding of expectations.

4. It’s not my job: Don’t sit back and assume that your supplier will watch your back. Supply chain design and development remains the responsibility of the product company. The inputs to strategy are targeted markets, technology needs and growth plans. Yes, the inputs also include changes to the supplier landscape and cost shifts, but it is unwise to rely on the supplier to tell you when to modify your supply chain. I recommend an annual review of labor and logistics costs, shifts in the market, tax changes and other macro-economic factors. What are the implications to your supply chain? Is it time to manufacture in a region for tax purposes? Are labor rates changing enough to consider a shift to another region of the world? Do you have a change in your product roadmap that will require new process technologies?

5. Only sure thing is death and taxes: Death is hard to control but don’t overlook the impact of taxes. The tax implications of your supply chain decisions can outweigh the labor cost benefits. Have a tax expert examine your plans ahead of time. Understand your target markets and if there are import taxes based on manufacturing content. Are you selling into government agencies? Some have restrictions about where the product is made.

6. Count the costs: Don’t make the mistake of just looking at the price tag from your supplier. Remember the cost to move the product to the market. Remember inventory carrying costs for a longer pipeline. Remember the cost of travel to manage a remote supplier. Quality costs are higher if your pipeline is longer and if the time to resolve is longer. And finally, what is often overlooked is the cost of time. If your new product slips a month due to the challenges of remotely ramping with the wrong partner, the costs are large. Do the math on the full costs of your alternatives.

7. Time Flies: Time should be mentioned a second time because it is just that important and is often not considered when designing a supply chain. It does take longer to get work done across time zones, cultural and company boundaries. However, if managed well there can be an advantage to having multiple time zones to work a product launch or a quality problem. The key is to set up the processes ahead of time with the right responsibilities and accountabilities. It is a little like a battle strategy in that you want to consider where you position your forces and how you arm them based on where the enemy lies. With new product launches the enemy is lack of documentation, lack of information flow and lack of iteration. Launching remotely needs more of all three. Don’t neglect to make that investment to save valuable time.

8. Risky Business: When natural disasters strike, the companies best able to recover are the ones that don’t ignore the inevitability of failure. Having a documented business continuity and enterprise risk management plan in place will give the troops a jumpstart on what to do. Work with suppliers ahead of time on “what if” scenarios. Know who within your organization will run the war room. Decide how you will respond to a disaster in any part of the world. Of course you can’t anticipate every problem but you can do enough to be in better shape than others. When being chased by a grizzly bear you don’t have to be the fastest, just faster than the other guy!

9. Stunted Growth: Don’t just think about what you need now. It is a big mistake to pick partners based on what you need today and not think about their global footprint, scalability, systems strengths and capacity. There is nothing worse than having to pick up and move your processes while growing just because you didn’t partner with growth in mind. If you need one assembly line now, make sure that your partner has room to give you three without moving you to another building or location. Can you claim dedicated resources now ahead of expected growth? Have you picked a supplier who has bought into your plans and will invest with you appropriately?

10. Flee, fly or flow: Last but not least, don’t staff up with a wimpy team.  Understand the importance of picking supply chain leaders who have lived through global supply chain challenges and can bring experience to the table. Resiliency is a characteristic that comes to mind. There are a myriad of challenges that come up with a global network of suppliers. The challenges can be viewed as a necessary evil or can be managed and mitigated to bring your company a competitive advantage.