Bob Mattoon of ISC Networks shared his extensive experience and tips for managing hardware startups at the Sunnyvale Meetup earlier this week. He focused his presentation on past experiences and lessons learned (see below for a copy of his notes from the talk).
The audience included a numerous mix of hardware specialists who contributed to the Q&A session and added their point of view to the conversation. Some o the topics discussed included:
– Customer acquisition strategies
– 3D printing for rapid prototyping
– Offshore vs domestic prototyping process

Thanks to Bob and to everyone for contributing – Happy reading!

 

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HARDWARE STARTUPS LESSONS LEARNED
Risk & Cost Management, Building Your Prototype and Pilot Hardware to ensure successful production ramp

7 tips for bootstrappers managing supply chain and contract manufacturers (onshore and offshore) in the design, specification, manufacture, and test of prototype and pilot hardware:
1) Perform Engineering Verification Testing (EVT) onshore and resolve issues prior to planning production release
2) Engineering to focus on the targeted and specified functionality in order to contain design and cost creep.
3) The Yields can be the difference between profit and loss. Yields should be addressed in both EVT and PVT processes.
4) Formalize and release ATE Test systems just as you would release a product.
5) Perform Production Verification Testing (PVT’s) from your targeted production plant as a prerequisite to releasing the product. All major functions involved in the transfer sign off as part of a formal ECN process.
6) Manage and greatly limit the number of sole sourced components. In both AML & AVL.
7) Work with suppliers through-out the design process on how best to ensure a viable supply chain of materials as well as material costs, and material lead-times as you migrate the assembly to production location.

1) Perform Engineering Verification Testing (EVT) onshore and resolve issues prior to planning production release.
i. Build 50 or 100 units
ii. Build exactly to Engineering release of both product & assy/test setup (numerical rev)
iii. Limits material expenditure to a low cost level especially if changes are needed
iv. Determine:
1. Functionality
2. What wasn’t documented and/or issues raised by CM in performing the build
3. Part / Design changes needed
4. FW or Software changes needed
5. Yields, plan vs actual
6. Test systems and assembly and test processes fully documented
7. Training requirements
8. Through-put, therefore what is the capacity

2) Perform Production Verification Testing (PVT’s) from your targeted production plant as a prerequisite to releasing the product. All major functions involved in the transfer sign off as part of a formal ECN process.
i. Build 500 or 1,000 units (based on R/R of product)
ii. Build to expected last Engineering Rev of product & assy/test setup (numerical rev)
iii. Limits material expenditure, especially if changes are needed
iv. Units can be used for “Gold” units for both CM and OEM, customer Beta units, sample units for training for Quality & Customer personnel, and UL Test units.
v. Successful build and design then become alpha revision level (“A”)
vi. Determine:
1. Yields
2. Test systems, assembly and test processes released
3. Training
4. Capacity now, in future, need – tie into forecasts
5. Final packaging & labeling reqmts
6. Production tracking to be monitored and agreed to with CM
7. Performance metrics to be tracked by CM for QBR
8. Final standard costs for release of product made transparent to Accounting & Mgmt
9. Supply Chain lead-times, costs, escalation points, AVL, AML
10. Reverse logistics / Repair depot needs and the capabilities
11. Logistics carriers, methods, costs
12. Inventory policy

3) Engineering to focus on the targeted and specified functionality in order to contain design and cost creep.
a. Does it meet the targeted specifications
b. Is it at the cost level targeted……………..make a profit

4) The Yields can be the difference between profit and loss. Yields should be addressed in both EVT and PVT processes.

5) Formalize and release ATE Test systems just as you would release a product.
a. Avoid the “Here’s how it works” approach and the $75k rework jobs
b. Avoid files and designs are only on someone’s C drive
c. How do you increase capacity by factor of 10
i. Leverage CM to be able to replicate test systems (cost effective)

6) Manage and greatly limit the number of sole sourced components. In both AML & AVL.
a. Avoid the “more available than sand”
b. Greatly impacts cost, lead-time, capacity, responsiveness – best way to lower cost is to lower part count and reduce single sourced parts
c. Greatly impacts Engineering resources and cost to continually respond to end of life parts
d. Because it is available here, doesn’t mean it is available there
e. Instill competition from suppliers

7) Work with suppliers through-out the design process on how best to ensure a viable supply chain of materials as well as material costs, and material lead-times as you migrate the assembly to production location.
a. Be aware of supplier’s Point Of Sale…………..gives clue to how they are motivated, and where they have resources to support you.
b. Suppliers can greatly add to the design process
c. Suppliers have a vested interest in the production ramp and sourcing
d. Suppliers may have multiple distribution points and can connect the dots for you
e. Be open to ideas, brainstorm with the suppliers, they were my business partner
f. Create QBR’s with suppliers within the supply chain, make sure these support the CM QBR’s and your business QBR’s

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TRANSITION CHECKLIST

1) Manufacturing contract, if required

2) Program Management – generating a program management timeline for all transfer activities, assigned parties, determined due dates, prerequisite steps/actions identified through successful completion of 1st article builds and Production verification builds

3) Aligning customer’s and manufacturer’s personnel and functions
a. provide full contact list of technical persons and manufacturing persons between customer and manufacturer
b. provide escalation path of critical milestones
c. identify key executives within customer and manufacturer associated with success of the program
d. identify support organizations required for success of transfer (i.e.: IT, Document Control, Engineering, Quality, Supply Chain)
e. identify key support systems (i.e.: PLM system, ERP system, Qualify system, Engineering Data system)

4) Establish and mutually agree upon business metrics to be reviewed and reported as a part of this transition and production
a. frequency of review
b. included categories and specific measurable criteria
c. define the sources for the data to be provided within the measurable criteria
d. define responsible parties for each measurable criteria

5) Financial
a. outlining of financial data to establish credit
b. payment terms and conditions
c. final selling price per unit & stated with FOB point
d. terms for NRE expenditures
e. purchase order, sales order tools and requirements
f. terms associated with pricing adjustments
g. PPV, NPV events defined

6) Personnel transitioning if required or advantageous – discussion on relocating personnel to outsource partner to aid the transition process on either a part-time, full-time, permanent, temporary arrangement which is mutually agreeable by both parties

7) Forecast of product(s) build for planning purposes and establishment of expectations
a. lead-time response for products, by quantity
b. analysis of product life cycle for all materials to assess end of life, lead-times, availability factors
c. manufacturer can begin to inquire of suppliers on availability of materials and forecasting material requirements
d. upside build requirements and their timeframe
e. stocking of FG, or sub-assembly, or raw materials as agreed upon by customer and manufacturer
f. capacity requirements

8) Product documentation
a. release all boms and AVL, so manufacturer can load all the boms & AVL’s into their ERP and tracking systems
b. all source control drawings and electronic files released and filed within Document Control dept
c. get samples of current packaging so manufacturer can reverse engineer and get priced by their packaging sources
d. all expensed items to be identified, usage identified, AVL information
e. All labeling, printed, CD material to be identified, released with original files and rev controlled
f. Firmware release and control
g. Product nomenclatures for reporting and/or required for input to test systems/data
h. Serialization of product requirements (nomenclature, tracking, reporting, systems interface, identified on product and/or containers

9) Special Material information
a. Any parts requirement LOA (letter of authorization)
b. Any parts where customer has established agreement with component vendor, and requires authorization
c. ASIC parts requiring authorization to purchase
d. Any parts requiring an incoming test and will experience a less than 100% yield impact, i.e.: untested ASIC’s
e. Any materials requiring specialized inspection criteria and/or reporting

10) Assembly processes and equipment
a. parts list of all assembly system components with AVL information for all purchased items
b. assembly processes released w/rev controlled
c. assembly process flow diagram w/rev control
d. source control drawings for custom assembly fixtures and equipment
e. assembly yields distribution
f. calibration requirements & servicing organizations
g. RoHS requirements

11) Test processes and equipment
a. parts list of all test system components with AVL information for all purchased items
b. test system programs, rev control of programs
c. test processes released w/rev controlled
d. test process flow diagram w/rev control
e. source control drawings for custom test fixtures and equipment
f. test yields distribution
g. rework processes w/rev control
h. test data & systems compilation & reporting requirements
i. calibration requirements & servicing organizations

12) Quality
a. quality data compilation required by customer
b. quality standards required
c. ISO and/or other certification requirements
d. Auditing requirements, with frequency, organization involved

13) Compliance
a. any compliance, laboratory testing, regulatory requirements E.g. FCC, UL, CE etc.
b. Any third party approval and compliance requirement.

14) Packaging
a. Defined all packaging requirements (including carton box, bulk pack, gift box etc.)
b. Hazardous material packaging requirements (if applicable)
c. Battery or powered devices packaging requirements
d. Environmental packaging requirements

15) Logistics
a. International Terms applicable for project
b. transportation methods to be used, preferred, when deviations are requested
c. preferred freight forwarders and/or logistics companies to use (their contact information to be provided)
d. Hazardous material logistics requirements
e. Powered devices logistics requirements

16) Reverse Logistics
a. Retuned product for customer need for repair depot requirements
b. defined replacement/repair costs
i. repair specifications
ii. repair quality standards
c. Ownership of logistics costs
d. Responsible party for completion of all forms to meet international and customs laws and regulations

17) Product Warranty
a. Workmanship and materials warranty defined
b. New assemblies
c. Repaired assemblies