What every hardware startup needs to know about hardware startups is that if you need to read a blog post to know about these issues you better get someone onboard who has hardware experience.
Most of the comments so far seem to focus on KS projects. Of course, there are issues well outside of KS campaigns. Software is easy. You have full control of just about everything you need to assemble your product. Hardware is a different beast.
There are issues in the design and manufacturing of physical products that border on being surreal --until you understand the reasons behind some of them. The first time a distributor told me "delivery for those parts is 22 weeks" I could not comprehend how they could stay in business. As I gained experience I realized they did that precisely because they are trying to stay in business (among other factors).
Also, while true to a great extent, going with authorized distributors isn't necessarily a guarantee of getting good parts. I have a couple of wire racks with enough defective components to buy two brand-new entry-level BMW's to back that up. Sometimes authorized distributors can get, shall we say, creative. Under special circumstances they'll work with brokers to bring in parts to fill orders that might be in allocation. They'll have you agree to NCNR terms and then, if there are issues with the parts you are on your own. If you don't know what "allocation" and "NCNR" mean and you are in a hardware startup...GOTO paragraph 1.
One of the interesting side-effects of our current plug-together "engineering" environment is that kids are coming out of school with very little real hardware experience. Snapping together a bunch of Arduino compatible hardware isn't equivalent to designing and making said hardware. I read lots of complaints on HN about software engineering applicants not being able to code. I've seen the same kind of thing with EE's not being able to design their way out of a paper bag. Pretty sad state of affairs.
It's even worse than what cdawzrd says. In some cases the advertised parts don't even exist on the drawing board, and the manufacturer is simply fishing for interest. When you express interest, a ridiculously long lead time is quoted (which no one will actually commit to meeting), and your interest is duly noted by whoever makes the go/no-go decisions at the company. They get their marketing data, but you don't get your parts... not anytime soon, anyway.
Their parts presumably take about 22 weeks to manufacture and get to the end customer. They probably cannot afford to build the parts ahead of time and stock them, so they only kick off the factory once they receive the order.
In the case of small orders, manufacturers may wait to start a production run until enough orders have come in to make it worth it, which can mean long lead times for someone who only wants 100 of something
There are many scenarios that can lead to these situations. I can't cover them all here. I'll go over what I think is the most important reality to understand in the electronics/hardware game.
First, please understand that chip manufacturers don't exist to sell hobbyists or startups a few dozen to a few hundred chips per year. They need to sell anywhere from tens of thousands to hundreds of thousands of components per month. That's their reality. The bulk of their existence is devoted to producing lines of components that are, to varying degrees, pre-sold under contract and allocated to specific products and manufacturers.
Each component category has different dynamics. What's true for common grade ceramic capacitors and resistors might not be true for the high-grade capacitors needed in power distribution systems for high speed boards. The realities for pushbutton switches are different than what happens in the manufacture of integrated circuits, sensors or connectors.
Except for real commodity items that everyone uses (SMD 0402 5% resistors) lots of components are simply not manufactured outside of solid contractual arrangements with OEMs. This is necessary in order to plan volume manufacturing and, therefore, reduce costs.
For example, it isn't rare to have a component manufacturer ask an OEM for a product plan and projected volumes before even agreeing to sell them a part. The processor in the RaspberryPi falls under this category. There are a number of chips in consumer products that are not available for general low volume purchasing. You can't even get a data sheet unless you can show that you are going to consume the chips in volume.
The point is that the component business, be it switches or IC's is all about volume.
How do small volume users get parts then?
I am going to over-simplify this and simply say that we get to buy what's left over after fully allocated production runs. If you want to buy a component that is being driven with demand by, say, Apple, you can --and will-- run into "allocation" events. These are points in time when the chip manufacturer is contractually obligated to deliver x number of chips to Apple. If there's nothing left for non-contractual customers to feed on they simply have to wait until the next production batch.
Distributors go out and sell these chips. They book orders and feed the numbers to the chip manufacturer. Most of these orders require that you agree to "NCNR" terms. "NCNR" means non-cancelable and non-refundable. In other words: You own what you ordered and there is no way out of the deal. They do this because the chip manufacturer will aggregate all of these orders and tack on that number to the batch they are running for their contractual customers.
The accumulation timeline is variable and often depends on market conditions. During the economic downturn (roughly 2008 to 2010) thousands of parts went on allocation. Lead times got out to 20, 30 even 40 weeks. Yes, if you picked the wrong part you had the very real possibility of having to wait almost a year to get in on a manufacturing run. Why? Because nobody was buying anything and they couldn't aggregate enough orders to justify making a run.
The other --and far more complex-- aspect of this is the need to equalize manufacturing volume. In order to support their infrastructure component manufacturers would rather have a steady and reasonably uniform level of orders per unit time (say, per month or quarter) than crazy unpredictable spikes. This means that they might very well force allocation or control events on the supply in order to group orders and schedule them as necessary. It makes no sense to, for example, increase costs significantly during a month when an abnormal spike in volume occurs when you can often simply tell the OEM that their parts will come out of the next run in four to ten weeks.
Distributors will only stock components they know they can turn over quickly. Inventory turns per quarter or year is THE king metric in any business that holds anything in a warehouse. If distributors stocked rarely used components in order to be able to provide you with short lead times they'd lose tons of money and possibly cause enough self-mutilation to go out of business. And so, in the context of an entire ecosystem that has to remain healthy through variable market conditions there is no choice but to have delivery lead times that are "impedance matched" to what's going on with the entire pipeline and not the needs of a lonely small to mid-sized OEM that isn't really floating the boat.
My first job was at a large consumer electronics company, where I would ask for component quotes up to 10million/year, and not get laughed at... I'm now at a smaller SDR house, where 2k/year is pretty good volume. The level of customer support from the vendors and distributors is significantly different now, and not in a good direction.
We've also run into the "Sorry, we can't sell you those parts" a few times, so it's a for real thing.
What every hardware startup needs to know about hardware startups is that if you need to read a blog post to know about these issues you better get someone onboard who has hardware experience.
Actually, someone who carefully studies Bunnie Huang's blog will end up with a better knowledge of these matters than many practicing EEs have.
Frankly, there's not really that much to know, other than "Don't pay full retail" and "Don't believe any promises that don't come with a FedEx tracking number and/or a report from your own incoming test facility." The rest of the details simply expand on those two admonitions.
I don't understand what this means in the context of business to business deals. Also, sometimes component suppliers have you over a barrel, and they know it. You'll end up paying way more than whatever retail used to be because you need that component.
Experience shipping hardware. Not much happened to me that Bunnie didn't warn me about, directly or indirectly. (I've followed his blog for a long time.)
I don't understand what this means in the context of business to business deals.
"Full retail" meaning "buy production inventory from DigiKey." The manufacturers' reps are usually able to cut you a much better deal than DigiMouse(tm).
Sure. A couple of blog posts and everyone is an expert.
Physical products encompass a very wide range of disciplines. You would be monumentally wrong to think that component purchasing is the most difficult aspect of bringing physical products to market successfully.
It's almost like saying that money is the only variable in building good websites, or the choice of a language or framework. The fact is that software development is a very complex art, often requiring expertise in a wide range of disciplines.
Yes, I know, in my prior post I said "software is easy" and now I am saying the exact opposite. I meant it in relative terms. An individual or a team with the right skill set can hack away and create a world-class software product with free tools, in their bathrobes, in a dorm room. They can deploy it to thousands of people, modify, fine-tune, fix and even pivot the product with little if any cost. College kids right out of school (or even before) can develop and offer significant software products.
Hardware or physical products are not like that. It is rare to have recent grads or drop-outs have the necessary skills to complete such projects. They require a lot of money and multi-disciplinary expertise. These days this generally means expertise in mechanical, electrical and software engineering as well as manufacturing, supply chain management, quality control, testing and more. Depending on what you are doing each of those disciplines often require domain expertise in sub-specialties. For example, electrical engineering ranges from analog and digital design to signal and power integrity --crucial for high-speed designs.
In addition to that, hardware products require expensive specialized tools and often years of expertise using them. Laying out a 12 layer circuit board for an FPGA board with signals ranging into the GHz range isn't something one is going to do with a free PCB layout tool and a handful of online tutorials. The machine I am typing this on has somewhere close to $50,000 in software tools installed --EDA, CAD, CAM, FEA, Field Solvers, Compilers, etc. The cost of the PC itself is a rounding error when compared to the cost of the software, the annual licensing and support agreements as well as the training costs.
Outside of that, depending on what you are doing, you might need tens to hundreds of thousands of dollars in standard and specialized test equipment and tools.
Let's put it this way. YC funds startups to the tune of $15K to $20K to develop the first incarnation of a software product. Just one of our DSO's (Digital Storage Oscilloscope) costs nearly twice that much. The point isn't to boast --we are small potatoes-- but rather to try to impress upon you that the hardware game is very, very different than doing software and the variables involved go far beyond how and where you buy your components or whether your Excel spreadsheet with your BOM is formatted correctly.
I could go on. The point is that in relative terms software products are easy. And that's what I meant.
I once worked for a VP of Engineering who was a hardware guy. I was a hardware guy, things were totally copacetic.
Unfortunately the software guys in that company weren't happy campers, because they were the lowest in the pecking order. The VP was sure that software was "easy", even though he didn't know much about it.
Still, things could be worse. Try working at a company run by marketing (I also did that once upon a time). Then both the hardware and the software guys are sucking hind tit.
Can you clarify what you mean by this? I am not sure if you are agreeing with what I said or pointing out something in my comment you disagree with. Perhaps my comment about software being easy?
I think I tend to agree with you. In this context, I'm trying to make the point that the ability to "ship" software quickly and easily seems to lead people to the belief that shipping hardware is almost as easy, and it's not. I'm not trying to imply that actually writing the software is easy, just that the process of making a piece of software available to millions of people is substantially easier than shipping hardware to millions of people.
There's a lot of tribal knowledge that's difficult to access via Google, although things are getting substantially better, as lots more people are going through small scale production ramps and blogging about it.
I wish there was more of this type of information about injection molding, that seems like more of a dark art than electronic assembly.
What do you guys think of having the component manufacturer source the parts? I've seen some that purchase parts directly from Digikey, but I'm not sure if they pool together orders for discounts, or if they just handle the purchasing so you don't have to. It seems like they could get a better deal than I could (I always assumed that a manufacturer would try to source locally in China and get stuff for dirt cheap, but they buy from Digikey too - seems kind of strange).
Does anyone know any good US based contract manufacturers? All the ones I've seen are ridiculously expensive ($17 for a 4" x 1" board with ~60 components, as opposed to ~$6 at Myro (thanks theunixbeard for catching that error)). I'd love to get something made here in the US, but I can't eat another $10 for my lights - especially for a service like assembly (where the quality seems like it won't matter that much - the light will work or it won't work). I've been toying with the idea of a stretch goal on Kickstarter to assemble some delta bots to do the electronic assembly (it'd be about $1200 for a single bot, whereas contract manufacturing is about $2000, but I'd have something to show for that money with a pick and place machine). Having a machine where you could throw a stenciled PCB on in any orientation, then pick and place the parts onto, and cook it on the spot (moving the camera up and watching for reflow) would be pretty awesome.
It's sticky being in the 'middle' - big enough where you need to use services rather than hand assembly, but small enough where you don't really have any purchasing power. The road to production has a big no man's land in the middle.
>>> It's sticky being in the 'middle' - big enough where you need to use services rather than hand assembly, but small enough where you don't really have any purchasing power. The road to production has a big no man's land in the middle.
Second quote of the week in one week. ;-)
I make a couple of small electronic gadgets for my side business. My day job is also involved in electronic manufacturing, and I've had a good overview of what it involves.
Amusing anecdote: I was restocking a critical part, and noticed that one of the _alternate_ part numbers was on end-of-life status. I panicked and bought out my supplier's entire inventory of my preferred part number.
That turned out to be the world's remaining supply, and the part is now obsolete. I suppose at the end of the day, the lesson is that no matter how good you think your suppliers are about keeping you apprised of component lifetime issues, once in a while, you're going to get screwed.
For being in the "middle," it's not just purchasing power, but that there are a lot of shady vendors out there. Any start-up that is headed towards that wilderness had better have an experienced buyer along. In fact, if you're still working at a day job, any experience you can get in the trenches of supply chain management will probably benefit you.
It's also worth considering what your design chain looks like, because it is intertwined with your supply chain. For instance, if you're shopping your firmware work out, and your microchip goes obsolete, you'll need to have a plan for responding quickly. I've observed that sourcing issues can eat a measurable fraction of your engineering department's time and attention.
At this point, I've stuffed and soldered 1000+ boards.
> sourcing issues can eat a measurable fraction of your engineering department's time and attention.
Or worst. I personally experienced a sourcing issue kill eight months of engineering design work and hundreds of thousands of dollars. It was a simple case of being a small fish in a big pond and the suppliers not giving a shit about providing advance EOL notices. No recourse. You have to redesign your product and hope to survive.
>What do you guys think of having the component manufacturer source the parts?
I'm assuming you're asking about having the contract manufacturer source the parts, right? This is typically called "turnkey" contract manufacturing as opposed to "consignment" where you source the parts yourself. It really depends on the kind of product you're building and your ability to negotiate with component distributors an manufacturers. If it's your first time around and you're optimizing for speed, turnkey is probably the way to go. If you need specialty parts and you know how to source them more effectively than your CM, then consignment may make more sense.
When I was involved in sub-contract engineering (more than 10 years ago) our firm had a weird setup. If we sourced the parts we'd charge a 10% fee. The customer avoided that fee if they provided the parts.
It's weird because when we buy off our BOMs from our regular suppliers we'd get well packed components that were easy to goods-in inspect and put to kit. If we needed 250 surface mount resistors we knew we either had a reel, or we would buy a reel because we'd probably use them.
But when the customers supplied stuff it'd come in horrible little bits and bobs. You'd get a strip of exactly 250 SM resistors. (Which is horrible for the P&P machine we were using, and resistors get dropped by the machine a lot). To us it should have been the other way round - "Supply the kit yourself? We charge you 10% (of something) because we still have to goods in inspect it and kit it and etc".
Most manufacturers are happy to do a mix. So, if your product uses one weird IC and you happen to have stock of it, but nothing else, feel free to tell them that you're supplying that part.
Bunnie Huang (Xbox hacker, Chumby designer, etc etc) also has a good blog series about such things. Here's the first one in the series about making a real BOM (it's more than just the parts!): http://www.bunniestudios.com/blog/?page_id=2812
Right. And this real BOM is what I would call the absolute minimum requirement. Once you start thinking about revision, tracking, defect management, end-of-life management, costing, EDA integration, versioning and other real-world factors and needs of a hardware manufacturing operation a BOM becomes a crucial and far more complex document. There are a bunch of specialized software solutions dedicated to dealing with BOMs. Excel isn't a BOM management system.
Go careful though - some of those systems are kludged to fit on the end of accounting packages. Something that can do payroll, which has been extended to handle ordering, which has been extended to handle BOMs, is really suboptimal.
I have experience of Sage line 50 / line 100. They were awful for the bits most of the company needed to do.
It's the problem with anyone dealing with domains outside of their experience. It's really hard the first time through to even know the right questions to ask. And, sure, you can buy a pizza for a friend who has some experience with the domain and that helps to a degree. But, as you say, I'm not sure there's a good answer (other than just assuming it will cost 2x your estimate and 2x your time estimate).
The last part is only semi-kidding. Back when I was a project manager (where I DID have some domain experience), that was my rule of thumb and it was more accurate than I like to admit. In another former life in a different role, we had these 95% schedules which were really 95% confidence assuming nothing significant goes wrong schedules--which were about as accurate as you would imagine.
I'm kicking around the idea of forming a hardware startup after a successful proof of concept using off-the-shelf electronics that I assembled by hand. What's really holding me back is that I have no idea where to start with a custom design or talking to manufacturers. The only option I can think of is hiring someone with experience in making customer hardware products at scale, but that's pretty expensive to bootstrap.
See, that's why I love HN. There's a huge wealth of information available to help people with an idea and a prototype have a shot at getting to market. Thanks for all the replies, everyone!
I'm only coming from the perspective of a buyer and interested tinkerer.
* It's better to over-deliver than over-promise. Yes, your marketing materials were really shiny but the product didn't really live up to expectations
* After-sales support is so bloody important - don't disappear after you've shipped (MiiPC & Cubieboard I'm looking at you)
* Don't lie to me if you say your product is going to be open source or worse, "hacker friendly" (although this was a problem even before Kickstarter and Indiegogo)
* Tailor your communications to your market - the wonderful people over at Ninjablocks/Little Bird Eleectronics had some issues with writing copy that was aimed at general consumers where a lot of their market wanted real technical details
Of course, you'll have different issues to deal with if you're going the VC/startup route rather than the crowdfunding route.
There are turnkey manufacturers who will build all this for you, but the starting place is a manufacturable design. If you started with off the shelf modules, then one of the first steps would be to get there. So, schematic development and PCB layout to come up with a single PCB that incorporates everything, into an off the shelf plastic housing would be the first step. Then you've got something to build 5 or 10 of, and see if people want to buy them. Bunnie Huang's blog has some good material on this.
I agree. I once got quite into the console-hacking world (think Ben Heck, and the like), and got thinking quite seriously about creating a successor to the GP32.
I did a lot of research, talked to some finance guys, and realised I was in well over my head if it was to ever be more than a prototype, so I dropped it. Would've loved to get more info than I could glean from the guys I knew who had supply chain and manufacturing experience: their opinion was "don't do it". Probably a good idea that I listened ;)
This is an excellent basic article but ignores some significant advantages available. For starters, "brokers" don't really exist in the way described. Many franchise and most independent distributors broker parts from each other. Arrow and Future in particular. Secondly, brokered parts can be an excellent source of cost savings; many will buy a 5k reel to sell 1k pieces and are left with extra inventory that can be had for pennies on the dollar. There is risk admittedly , but finding a reputable independent distributor like America 2 or Signature Electronics can be a benefit to purchasers. Aside from cost savings, these companies can offer forecast information to help you avoid some of the problems listed.
As for finding a good contract manufacturer, there are services like EMSforce that can take a project and present multiple bids to you in a way that offers competitive pricing without sacrificing service.
Part ordering is time consuming and annoying, and the pricing in low volumes (typical for development work or upstart products) is really awful (high, and large disparities between suppliers). We created http://sandsquid.com for making it easier to purchase components online (especially at the early stage of the product life cycle) while still maintaining reasonable pricing and an ability to easily scale up the orders as needed.
Sandsquid was born out of our own need, manufacturing USB test jigs for a customer of our consulting business (we then made it as a bunch of scripts, but then decided it's too good to keep for ourselves). We just couldn't come to terms with the amount of effort it takes to order parts for a moderately complicated PCB.
here, Sr. Hardware Engineer from big consumer electonics corp.
this blog is tooo basic.
for startup, they should co-work with design house instead of homemading hardware.
the big cost is the equipments, not the components.
from prototype to engineering sample, u dont need to think about components or BOM.
make it work, make it meet your req of spec, fix all the bug, p/r it, mp it.
Keep it in mind of BOM, but not from beginning, but from the engineering sample.
I remember moving a few of our older products to NRND status at my old gig. It basically meant that we're EOLing the products and it's your last chance to buy in bulk before they'll become unavailable. We let this be known very clearly to our main customers, but I doubt small time buyers who buy from our Distis really got the message :(
Definitely a good thing for hobbyists/Kickstarterers to keep in mind!
Most of the comments so far seem to focus on KS projects. Of course, there are issues well outside of KS campaigns. Software is easy. You have full control of just about everything you need to assemble your product. Hardware is a different beast.
There are issues in the design and manufacturing of physical products that border on being surreal --until you understand the reasons behind some of them. The first time a distributor told me "delivery for those parts is 22 weeks" I could not comprehend how they could stay in business. As I gained experience I realized they did that precisely because they are trying to stay in business (among other factors).
Also, while true to a great extent, going with authorized distributors isn't necessarily a guarantee of getting good parts. I have a couple of wire racks with enough defective components to buy two brand-new entry-level BMW's to back that up. Sometimes authorized distributors can get, shall we say, creative. Under special circumstances they'll work with brokers to bring in parts to fill orders that might be in allocation. They'll have you agree to NCNR terms and then, if there are issues with the parts you are on your own. If you don't know what "allocation" and "NCNR" mean and you are in a hardware startup...GOTO paragraph 1.
One of the interesting side-effects of our current plug-together "engineering" environment is that kids are coming out of school with very little real hardware experience. Snapping together a bunch of Arduino compatible hardware isn't equivalent to designing and making said hardware. I read lots of complaints on HN about software engineering applicants not being able to code. I've seen the same kind of thing with EE's not being able to design their way out of a paper bag. Pretty sad state of affairs.