Startup company product contract manufacturing and design outsourcing

By Mark Zetter

Startup company executives would be remiss not to consider evaluating a contract product design or contract manufacturing partner during the early stages of developing their company.

Startup and early stage companies outsource many services to conserve the rate at which they burn cash while on the path to reaching break even or becoming cash positive.

Startup product portfolio companies are often encouraged by venture capital investors to increase scope and depth of expertise but not to put much of the required investment to do so ahead of earning revenues.

Typically, by the time Series B funding occurs, many portfolio company executives (focused on the objective of bringing a manufacturing product to market) have finished most of their product prototype work and are beginning to think about product manufacturing and related production issues.

Below is a startup company rolling operations plan. While it is not comprehensive, the plan does include many startup company product manufacturing activities and components for executives to consider when bringing a hardware-based product to market.

Startup executives can refer to this plan to help them review internal depth and scope capabilities against anticipated company capability requirements so they may then determine at what point it may make sense to consider evaluating and engaging a contract product design partner or contract manufacturing partner.

Startup company inception to first three months (critical period)

Determine cohesiveness of startup's product development teams
Gain clear understanding of startup executive team and what near and long-term goals are
Weekly status-to-plan review (followed by setting up monthly budget-to-plan review)
Coordinate product assurance group strategy to ensure field requirements are met
Ensure printed circuit board assemblies (PCBA) are laid-out efficiently for integrated circuit test (ICT) with clearly-defined test points (can the test software do troubleshooting?)
Ensure startup is well-positioned to sell its operational capability to startup customer base

I. Manufacturing infrastructure needs (mid-term):

Establish product manufacturing and operations strategy
a. Review current outsource contract manufacturing relation structure for alpha, beta, and new product introduction (NPI) requirements
Identify product quality control strategy

Establish component tracking system, including determining what components need to be tracked and how they are tracked; create approved vendor list (AVL)

Identify startup support needs; align startup strategies accordingly to ensure timely implementation of manufacturing and quality control strategy

Define and help install document control system and engineering change order (ECO) system

Budget planning process to help establish the correct basis budget for startup operations

Identify additional team members required against startup company needs

Guide testing strategy for product printed circuit board and module and systems level (where applicable)

Develop product quality focus group

Review existing suppliers and target alternate suppliers - to establish supplier fit

Identify list of strategic suppliers for the product (meet with each, where appropriate, to evangelize the product to establish ‘mind-share' with strategic vendors)

Review current contract design or contract manufacturing partners low-volume contract service agreements

Define twelve to eighteen month timetable more clearly

II. Long-term manufacturing needs: (all long-term needs in parallel)

Begin relations with contract design house or contract manufacturing providers

Begin request for proposal and request for quote (RFP and RFQ) process; developing quote kits for contract design and contract manufacturing providers to be considered

Begin on-going development of scope and depth for program management activity (for efficient management of eventual program migration)