7 Mistakes Contract Manufacturers Make During the NPI Process

Most of the time, hardware startups are faced with the challenge of New Product Introduction (NPI) without any past experience in manufacturing things. Although manufacturing may feel like a waterfall process, that assumption is far from reality. Especially when carrying a product from prototype stage to pilot run, the tools you make product with almost change completely to accommodate manufacturing larger quantities. (You wouldn't use a 3D printer to make case assemblies now, would you?)

This means Contract Manufacturers (CMs) like us have a big responsibility in guiding projects in the right direction, cut away needless expenditure and time-wasting activities (Remember my example about 3D printing case assemblies?). We got together with Chris Howes, VP of NexPCB at our China headquarters to discuss common pitfalls CMs fall into during the stages of NPI. Watch the video below to learn about these mistakes so that you can avoid them in YOUR production:

1) Contract Manufacturer Doesn't Understand Your Target Market

2) Not Accounting for Flexibility and Product Pivots

3) Having Inexperienced Engineers, Not Doing a Throughout DFM

4) Testing Method Doesn't Cover the Important Things

5) Lack of Communication between Internal and External Stakeholders

6) No Focus on the Supply Chain, Weak Supply Chain Management

7) Weak Response to Supply Chain Shocks

For those who prefer text:

Orkun: Hi everyone today we'll be looking at seven common mistakes Contract Manufacturers make during the NPI process. I'm Orkun, and this is our Vice President, Chris. Chris, how are you today?

Chris: Hey everybody. I'm great. Thank you.

Chris (Ex-IBM, Systems Architecture) has been working closely with hardware startups as early as mid-90's.

Orkun: First, Contract Manufacturer does not understand your target market. Chris, in terms of why a Contract Manufacturer should understand the customer's target market, what would you say?

Chris: Well, every product that we make and every product that a CM makes, obviously is going to go into an end user's hands. There's something they're going to use that product for. And it's very important that when you're producing any type of a product for whatever industry is in, that it be customized really for that end user.

Whether it's a consumer electronics device, whether it's an industrial IoT device, whatever that that industry makes, there are things like durability, there's material quality, there's many different aspects of the product itself that you need to understand to make it well, so that when it goes to that final end user, it really meets the expectation that they have on that product.

Orkun: Second most common mistake that Contract Manufacturers make is not accounting for flexibility and product pivots. Hardware startups start off with a napkin idea and until they reach production stage, there'll be many changes to their product.

So, a Contract Manufacturer should be flexible and account for these pivots as well.

Chris, of all the companies that we worked with have there been extreme changes [to the product] from the idea stage, when we onboard a customer versus what we have produced for them at the end?

Chris: It's funny you'd ask that question. I would actually say that's the more common scenario versus the uncommon scenario.

And the reason why actually is when a prototype is in its initial stages all the way through to its pilot, there's changes and things that have to be done. And many times in the very early prototyping stages, there's a lot of learning going on. And then at the same time, you've got your marketing team understanding your customer.

You have maybe changes to the component markets. There's all types of things that can happen in the early stage of hardware development. And so CMs generally like consistency. They like things to be very even, they want things not to change a whole lot. And if they do change, there's very rigid processes that are required to go through change management.

And so that's really not very good if you're trying to develop a new piece of hardware, right? Where if things change, you need to be able to pivot. You need to be able to, make those adjustments quickly. Because every day that you don't have your product on the market is, cash burn.

Every day you don't have the product in the market is a really an opportunity to miss some of your market. So it really is incumbent upon, those that are making the products for the customers to be able to change what those customers [want], I mean, obviously there's limits and there's things that you have to be able to set in stone as early as possible.

But I think being flexible is very important for a CM when they're working with especially early stage startups

Orkun: Coming to number three: Having inexperienced engineers and not doing a throughout

DFM. For those who don't know what DFM is, DFM stands for Design for Manufacturing.

Chris, how would you explain DFM?

Chris: Well, DFM, as you said, Design for Manufacturing. is a, a process. There's really a set of steps that you have to go through to take a product from something that looks really nice, you know, what we call the, Looks-like-Works-like type of an environment where, yeah it might've worked if you're doing 3D printing, it may have worked. if you did, CNC and may have worked if you diNd very low volume electronics, but what ends up happening when you need to scale? So early stage, if you want prototypes a 100, 200, 500, there's a lot of technologies that can be used to make that happen.

But if you really want to see scale and really get the economies that come from having high scale manufacturing, there's certain types of tooling that you need to use. There are certain types of processes that need to be used that need to scale. And so that's where Design for Manufacturing comes in, where you need to look at the overall design of a product, the packaging, the housings, the electronics, the parts, all the different aspects of this that you say, okay, how can I make this as easy to manufacture as possible? But at the same time, keep the product with the same look and feel and keep the product acting and really working for the end user the same way it would have worked if it was using those other types of processes that may be more additive or slower. So that's really what DFM is about is bridging that Looks-like- Works-like environment where maybe you had a prototype that costs $200 to create.

And you're trying to get that down to $20 or $30. Going through that whole process to understand how do I make this manufacturable? How do I put this in really large scale factories where I can have a hundred people putting together two or three thousand of product every day. So that's really what is the process.

Orkun: In terms of DFM, do you think DFM is something a Contract Manufacturer should do when they first begin a project or is it a [more] continuous process?

Chris: It's most certainly a continuous process. And then it goes back to our first point, which was, understanding the end user and then the second point, which was pivoting and what happens during product development. So if you start from the very, very beginning doing DFM, then you have to kind of restart that process at points because maybe some pivots happen, maybe some changes of design happen, maybe marketing figured out that some things weren't right about the product placement, some things need to change...

And so you have to restart that process, but you also can't wait until the very end either. Because it is process, it takes time. And so, there is still that cash burn element. There's still that element of time decay for a product getting to market.

That makes a difference. So I believe it's a balance. I don't think there's a right or wrong time to start DFM, but I do believe that it's an iterative process that happens at various stages of the NPI cycle.

Orkun: Coming up to number four: Testing method does not cover the important things. So what are those important things? This is actually very similar to the first issue. It's about the Contract Manufacturer, understanding the target market of the customer. You know, there are product use cases and usages environments related to each project and the understanding of this, the certifications and just imagining how this product will be used or abused within that environment, I think is very important. What do you think a Contract Manufacturer can do in order to understand the testing process better?

Chris: So the first thing is understanding that testing is a multilevel type of a topic, right? So there's the testing that happens during manufacturing. There's the testing that happens at various stages, whether you want to call it the QC processes, or you want to call it the, the overall, testing methodologies for the product while it's in production. And that's one type of testing that CMs are generally very good at. But then when you take the next step, where as you said, there may be certain users that need, in order to sell legally to those users in certain countries, there's other types of testing that has to be done on a product in order for it to get electrical certifications or to get, RF certifications or to get some type of a safety requirement. Those are the types of testing that a lot of times CMs may be good with and may not be good with. But those are, those are actually not really in the same category of testing. So when you have one word where you just say testing, you know, for many people you have to be more clear, like, what does it mean? What are we really talking about? The methods around that many times are very specialized for different elements and some of the processes, for example, if you have a medical device, right, there's things that you have to do during the assembly, or there's specific requirements around the assembly facility that, there has to be in order to make that certificate valid. And in order to actually say that your product, went through that particular process. So, and again, I think sometimes it's about the nuance, about what kind of testing does a product, really need. The customer needs to be very good at communicating that to the CM and the CM needs to in turn, understand "How to I do that? And how long does it take, and what is it good for?" And really help to set the stage, you know, in many ways for why that testing is important.

Orkun: Okay, next up: Lack of communication, between internal and external stakeholders. So what we see a lot of the time with Contract Manufacturers is that, once a project has been onboarded, the communication [level] drops between the manufacturer and the customer. There are always lots of things that are left to guessing that the customer hasn't explicitly agreed upon, or the manufacturer hasn't clearly understood. What do you think a CM and a customer should do in order to clear up these issues?

Chris: Well, I think the first thing is to have a solid communication plan. What are the scenarios where a CM needs to get approval from a customer? What are the scenarios where it's very, very important for the CM to do communication.

And then on the other opposite side, the customers need to make sure that they are constantly communicating and understanding things, whether it's timelines, whether they're understanding QC rates, whatever those maybe, the customer also has to be a little bit proactive about making the communication [work].

But I think your point is, well taken and that, really it's a common issue. Especially when your CM is in China or your CM is in Malaysia, or your CM is in Japan and your CM is in Korea or wherever your CM may be, it's possible that the customer or the people that are ordering this product are in the US and Europe somewhere else that's in a completely different time zone. So it's a lot of trouble to stay up late at night. Who do I call? it's late for me. What time is it for them? And then if you email, sometimes emails can fall into a void. Right? So, I think that having that communication plan in place is very, very important. But then also it comes back to what we were talking about earlier. Part of the, the DFX process, is you're also creating procedures, you're creating processes, where there will be break points where a CM has to get input from a customer. If there's a certain QC checkpoint that fails, or there's a certain thing that keeps happening again and again, and again. Then you need to make sure that there's solid communication between the CM and the customer. But then you also made one other point that I think is very, very important too, don't ask a CM to be creative, right?

Orkun: What could happen if the CM gets creative?

Chris: They're gonna make decisions that may not be in line with the vision or the values of the customer. They're going to say, okay, what's easiest for us to do, or what makes the most sense based upon the the parameters that we have that we're working on.

But again, it goes back to if your CM is in a different country, a different culture, a different place than you are, then a lot of the decisions they make are going to be informed by their culture, their background, really how they would think. And so if you're going to ask them to be creative, the framework that they have to be creative, and the framework that you as a customer would have to be creative are different.

And so the chances of you getting an outcome that you're not pleased with is very high.That's why it's very, very important that communication channels be very strong and that there'd be as little room as possible for a creative interpretation or decision making.

Orkun: Coming up to know number six: No focus on the supply chain. [I think] a problem that we see mainly with North American and European Contract Manufacturers is that they have great design ability, engineering resources; but when it comes to manufacturing when it comes to supply chain resources, they overextend and occasionally fail to volume up their production. So, do you think the job of a Contract Manufacturer is to [handle] R&D efforts such as Design for Manufacturing, Design for Assembly, or is it very important for a Contract Manufacturer to leverage their supply chain capabilities as well?

Chris: So for us, part of our DFX service is we look at components, we look at the overall BOM of a product and say: What do we think is going to happen longterm to that product's parts? Are they going to be available for 18 months, 24 months? Is there a high probability that there may need to be a component change in the future? So we do fairly deep supply chain research around our customer's products based upon their production plan. So there's actually kind of two elements to this, right? One element is a customer will tell us their production plan. They'll say, okay, over the next year, I expect to make 40,000 of these products. Or they, they say, well, we're not so sure, but we think it's going to be between 20,000 and 40,000. Right? They'll have an idea. Based on that we can understand from our suppliers and looking at the supply chain, are these various components going to be available? Now that's one element of this, but what happens if is a change? What happens if the customer comes back and says, "Oh, we got a big order. We need to increase our supply by 50%." What do you do? That's actually where the scale of that value comes in ,when you're talking about, countries where, in a bit they're kind of post manufacturing economies. When you talk about Europe and you talk about the US, they have very strong manufacturing capability, but it's normally not high scale. Right? So as you said, their capabilities for precision and for high quality is very good. But if you ask factories there to make fifty thousand or a hundred thousand of something in a short period of time, it's really not the way that they're designed in the year 2020. That's where, having a good contract   manufacturer that understands scale and that understands the ability to be elastic is very, very important. And as you said, some CMs are very good at that, some CMs are not. But really it comes back to, again, that's, a communication challenge. It's a communication issue where a customer has to tell a CM "Hey, this is our expectation." And then the CM needs to come back and be very clear. "Okay, great. We can, we can either meet or not meet that." But they need to qualify and say: "But if you need more or you need less, then this is what's going to happen as a result of that."

And so, again, there's, there's a lot of communication challenges that can happen, even if you're in the same country with your CM, let alone on the other side of the world.

Orkun: We talked very often about, the flexibility that the CMs should have. And now that we're living in these, very odd times that, that restrict traveling, that restrict parts availability, that restrict many things, that creates shocks in the supply chain, how do you think a Contract Manufacturer should respond to these?

Chris: Yeah, you're right. I mean, this year, has been one for memory for a long time. And there have been really multiple shocks to the system that have happened this year. So you had economic shocks, you've had travel suspensions, you've had supply chain interruptions. You've got countries that are not happy with each other on trade. Right? There's a lot of things going on. And so it comes back to really, how do we address these things in a way that allows for customers to get the products they need when they need them. And so, as you said, flexibility is key. Now, the way we do this, is we have 500 suppliers all around the world. Many of them doing very similar things that allow us to minimize shocks and the impact of shocks to our system. And so I would say that to anybody that's doing manufacturing, is working with a CM, making sure that your CM has a geographically dispersed base, they have the ability to deliver, even if there's localized shocks.

We have factories here in China. We have factories in Malaysia. We have suppliers in Europe, in the US and, obviously here in Asia. We're able to a bit more structurally handle some shocks. Obviously big shocks will cause issues for everyone, but we've kind of designed them NexPCB to handle, a lot of different shocks and a lot of different potential issues. But I think it's very important for a CM to realize that, their underlying supply chain and their ability to handle localized., regionalized and globalized shocks is very important and they need to really think about how that affects not only their business, but how does it affect their customer's business too.

So again, flexibility is key. We've talked about that a lot, and especially in the year 2020 and beyond where flexibility is going to be not only the key, it's going to be a strategic imperative.

You can read more about how we handle NPI here: New Product Introduction