On Product (3 of 4)- Own your Engineering

Related to the previous blog on cordless sets is a problem that I could not fix. Mainly because this was not a technical issue, but an ownership issue. The owner of the company had an opportunity to branch out and have some ownership in a manufacturing facility in China. We already had a factory, but this opportunity was something the owner wanted to pursue. The idea of a second facility was not in itself good or bad. But we did have an issue. We did not truly own our engineering, which meant we needed to do a few things to ensure success and that is where we failed.

Let me correct that. This is where I failed. I failed in not effectively and passionately fighting for the things we needed to make that a success. I, and some others, raised the issues but we were not adamant over it. Partly because our concerns were not well received, but our job as professionals was to make the case effectively and in that, we failed.

Some of the issues that arose out of wanting a second factory included logistics, engineering, and customer service issues. Please note that as of this date, I believe the “new” factory is out of business, so the problems here are no longer an issue, but they were during my time. The issues were in truth simple and easily avoided, but they cost money and that is usually where folks become more susceptible to ignoring the realities of the situation.

For this segment, the suggestion is to “own your research and development and designs”. This desire for a second facility affected our DECT cordless and our SIP SKUs. How? Well, the design of the cordless set was identical, and the second factory could, and did, copy the plastics. So far so good? The issue here is that there is firmware in the cordless telephones, especially in higher tech like DECT. That meant that a cordless handset from Factory A was not compatible with a base set from Factory B etc. That is a real issue.

In addition, the SIP product we had was also duplicated by the second factory. This is more critical as SIP sets have more code embedded. This meant that we had 3-4 SKUs that were duplicates of each other and that would not work well together. In this case, SIP sets from Factory A could not be mixed with SIP sets from Factory B at all. Let me give you some examples of the problems this caused:

1. If you had shipped 100 SIP sets from Factory A and 1 set from Factory B, that one set would not be work. Hard to diagnose remotely too.

2. If a customer called because they took a cordless handset from Factroy A and put it on a base from Factory B and they did not work, Customer Service could provide how to synch the two. Except that becasue they were from different factories, the handset would never synch. That meant a return, logging that in, sending a new phone but that required a call to the property to have them read a particular label to make sure the right set from the right factory was shipped.

3. Inventory Management became more difficult as well. If we had 900 units, that could be 600 of Factory A and 300 of Factory B etc. If you needed 700 for an installation, you were short 100 units or short 400 units.

As mentioned, I was unable to make convincing arguments for us to design our own firmware. The issue was partly cost. You see our own engineering meant our own investment, but the factories in China offer “free” engineering so long as you purchase from them. (They usually charge a small fee per unit as well.) It is usually easier to go with free, hard to argue against that. To make matters more difficult, ownership did not believe that there would be issues with inventory, support, and potential logistics issues.

Our own engineering would have probably cost $75,000-125,000. We may have had ongoing annual costs as well, hard to tell at this stage. We would have needed outside consultants, but owning our own designs meant that we would give both factories the engineering, firmware, and SIP masking for the chips. This would have made the products, regardless of where they were manufactured, fully interchangeable. We also would have had much better control over our features and quality. Just stating that makes it seem obvious.

However, even if we did not own our engineering, there were some secondary, less all-encompassing solutions, that we could have been to implemented including a bar code inventory management system (cost of about $50,000). We did not have such a system in place, in other words, we DID NOT HAVE a system to keep track of the barcodes and therefore only knew what part number shipped and that did not tell us which factory made that SKU. Tracking to the bar code would have made this more manageable but again costs and time were arguments against the new system.

Just to be clear, our inventory management system worked well. It was not the most detailed due to the bar code situation, but it was detailed enough. We kept track of part numbers and had a very good system in place to move inventory around. We did eventually differentiate between factories with an alphanumeric sticker, but you had to physically see the sticker on the telephone (e.g. human interface) to tell products by which factory manufactured them. In the end, we never knew which factory’s product was installed in a property (no bar code scans). This made customer service and technical support very difficult.

As to F3TCH, we are doing as much as we can in-house. Taking some of that cost, finding ways to own our R&D and exerting much more control over our product. This is an ongoing commitment. Lessons learned for sure and while F3TCH is a mobile application, those lessons are applicable with some modification.

It is worth repeating, our suggestion here is to own your own engineering and a corollary is to communicate and fight for the right solution and support for the decisions you are required to implement.

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