Hardware Startup Product Design: From Prototype to Production

Founding a hardware company with a great product idea is only the start. You’ve got to finance it, manufacture it, market it, and sell it (not necessarily in that order). Not keeping a close eye on any of these aspects can make the difference between success and failure.

Design and manufacturing decisions made early on can have a significant effect on your margins and not only make your original business plan obtainable, but also sustainable for the projected lifetime of the product.

Building a working prototype is only the beginning. As your design goes through iterations, unanticipated problems arise – and until you have a thorough understanding of your manufacturing costs and supply chain logistics, securing equity funding and scaling to production remains a major hurdle. That means knowing how and where every part will be made, from the earliest stages of design.

Part of that preparation is knowing when to bring manufacturers into the conversation. Engage them too early and they may not see the viability of your product – there’s no money in it for them yet, and they won’t hold your hand through the concept stage. Wait too long and you risk locking in design decisions that your preferred manufacturer can't support, or discovering you’ve doubled the cost of a part by not understanding their processes.

The right moment is when your design is developed enough to have a real conversation – and that conversation starts with the RFQ (Request for Quotation).

How to Approach the RFQ Process

Prepare Before You Engage Suppliers

Once you have a thorough understanding of your design, your bill of materials (BOM), and the processes that will be required for production, you can engage with your potential volume manufacturing partners.

In order to give you an accurate quotation, each supplier will expect you to submit your design for them to review and inspect. They will also want to know your minimum order quantity, expected delivery, and potential future business opportunities. All these factors will have a huge effect on the quote that you receive.

How You Word Your RFQ Matters

Most contract manufacturers have a wealth of experience and are able to tell very quickly if your design is complex or expensive to make and how much it will likely cost.

Therefore, be careful how you word your RFQ. If your design looks like it is fully detailed with tolerances and other process-specific notes – and your RFQ mandates that the design is finalized and cannot be changed – then expect a very high quote.

Manufacturers are able to make most things, but implying that a drawing is set in stone means that your quote may include a number of manufacturing operations with specialized tooling or work-holding equipment. All these ancillary activities can increase the unit cost enormously.

Your manufacturing partner can help you explore ways to reduce production costs without sacrificing quality. But getting the most out of that relationship starts with choosing the right partner in the first place.

STARTUP SPOTLIGHT: KAIKAKU

Choosing the Right Supplier

Cheaper Isn’t Always Better

You may get the best price from the faceless supplier on the other side of the world, but if things go wrong it can affect your product quality, release schedules, inventory, and bank balance. The only way to avoid this is to engage with your supplier and allow them to suggest ways to improve your design to reduce overall costs.

While it may seem tempting to a manufacturer to hike up costs wherever possible (you should definitely ask them to itemize their quote), it is actually in their best interests to make the parts as quickly and as cheaply as possible. Tying up machine tools and personnel just for one lucrative job may force them to reject work from other clients. Plus, if it all works out, they will have you as a client for the foreseeable future.

Shortlist, Don’t Blast

While trying to win your business, each contract manufacturer will be quoting your job for free.

It’s not really free for you because you have to invest time and effort to explain your design and your requirements, and review and approve any proposals or potential changes requested by each manufacturer. If you send out an RFQ to 10 different suppliers, that could be 10 times more work for you. Therefore, it’s a good idea to create a short list of suppliers by reputation, recommendation, or previous experience. You may eventually find a cheaper quote elsewhere, but the time spent with each yields diminishing returns.

STARTUP SPOTLIGHT: The Washing Machine Project

Protecting Your Intellectual Property

Use NDAs – But Understand Their Limits

Protecting Intellectual Property (IP) in the hardware startup space is critical, especially when dealing with suppliers you don’t know. If they were to share your IP with your competitors, they could get an equivalent product to market before you on the back of your hard work and innovation.

One way to prevent this would be to have each potential supplier sign a Non-Disclosure Agreement (NDA). These legally binding contracts require parties to keep confidentiality for a defined period of time. NDAs are not foolproof, though, and still rely heavily on the integrity of all involved. You should be especially wary of contract manufacturers who may subcontract some of the work to another third party (e.g., a plating specialist). Unless that third party is also included in the NDA, or they have a generic NDA signed for all the work they receive from your supplier, your top-secret design could be in jeopardy.

Consider Splitting Your Supply Chain

Another option is to spread the manufacture of each part of your design to different suppliers so that they cannot replicate your entire product – but this may not be feasible, especially if you are relying on them for final assembly and packaging. Once your IP is protected and your supplier relationships are in place, the next critical moment is knowing when to stop iterating and commit to production.

STARTUP SPOTLIGHT: Tatum Robotics

Are ECOs Inevitable?

The last thing to consider is when to draw a line in the sand, release your design for manufacturing, and issue the initial purchase order. At this point, you should be confident that all issues have been ironed out and your end product will be manufactured at the quality you expect. If the first product runs don’t meet the standards you require, or you have failures in the field or customer complaints, then you’ll need to pay big bucks for changes to the design or the manufacturing process.

Any changes will need to be captured formally through an Engineering Change Order (ECO). The more severe the change, the more it’s going to cost. ECOs need to be documented clearly so all factors affecting the design, the manufacturing processes, and the overall product are fully understood by all parties. All design changes must then be reviewed thoroughly before implementation to prevent any further issues.

And if you engage with your suppliers upfront, you may even get it right the first time. That’s how the right tools make this entire process – from the first design decision to the final ECO – significantly more manageable.

STARTUP SPOTLIGHT: Zenblen

How Onshape Solves These Challenges

• IP protection: Rather than emailing files you can’t control, Onshape shares designs via a browser link. No account required, no data leaving its servers. When the engagement ends, delete their access in one click. The Publications feature lets you share only the parts relevant to a specific supplier, keeping the rest of your design history private.
• RFQ collaboration: “View” and “Comment” permissions let suppliers measure, mark up, and suggest manufacturing improvements on your 3D model without ever receiving a copy of it. Design changes made in response are visible to everyone in real time.
• ECO management: Built-in Version and Release Management creates an exact record of every manufacture-ready design state. ECOs are worked on in isolated Branches, reviewed, then merged only when approved, so nothing in your released design changes without a clear paper trail.
• Eliminating drawing errors: Model-Based Definition (MBD) embeds tolerances and GD&T directly into the 3D model. There’s no separate 2D drawing to fall out of sync, and when a Revision is released, all manufacturing data travels with it.

Better Tools, Better Results

Of course, there are many factors to consider and many processes to manage in order to successfully launch a new product. But if you carefully plan your design, your design processes, and your design tools, you’ll be much better equipped to handle the unexpected business challenges that are bound to come your way.

(This blog was originally published February 6, 2019.)