supply chain

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Bridging the productization chasm

April 23, 2013 in Uncategorized | No comments

Hidden from view to most travellers on the Design Highway, the productization chasm looms into view just as the pinnacle of Mt. Volume Production seems obtainable.  Many a valiant design project has cracked on the rocks below like a gull dropping an oyster.

Bridging the productization chasm

To cross the productization chasm we need a bridge. And the best way to build a bridge is to start from both sides and work toward the middle.

For design folks, this means thinking about production early on, designing manufacturability in from the get-go, thinking about test and process and quality and yes, the dreaded S word, supply chain. It means being proactive, doing tolerance analysis before assembly problems are flagged, conducting DFMEAs (Design Failure Mode Effects Analysis) early on.  It means talking to manufacturing.

For manufacturing folks, it’s actually not just saying, hey design guys you have to follow our rules.  It’s about understanding the nature of the design process understanding that first prototypes are meant to be tested, broken, and redesigned (see We design, we test, we break things). It means taking he time to understand the product functionality and also its market positioning.  Productizing a million-piece-a-month consumer product is vastly different from productizing the transmission of a pickup truck. And it means talking to design.

For both sides understanding and often times compromise are needed.

As for us, well, all too often we get called in after the bridge fails or when no one even considers the need for a bridge.  Good for business maybe but we’d far prefer to be involved early on, helping both sides bridge the chasm.

Chuck

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Three questions answered: Supply chain management

April 17, 2013 in Three questions answered | 1 comment

In the first installment of what we hope will be a series of short interviews on a variety of topics, our new marketing maven, Steph Ross, interviews Teresa Neeley about what supply chain management is. And isn’t.  Hint, it’s not about supplying chains. Enjoy.

Chuck

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I’m a novice with all this supply chain stuff, Chuck’s occasional blogs on the topic notwithstanding, so I figured that I’d start asking questions.  And who better to ask about supply chain management than Teresa Neeley, Zebulon Solutions’ very own Supply Chain Manager (bet you didn’t see that coming….). Better yet, she promised to explain all this in layman’s terms, instead of all the crazy acronyms, foreign sounding techy terms and jargon that tend to fly around the lab. So here are three questions answered on supply chain management.

Steph

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Steph: So what exactly does a supply chain manager do at Zebulon Solutions?

Teresa: We’re a productization services company, which means we don’t have our own products, rather we help prepare our clients’ products for manufacturing. Supply chain development is a very important part of this process for our clients. So our Supply Chain Manager—for example, me—manages anywhere from one to all parts of an assembly for a particular product or product line for the client. This could include sourcing the entire assembled product, and any additional logistics that go along with manufacturing products. I start by first creating a Bill of Materials—often called a BOM, sorry,  you can add that to your crazy acronym list—necessary to create a product. I then provide the client with a list of appropriate contract manufactures and their locations, each carefully selected for the product and the volumes. It’s then selecting the right supplier who can effectively meet the costs necessary to manufacture the product, all while keeping in mind the volume of the product and where its end user is.  Another significant part of my job is to help mentor clients through the new product introduction. I help the client to understand how their product fits into the suppliers manufacturing process and I supply them with the tools to plan, maintain cost and manufacture their product.

 

Steph: What is the most important facet of being a supply chain manager?

Teresa: The most important facet of being a supply chain manager is knowing what is best for our client. It’s finding the balance between listening to what the client wants and understanding what the client needs. Through careful communication and experience, I feel I am able to better understand what the client needs.  I always take the time to sit down and really get to know the people at the company and their product. In doing so, I can find the client a supplier/contract manufacturer that is best suited for their needs.  It’s all about relationships.

 

Steph: What is the most rewarding aspect of your job?

Teresa: When the clients build good working relationships with their contract manufacturers and suppliers. I know I’ve done my job well when the client and the contract manufacturer/supplier not only trust in what I do by bringing them together, but they trust in one another. I feel that building a good working relationship is what ensures a successful product. Knowing that I was a part of that process is extremely rewarding.

Supply Chain Manager

Teresa

 

 

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A solution to a problem, not the other way around

April 8, 2013 in Uncategorized | 1 comment

A lot of  start-ups out there offering technology solutions  in search of problems.  We’ve worked with our share.  Some make it, many don’t. So it’s refreshing to work with companies that have problems to which they are applying technology solutions.

One such company is a customer of ours in Florida, BarMaxx.  They’re in the supply chain management business for liquor serving establishments. It turns out that such establishments–bars and restaurants–have a very real problem: shrinkage.  Which is industry-speak for booze that is poured but does not get paid for.  It’s a multi-billion dollar problem in search of a technology. BarMaxx has a solution  combining RFID technology with high precision load cells to identify the bottle being poured, calculating the quantity that was poured, and associated that with the POS system already in use.  Sounds tricky and it is, but the technology is sound, the benefits are large and the potential savings mind-numbing.

RFID-Radio Frequency Identification-technology has been around for a long time but breakthrough applications like this have been rare. Rare enough that BarMaxx has been nominated for Best Use of RFID to Enhance a Product or Service by the Seventh Annual RFID Journal Awards.  Better yet, BarMaxx is now a finalist in that category, along with Boeing and Parker-Hannifin.  Like people, companies are judged by the company (no pun intended, mostly) they keep, and that’s a pretty impressive crowd.

I wish we could take some credit for their success, but in truth we just started our engagement with them, helping them productize this great technology and take it to the next level. Hopefully including winning First Place at the big RFID show in May.  I’ll be there, rooting them on, and checking out potential vendors for the next generation, highly productized, implementation.  Which will hopefully win a few more awards, but more importantly, will solve real problems for real customers.

Cheers. Salut. Skål. Bottom’s up.

Chuck

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Sometimes cheap is cheap

November 13, 2012 in Uncategorized | 2 comments

Sometimes cheap is cheap.  But sometimes cheap is just cheap.  The old adage, “you get what you pay for,” has its merits, even more so the engineer’s version, “you get less than or equal to what you pay for.”  But it’s also impossible, at any level, to ignore cost as a driver. Driving down costs is table stakes to be in business today; aggressively driving down costs is the only way to make money.  This applies to multinational corporations as well as small businesses.  And it’s not just the big ticket items, it’s also worrying about millicents.

In the manufacturing corner of the universe, finding lower cost–yes, cheaper–solutions is an never-ending struggle, fraught with risks to schedule, quality, customer satisfaction, safety and the like.  Yet ignoring cost is the surest way to go out of business too.  So we walk that thin line, searching for ways to lower costs without compromising other important factors.  And while it’s easy to find a lower cost supplier offering an inferior component or service, its really tough to find a supplier who will provide a quality product at a lower cost.  Likewise cutting corners on processes and quality systems can lower costs but with horrendous downsides.

We’ve got one of our operations guys in China right now, pulling what’s left of his hair out over a tool build gone south.  The really cheap solution has turned to cheap, in more ways than one.  We’re working to find ways to fix a flawed tool design and support the toolmaker in order to get a quality set of tools out for our client, but cheap is not cheap now. Not surprisingly, it actually costs more to fly a team halfway around the world, throwing away half-finished cores and cavities, and doing it over than it would have cost to have done it right (another adage) in a low cost but quality shop. This is not to say that making tools in China is a bad idea–in fact some of the best toolshops in the world today are in China.  And many have low cost structures without compromising on tool design, on steel quality, on skilled toolmakers.  But sometimes cheap is just cheap.

Do drive costs down.  Worry about the millicents. But don’t get (too) cheap.

Chuck

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Onshoring vs. reshoring

August 7, 2012 in Uncategorized | No comments

In this tumultuous election season, the evil antagonist Offshoring as well as the heroic protagonist Reshoring are getting a lot of air time.  Outside of the political arena, manufacturing pundits such as Harry Mozer at the Reshoring Initiative and bloggers like Derek Singleton on What Can be ‘Made in the USA’? are making strong cases for reshoring. Heck, we even blog periodically on the subject, see for example Making reshoring work. But is reshoring really the right battlefield here?

One of the main counterarguments to offshoring is that there is often little or no ROI to the effort that it takes to set up and dial in an offshore manufacturing solution. Spending $50K in travel, $250K in senior management time or a like amount in productization effort, eating 3 months of yield hits, excess field returns, and / or missing Christmas have to be weighed against the cost savings. And like any good ROI calculation  (we actually prefer IRR / NPV, see for example Productizing for dollars) the time value of money has to be weighed in–these costs are up front; the savings comes over time.  So spending $300K to set up offshore manufacturing that will yield a $10 savings on 10K units per year over 4 years with a hurdle rate of 20% yields a negative NPV.

But, and this is big, once this money is invested in off-shoring, there is a similar barrier to bringing it back.  Sometimes this can be offset by local incentives and reductions in overhead costs like travel, but reshoring then has to swim upstream against the recurring savings.

A better financial case can be made for onshoring of new products–never moving their production offshore in the first place. Now the playing field is more level, and a careful IRR analysis may indeed show that using local sources yields savings in the overhead, supply chain, and management bandwidth that offset that labor premium.  Less time spent on airplanes to China means more time spent improving yields or managing the business, more money for design experiments and less for doing far flung audits.

It should be noted that in some ways onshoring is counterproductive to our business model, since we make good money flying our productization team to far-flung locations fixing messed up supply chains and flawed processes.  This week in fact we have a process engineer and a program manager on airplanes doing just that.  But just because we can make money on it does not make it right, and that cost has to be weighed into the equation. Frankly, one advantage to outsourcing such tasks to folks like us is that those costs are quite visible, as opposed to fixed costs of sending overhead already on the payroll.

In our Keepin’ it local series of blogs, we are looking at exactly the onshoring case. We could save some money for sure by going offshore, but would we recoup that additional investment in  terms of finding, qualifying and bringing up an offshore solution?  The analysis isn’t complete in that case yet–stay tuned to see how we fare.

Chuck

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Keepin’ it local, part 1: Requirements

July 20, 2012 in Keepin' it local | No comments

This is the first installment in a series chronicling Zebulon Solutions’s efforts to keep the supply chain local for a large product development project that we’re working on.  We don’t know where this will end up yet, but we’ll report on the path we take along the way.

Zebulon Solutions is a productization services company–we help our customers turn their R&D projects into manufacturing ready products.  We don’t own the product, and often times we don’t even do the design; we just help make it manufacturable. And help is a key word here–we’re rarely the only voice, and we don’t always get the last say in decisions, even when it comes to manufacturing and supply chain.

So we have a major customer, who shall remain nameless (and moreover, somewhat deliberately disguised–we take confidentiality seriously) who is designing a large scale, system level product that we shall call System X.  Think of it as a piece of capital equipment with a BOM cost running into the hundreds of thousands and a number of significant subsystems. We’re not doing the design but we are tasked with setting up the supply chain, from components to subsystems to final assembly and test, and also in helping to optimize the design for manufacturability, testability and the supply chain.

Honestly, keeping it local is not a hot button for our customer.  Other than a firm ban of using China sources, for IP reasons,  we have no direct customer imposed constraints on where we build this nor on the supply chain. What we have are requirements on performance, lead time, price, order flexibility, and end delivery point.  We’ll let these drive the supply chain, and see if they lead to a local solution or no.

  • The product is highly complex, a product in some ways pushing the leading edge beyond anything out there.
    • This means that there will likely be some pretty challenging assemblies and testing challenges
    • It also means that churn is likely
    • Both of the above favor a local supply chain
  • Lead time is also an issue
    • Again this favors a local supply chain
  • As always price is an issue. But our customer is wise enough to look at cost of ownership
    • Development pricing seems to favor keeping it local–less cost for supplier quals, getting on airplanes etc
    • But unit pricing, as always, makes us think seriously about low cost regions, for all the normal reasons
      • For non critical components, of which there are of course many, why wouldn’t we choose the lowest cost supplier?  Which are often Asia based.
  • The customer does have one somewhat unique requirement, in that they need to be able to order these systems in batch size = 1 increments, at sporadic intervals, with little to no forecasting
    • This is what drove us to start thinking local, because we need a lot of flexibility and will have to scramble to hit lead times
  • The end delivery point is tbd, but most likely Asia
    • This does not favor a local solution, but the tbd aspects keep us from looking globally, at least for now

Nothing is locked in yet, but the requirements are at least causing us to think that it would be good to try to keep as much of the supply chain local.  Not quite sure what local means: in Colorado? In the US? In North America? And also, as a complex system, it’s not as easy as asking Where is it built? as we need to look at components, subassemblies, subsystems and system integration.

To date we know that one of the major buy subsystems will come from Massachusetts as a sole source for technical reasons.  There is a custom interconnect component that we have identified a number of US sources for that should work out, and we are starting to look at Colorado based PCBA houses for doing board level assembly.  But many of the electronics components, while coming out of disty, are in fact Asia built, and that is already causing us a few concerns on lead-time but also providing some favorable pricing. Many custom mechanical components as well, but we haven’t scratched the surface there yet.

Still much, much to do.

To be continued.

Chuck

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Good, clean BOMs

June 4, 2012 in Uncategorized | 2 comments

Two supply chain folks meet in the airport.  One says, “Hi Jack, did you bring the BOM?”

OK, so humor isn’t our forte.  But BOMs are.  A good, clean Bill of Materials (BOM, pronounced just like bomb) is necessary for manufacturing any product.  Seems like a no brainer, but it’s amazing the number of small businesses that build products without a good BOM (or drawings, but that’s a whole ‘nother matter).  Often the excuse is that it’s outsourced; often it’s time to market; sometimes it’s just about those round toits (I’ll get around to it…).

A good, clean  BOM is not tough to build.  Oftentimes the basics can be automatically generated as the outputs of a CAD program.  While this is a start, it’s not enough.  A BOM, at a minimum should include:

  • General
    • A tiered structure–so that subassemblies can be identified and rolled up
    • Specify the volumes for which it is costed
    • A date and revision designator
  • Fields
    • Line item numbers–seems trivial but makes it much easier to ID issues and socialize changes
    • Manufacturer (although sometimes this is part of a separate document, the AVL (Approved Vendor List)
    • A unique part number and also the Manufacturer’s Part Number
    • Quantity
    • Unit cost
    • Extended cost–unit cost multiplied by quantity
    • Lead time
    • MOQ (minimum order quantity)

Just be careful discussing the subject in airports.

Chuck

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It takes a village (to build a local supply chain)

May 21, 2012 in Uncategorized | No comments

Been much discussion lately about reshoring, bringing back manufacturing, bringing back the supply chain.  It’s complicated of course–just building something local neither works nor does much good if the supply chain is not local (see for example Making reshoring work or But we assemble it here). I was reading fellow productization and DFM blogger Mike Shipulski’s latest blog, Make It Where you Sell It,  regarding the merits of putting production near the end market, even for things smaller than a tank. Thinking that premise through, it seemed like a good idea but likely not enough–because again it only works if the supply chain is also local, or at least local enough (for more on good enough see our blog on Lagom…)

But if everyone in the “village” did the same thing–up and down the supply chain–then the concept does work. Individually we can’t make a difference, and when we run our ROI calculations we may well get the dreaded “just make it in China” answer.  And that’s important, because if we don’t focus on ROI, on making a profit, we won’t remain in business.  But as a village, all of us together as part of the supply chain, we can perhaps change the answer from red to black.

If everyone made one decision this week to use one additional local supplier, thing what a difference that would make.  Not just for jobs, but energy consumption in freight and even a few more minutes each night reading to the kids instead of yet another conference call.

Chuck

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80% leakage

April 26, 2012 in Uncategorized | No comments

“What percentage of the manufacturing spend by Colorado cleantech OEMs leaves the state?” was the question poised at a recent meeting of the Colorado Cleantech Supply Chain Advisory Board.

“80% leaks out” was the answer.

That’s a pretty big number.  It means that for every bracket bought from a Colorado supplier, four are bought out of state or out of the country. It also means that there is inherent savings to be had in logistics costs and lead time, risk avoidance and quality control, if our manufacturers could only source more of their supply chain locally.  Of course this is a complex question and the cost advantages of low labor rate countries can often overwhelm all other issues, but it is a question nonetheless worth asking.

And of course this is not just a cleantech issue; it’s a problem that cuts across all industry segments.  The solutions are as complex as the question, but include building up a strong, well focused supply chain locally; educating manufacturers on the cost of ownership and ROI advantages of sourcing locally; and working with government and labor to bring down the costs of manufacturing locally.  China Inc is not likely to start quaking in fear anytime soon, but we can do better. We can leak less.

Chuck

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Making reshoring work

April 10, 2012 in Uncategorized | 4 comments

Reshoring is a popular soundbite these days in America.  “Let’s bring manufacturing back to the good old US of A. And in entertainment news, we… ”

If only reshoring was as easy as kissing a baby.

Reshoring is tough for many reasons.  Which is not to say that it cannot or shouldn’t be done, rather to say that doing it right, like most things in life and business, takes up front analysis, careful planning, and skilled execution. Some of the  issues that need to be addressed up front include:

* Reshoring the supply chain: it does little good to bring back final assembly of a system whose entire supply chain in Asia.  And its called a supply chain for a reason–it’s where the suppliers’ suppliers are located too. Which is not to say that domestic content needs to be 100%, rather that this needs to be carefully evaluated. Oftentimes it is best to continue to buy certain components or subsystems offshore while bringing back others.  But this all needs to be looked at holistically

* Minimizing labor content: while offshoring is not all about labor rate differential, nor is reshoring, labor rates are a big part of the equation.  So reshoring means getting aggressive about minimizing the labor content.  Automation is relatively more important than for offshore production, as is line layout, industrial engineering, assembly optimization and training.

* Taking advantage of logistics benefits: in general reshoring provides a benefit in terms of logistics costs, in flexibility, and in quality control.  Developing a game plan that plays to these strengths is essential. Making logistics work favorably can also mean co-loacting with key vendors or customers, gaining savings on packout and freight, and leveraging the cash flow advantages.  Offering customers better terms for example could allow for more pricing leverage while still improving overall cash flow due to not having inventory on the water.

*Designing for manufacturability (DFM): related to the labor rate disparity is manufacturability.  Designing a product that is easy to manufacture takes labor out, reduces scrap, and reduces expensive rework / repair and even eventually field returns.  Close collaboration between design and supply chain is needed to make the right choices on build vs buy and selection of vendors who have secondary advantages like co-location.

* Pricing power: While trite, Made in the USA can command pricing power.  But this only holds up if quality is not just perceived as better but is better.  And this is total quality, including on time delivery, long term reliability, and user experience.  Wrapping an inferior product in a flag won’t go very far.

* Select the right product lenes to reshore: Patriotism aside, not every product line is right for reshoring.  Do the  analysis and be selective. Make sure it makes business sense, not just a knee-jerk reaction.  But do look at the long term and total cost of ownership.

Zebulon Solutions can help with the analysis, the planning and the execution of reshoring initiatives.

Chuck

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