The productization business

May 18, 2012 in Uncategorized | No comments

We had several folks tell us in the past week “You guys have a good business model”, meaning our productization services business.  And while praise of any sort is always heartening for a business, this was doubly so because productization is often the neglected stepchild of Father Design and Mother Manufacturing.  So honestly we sometimes question ourselves on this–do we have a niche that is too small and obscure?

Our first public presentation back when we first started was to a local entrepreneurial meetup where several marketing mavens told us that we needed to abandon productization–no one knows what it is.  And while we still sometimes get that “tell me again what it is that you do,” both the terminology and the actual productization service seem to be gaining ground.  We get a lot more head nods these days, and frankly more POs (thanks to all your loyal customers), and increasingly, more repeat business (double thanks!).  So maybe, just maybe, we’re on to something with this productization business of ours.

Chuck

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Those forks in the road

May 7, 2012 in Uncategorized | No comments

The road to product development success is littered with forks.  Zillions of them. Plastic forks, long handled grilling forks, silver forks, rusty old pitchforks, and the occasional forklift.  Some are mundane; some look suspiciously like the forked tail of a devil.

And while it’s true that the decision of which path to take can be tough, we all know that dwaddling will turn us into the armadillos of the product development world.   Road kill.

Metaphors aside, the keys to making quick decisions are:

  1. Recognize that a decision needs to be made
  2. Gather data
  3. Decide based on the data
  4. Move on

Doesn’t matter if this is a technical decision–which power supply topology to use; a supply chain decision–to manufacture onshore or in China; or a business decision–to raise capital or spend that same effort to find new customers or partners. Failure of any of these steps can be disastrous.  Often one fork of the road is to maintain status quo–to move a production line or not; to invest in  a cost reduction redesign; to redo a set of validation tests–and often these are the toughest, since it is easiest to ignore the need for a decision.

In the product development world the lack of speed in making decisions is one of the key drivers to schedule slip.  Gantt charts are sprinkled with milestones and phase-gates, zero length diamonds amidst all those horizontal bars. The problem is this presupposes an instant decision, which sometimes happens but all too rare.  And often for good reason–it can take time to process the data to make good decisions.  But hopefully not too much time.

Returning to the world of metaphors, when you see a fork in the road, take it.

Chuck

 

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The engineer and the MBA

May 4, 2012 in Uncategorized | No comments

Over the past year I’ve had several opportunities to spend some time working with MBA students at two local business schools.  Judged a business plan competition at Daniels (Denver University), and then led a market assessment and am also a mentor for Leeds (University of Colorado Boulder).  Got to hang with MBA students and hobnob with professors.  All  heady stuff, with a dose of irony since my business degree is from the school of hard knocks and managing real P&Ls.  So I learned quite a bit myself, and hopefully gave back a wee bit too.

What engineers can learn from MBAs:

1. Every decision should include a financial aspect.  Spec a part; look at the cost.  Design a process; look at the cost.  It’s not good enough just to say “hey this part functions best.”

2. Look at everything from a total cost of ownership point of view. It’s not just piece part cost, it’s yield, it’s field returns, it’s overhead, it’s inventory tied up on the water.

3. Understand cash flow.  This probably should be number one, but it’s tough.  If you buy a part in China, have it sit in WIP in a factory for a month then two months on the water, that makes a difference.

4. Learn to calculate IRR.  Use it to make financial decisions (1), calculate total cost of ownership (2), and to do an IRR calculation you gotta understand cash flow (3).  Hint: IRR = Internal Rate of Return, an ROI type calculation, but better suited for development type projects with uneven cash inlays and outlays.  It’s the inverse function of NPV = Net Present Value.  And it’s in Excel, although it can be tricky to use (it’s an iterative calculation so sometimes it needs a seed…).

What MBAs can learn from engineers:

1. What a BOM is (Bill of Materials); what an ECN is (Engineering Change Notice); what EOL is (End of Life).

2. Understanding the age old engineering adage: On time. On budget. Works. Pick Two.  Engineering is about compromise. And Murphy was an engineer.

3. What a product development schedule really entails, and how to budget and schedule for the real world.  Engineers know what it really takes to get a product out the door; they know that real product development involves iterations; and that novel products and technologies take a lot of efforts.  Yes DFMEAs and validation testing cost money up front, but they decrease the total cost of ownership. See above.

4. That engineering is very often about good enough; that no product will be perfect; that compromises are in order. And that saving money does no good if the dang product doesn’t  function properly

Of course there is always the option for engineers to just plain enroll in a b-school, but not all of us have the luxury of the time and money to do so.  But that doesn’t mean we engineers shouldn’t learn the key points.  And maybe teach an MBA a key point or three about engineering as well.

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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Engineering for a long product life

April 19, 2012 in Uncategorized | No comments

Last month General Electric unearthed a time capsule buried a hundred years back in the cornerstone of a building.  One of the objects inside was an incandescent light bulb.  They plugged it in and it lit up.  Now that’s engineering.

http://www.cleveland.com/business/index.ssf/2012/03/general_electric_opens_time_ca.html

Not that every companies can claim a product that will work reliability out of the retail pack much less after having been buried for a century. Kudos to GE.  Of course this is a sample size of one and its storage life, not operating life.  But still…

So what does it take to engineer a product that will work reliably for an extended product life?

  • K.I.S.S (Keep It Simple, Stupid): Pretty much what the acronym says–design for simplicity.
    • Note that achieving simplicity is in fact a lot tougher than a really complicated design
  • Run lots of experiments; run lots of tests. Edison is famous for describing that it was not so much that he invented a way to make an  incandescent light bulb, rather that he found thousands of ways to NOT make an incandescent light bulb.
  • Design experiments and tests to investigate orthogonal aspects.
    • Don’t try to design a home run test that clouds the analysis
    • Try to design experiments that will fail–too often engineers try the opposite, to get a pass
    • Learn from all those failures to come up with a design that works
  • Use predictive tools like FMEAs
Hopefully one of my great, great grandkids will one day write about something we designed here at Zebulon Solutions that lasted a hundred years. I kinda doubt it, but it’s a pleasant dream.
Chuck

 

 

 

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Making reshoring work

April 10, 2012 in Uncategorized | 2 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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CU Cleantech Incubation Open House

March 29, 2012 in Uncategorized | No comments

CU Cleantech is holding an Open House to present commercialization assessments on six exciting cleantech technologies, one of which Zebulon Systems has been helping to support.  Join us on April 18th at the CU Deming Center in Boulder, CO.  For more details see http://cucleantech.com/

Chuck

 

 

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Productization denial

March 19, 2012 in Uncategorized | 2 comments

When I talk to long-time colleagues about what we do here at Zebulon Solutions, a typical answer is,  “Good luck with that; most folks won’t know they have a problem until it’s too late.” Not strictly true, but also not that far of the mark, unfortunately.  It is in fact common for startups and even established companies to view the transition from ten working prototypes to volume manufacturing as no-big deal.  It is common for the business plan to include zero dollars for this.  And its all to common for the philosophy to be hey that’s why we have a contract manufacturer.

To be fair it very much depends on the nature and maturity of the technology / products.  For mature technologies and / or mature product lines, bringing the n+1 variant of the product into production is in truth not hat difficult.  But we tend to gravitate toward the “weird s___” products and technologies, typically unproven, typically complex, typically falling into the if it was easy someone else would have already done it category.  Yet even for companies who know they have something new, something novel, something complicated, this denial of the productization magnitude is still disturbingly prevalent.

The reasons for this denial are many. Over commitment from a contract manufacturer, who, in order to win a piece of business in today’s tough economy, may well say “I can do that.” Financial pushback is another common root cause, but eliminating the cost form forecasts does not necessarily eliminate the cost from actuals. Academic or R&D centric development teams with little experience in putting such products into productions also can be too blame.

Some questions organizations can ask themselves to see if they are at risk of productization denial:

  • Is my technology mature?
  • Is my product a variant of an existing, proven product?
  • Has my most senior operations executive launched dozens of new products of a similar complexity and maturity into production?
  • Have I seen a manufacturing line where my CM will build this that is building similar products already?
  • Have I budgeted and planned for production test development? Design validation testing?
  • Have I done a DFMEA?  A PFMEAs? A DFx review?

Lots of YESs, sleep well; too many NOs, better rethink.

Chuck

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News from Zebulon Solutions: March 2012

March 16, 2012 in Newsletter, Uncategorized | No comments

Our March 2012 newsletter is available.

To subscribe to our newsletter, click here.

Chuck

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Rocket scientists and manufacturing engineers

March 14, 2012 in Uncategorized | No comments

A couple of weeks back, I sat in on an executive meetup sponsored by CAMT (Colorado Association for Manufacturing and Technology–a good outfit that we try to support however we can) promoting  their new ACE program in collaboration with NASA. NASA, of course is the ultimate organization run by and for rocket scientists.  But it turns out that NASA wants to find more commercial outlets for its technologies, and hence they are partnering with organizations like CAMT around the country to get the word out that the new NASA is supportive of endeavors that it doesn’t take a rocket scientist to understand.  That’s the good news.

The not so good news is that the three hour discussion was frankly way too focused on the well-hashed areas of fostering innovation and technology transfer and commercialization.  There is nothing wrong with this per se–Zebulon Solutions supports the CU technology transfer office for example via CU Cleantech. But this was a forum on manufacturing, specifically manufacturing in Colorado.  Massive amounts of innovation and / or a  new wiz bang technology is great but if its manufactured in China, there is no gain for local manufacturing.  Think Apple: they develop lots of cool technology and innovate like crazy, but it does not create US manufacturing jobs.  I’m not against China, but I also think we in the US need to put our heads together and figure out how to get competitive in manufacturing again.

Let’s get those rocket scientists talking to manufacturing engineers. And to supply chain experts and industrial engineers and quality professionals and inventory management specialists.

Chuck

 

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