Monthly Archives: January 2014

aPriori, rationi viam ad sumptus! Caput II

In yesterday’s post, we re-introduced you to aPriori, the masters of Enterprise Product Costing that have been working their cost reduction magic for a full decade, taking out mountains of cost before the first part is produced! We noted that, even though it’s been over half a decade, the masters of costing have stayed the course and are still focussed 100% on taking cost out during the design and production phases, where up to 80% of the cost of a product is locked in. They do this through complex process models, built on CAD geometry, that they embed in sophisticated VPEs (Virtual Production Environments) which are populated with accurate cost data for each material, machine, and overhead factor that contributes to the total production cost.

Today we want to highlight the major improvements made in the last five years.

Significantly More Production Process Models!

When SI first reviewed aPriori, their out-of-the-box capabilities were limited to metal-based parts only, and there were only a few dozen process models. Now they can handle virtually any metal and plastics component you can think of and support over two hundred production process models out of the box. In addition, they recently signed some very big name electronics manufacturers and are adding electronics process models to their repertoire, and a few of these will likely be available out-of-the-box this year.

Significantly More Virtual Production Environments!

Now that they have close to 100 customers across the Americas and Europe, that produce their components across the Americas, Europe, Asia, and even Africa, they have up-to-date cost models and accurate VPEs for every major geography out-of-the-box. An engineer, or buyer, can get a rough idea of production cost for any supported production process in any geography before even engaging with a supplier, who can, of course, provide even more accurate cost data specific to their factory.

Support for Every Standard CAD File Format and Just About Every CAD System

The more customers you get, the more CAD systems and file formats you have to work with. At this point in their evolution, aPriori now supports every standard CAD file format and every major CAD system currently in use in the manufacturing sector.

Improved UI

It looks better, responds faster, and integrates the best of CAD and OLAP. The main screen has three sections: the component view, the cost model, and the process model. Each displays the high-level information, but in each the user can drill down as deep as she desires.

Full Excel Export Capability

Not only can the user copy and customize process models and VPEs, update / override any cost, and save any scenario – but they can also export the full scenario and underlying cost model to excel for analysis, review, and distribution.

Powerful Comparison Reports

The user can compare multiple process models, and associated costs, for a part side-by-side, and, if desired, export the full comparison report to Excel.

Roll-Ups and Automatic Process Model Generation and Solution

A user can create a component-based production should-cost model that rolls-up the production should-cost model for each part and the system will automatically cost the full component using the individual part geometries and identified (or default) production processes and, if desired, the lowest cost production process for the entire component.

The improvements save their customers millions every year. For example, the construction equipment manufacturer that saved over 500K annually just on frame and door production also saves over 200K annually on cage rear pivot production. The manufacturer thought that machined casting w/x-Ray was the best way to produce the part, but the aPriori solution was able to determine that a two-step process that first burned the part farm from plate and then machined holed the cavities could reduce the cost from 16.56 to 10.05 on 22K cage pivots per year.

And it’s not just construction equipment manufacturers that save. Thermo King, which produces temperature and climate control products for the transportation industry, analyzed 5.679M in annual spend across 294 sheet metal parts and quickly identified a potential savings of 900K (16%) and realized 400K of this in just 12 days! And a a 6.5B manufacturer of commercial trucks that analyzed 7.7M Euro in spend across 86 sheet metal parts was quickly able to identify that 17 of the 86 parts were “outliers” (and nowhere near expected costs) and through additional analysis was able to identify better production methods that led to a confirmed savings of 1.6M Euro (21%).

It definitely helps to know your expected production costs aPriori!

aPriori, rationi viam ad sumptus! Caput I

When we last covered aPriori in 2007 and 2008 in aPriori and The Sourcing Maniacs 2008 Vendor Tour Part III, they were very focussed on Enterprise Cost Management (ECM) and taking cost out of the design phase. Fast-forward six years later, and nothing has changed, except, of course, the depth, breadth, and usability of their platform — which has grown in leaps and bounds.

Unlike traditional sourcing applications, including advanced spend analysis and decision optimization, that are limited to component cost-based should-cost models, aPriori can also factor in design and production factors to model the full production cycle of the part you are buying (if it’s metal, plastic, or, in some cases, electronics-based) and give you a true understanding of what the part should cost to make. The reality is that the cost of a part is dependent not only on its design, but on the production process employed. As noted in our first post, a supplier that’s always made a certain part a certain way might not realize that new technology or materials would allow them to make that part significantly cheaper if they used a different process. Since the aPriori application instantly and directly interfaces with your CAD program and interrogates the solid model to extract the geometric cost drivers, the aPriori application can automatically determine all the process routings that can be used to make the part, compute the costs associated with each step based upon standard machine, material, and labor costs, and compute the total cost of each part on a per unit basis by factoring non-geometric cost-drivers such as production volumes, the selected supplier or factory set-up selected, and the exact routing and machines used. This is because the aPriori application currently supports over 200 out-of-the-box process models in over 12 major process groups (including, but not limited to, Bar & Tube Fabrication, Casting, Forging, Machining, Plastic Moulding, Powder Metal, Roto & Blow Moulding, Sheet Metal Sheet Plastic, Stock Machining and Rapid Prototyping.

In addition, because the application supports the creation of complete VPEs (Virtual Production Environments) that encapsulate the production processes, a customer can fully model the production and overhead costs associated with each production process supported by a factory in question, including local labour, power, maintenance, and other overhead costs to create a fully accurate should-cost production model, which can be compared to alternate production processes in the factory and other factories modeled with an appropriate VPE. This allows for the true identification of the lowest cost because, as the Sourcing Maniacs documented in their vendor tour post, the COGS is a combination of raw material costs, labor costs, production overhead costs, and margin and these costs not only vary by locale and production process, but in their interaction. For example, just because you identify three ways to make a part and each requires three steps, this doesn’t mean that each process is going to be roughly equal in cost. Not only do different processes require different amounts of manpower or energy (for energy-intensive equipment like lasers, etc.), but reordering the steps can change the manpower or energy required in subsequent steps.

Let’s take, for example, the production of the main Frame sides and door for a piece of heavy machinery construction equipment. An aPriori customer was cutting the entire frame using a laser process. While this seemed efficient, as only one piece of machinery was required, cutting the entire frame and door using a laser cost them 75.54 per frame and door combination, and they required over 14,000 of these combinations a year. That’s over a million dollars on just one part! If, however, as discovered by aPriori who analyzed the geometry and ran it through every possible production process that was available to the manufacturer, they switched to a two-stage production process that involved an initial laser cutting of the frame and door followed by an NC Punch process to punch out the internal cavities, the time required to produce a single frame and door combination decreased by 14 minutes and the cost decreased by 56% to 33.29 (as laser cutting is expensive compared to NC punch).

So what’s new with aPriori? Come back for Part II.

Top 12 Challenges Facing India in the Decades Ahead – Prologue

India is the land of contradictions and, as outlined by Jean Dreze and Amartya Sen, it certainly does have An Uncertain Glory ahead of it. It could very well be the 2nd largest economy in the world by 2050, or it could slip out of the top ten and hover three quarters of the way down the top 20 list. Why?

Despite the fact that the Republic of India boasts the 2nd largest population in the world, and the fact that it boasts the largest number of English speakers outside of the United States (Source: Wikipedia) it currently faces more challenges than any emerging country, and certainly any emerging country in the BRICS (Brazil, Russia, India, China and South Africa), and on some metrics, ranks worse than some of the poorest countries in Africa!

While it does have a great opportunity before it, it also suffers from some of the greatest misfortunes of any country on the planet, despite the fact that it is, at the same time, probably the greatest example of democracy on the planet. Consisting of 28 states, 7 union territories and 3.288 Million square kilometers, India has 22 languages of official status in the eighth schedule to the Indian Constitution, 7 major religious groups (Hindu, Muslim, Christian, Sikh, Buddhist, Animist, & Jain), and caste based reservations as a result of the caste system that plagued India until the end of British rule! It also has 6 recognized national parties and 47 recognized state parties. (Imagine the difficulty of getting anything agreed on with that many different viewpoints butting heads!) To put this in perspective, in contrast, the United States, consisting of 50 states and 4 [unincorporated organized] territories, only has to deal with, at most, 2 major languages [English and Spanish] and almost 96% of Americans who declare religion are Christian. Furthermore, there are only 2 major parties and 3 minor parties (Libertarian, Green, and Constitution parties). So, the fact that India has survived, and grown (over the past thirty years in particular), as a constitutional democracy for 66 years is quite impressive.

But the fact remains that this constitutional democracy is plagued with problems and issues that have to be addressed, and solved, if the country is to continue to grow, and flourish in the coming decades, as some optimists are predicting. In the next twelve posts (over the next twelve weeks) in the series, SI will dive into twelve of the most prominent issues to present you with a clear picture of the major challenges that lie ahead of India in its quest to become the next great Asian superpower and the center of your global supply chain.

Stay Tuned!

Will 2014 Be the Year the SEC Kills Crowdfunding? And Innovation With It?

According to a recent article over on VentureBeat, it might cost you $39K to crowd fund $100K under the SEC’s new rules. On October 23, 2013, the SEC Issued its Proposal on Crowdfunding, available as a 585 page PDF, that, if passed, could put an end to crowd-funding, and even innovation, as we know it.

According to the VentureBeat article, the (proposed) legislation requires that the selling of crowd-funded securities take place on registered websites, which doesn’t sound too bad, until you also add in that these websites (which must be registered with the SEC and FINRA), must also provide investors access to a business plan, a detailed breakdown of the planned use of the proceeds, a company valuation, and financials. And already the problems begin.

If you look at the average Kickstarter campaign, it is to create something new, through a new endeavour, which has no financials, no company valuation, and no business plan beyond we plan to build this, in this way, and our production estimates are that it will cost this much. In the end, we will deliver X to you, or to the community. The business may or may not go on once the product is completed (and delivered). Moreover, these efforts are typically put together by the innovators themselves, who have expertise in creation and production, not writing business plans that have to include sections on marketing, sales, financial projections, etc. etc. Who’s going to write this plan? Create the (potentially ludicrous) financial projections? Provide, and take responsibility for, a valuation of a company or product that doesn’t exist?

But this is just the beginning. If the event (intends to) raise(s) 100,000 or more, in addition to providing potential investors with tax returns for the most recent tax year, the firm also has to provide investors with audited financial statements (before the offering and audited tax returns after the disposition of the funds). CPAs (Certified Public Accountants) are not cheap!

In addition, a crowd-funding campaign has to pay the registered website a success fee (calculated as a percentage of proceeds) for facilitating the transaction, compliance costs related to the preparation and filing of individual forms related to the crowd-funding offer both before and after the campaign, and additional fees to third parties whose help it will need to complete the financial (projections), business plan, and obtain a market valuation.

All told, the SEC estimates portal and compliance fees will eat up between 12.9% and 39% of the money raised, but, depending on what the fees turn out to be, and how much help the inventors and creators need to satisfy all of this bureaucratic BS, the costs could conceivably reach 50% of the proceeds, or more!

What is the SEC thinking? If a bunch of educated and reasonably well-informed people want to risk throwing $5 to $5000 of their disposable income behind someone who is willing to take a chance and try to do something new, what’s wrong with that? Innovation is what made North America, and without continued innovation, North America is going to be in big trouble. GDP growth is nominal, unemployment is high, and China owns too much of our debt. We need to be encouraging innovation, not discouraging it.

And while the SEC is spending time and effort writing 585 pages of rules to govern amounts of money that are minuscule in the grand scheme of things, hedge fund managers and investment banks that can crash the market and tank our economy literally overnight run free and get rich at our expense. (And SI agrees, the bank ain’t gonna help you.)

SI isn’t saying that there shouldn’t be some regulations around crowd-funding, as you do want some protections for the common man, but they should be reasonable and minimal. For example, maybe crowd-funding regulations should allow for unregulated crowd-funding events which could be:

  • limited to a maximum raise of 999,999,
  • limited to a maximum investment of 9,999 per investor, and
  • limited to registered platforms
    (that can register for free and decide whether or not they want a cut of the money raised with a 2% limit).

With the exception of (big studio-quality) movies *, most of the crowd-funding efforts are for initial product or idea development, and most of them are looking for (well) under 1,000,000, which is the number where you are looking to build a real company and would, presumably, be far enough along where you could bring in (super) Angel and VC funding.

In SI’s view, the individuals and small teams behind the efforts should be left alone and given a chance to innovate. Some may fail, but that’s okay. The point is that most will succeed, and anyone who is going to invest in crowd-funding understands that innovation is fraught with risk and that sometimes success only happens with grass-roots effort.

If you also agree, your chance to provide the SEC with your views expires in two weeks on January 21, 2014! SI encourages you to Submit Your Comment through this link today! Please save crowd-funding! We need every ounce of innovation we can produce!

 

* These should have their own class of exemptions. You might want some accountability due to the large amount of money that can be involved, but certainly nowhere near the levels that traditional investments of this size require.

Best Design Trends of 2013? Don’t You Mean Worst, VentureBeat?

Of course the doctor is going to to be attracted to an article that purports to chronicle the 10 best design trends of 2013, but after a quick read, the doctor wonders if the author meant to say the trends mentioned were the worst trends because, as far as the doctor is concerned, the list contains four (4) of the worst design trends of the year. (An editing snafu, maybe?)

In no particular order, these four (4) trends are among the worst that 2013 had to offer.

  1. Responsive Design
    There’s no such thing as responsive design, at least not from a programmer’s perspective. The idea behind responsive design is that a single interface is coded to adapt to the viewing environment by using fluid, proportion-based grids, flexible images, and CSS3 media queries. While this sounds great in theory, this is impossible in practice as what looks good on a 5″ mobile touchscreen won’t look good on a 27″ monitor, nor will you be able to fit the same amount of information. In other words, you will have to code the UI to minimize, replace, or drop components as the screen size decreases from whatever the normal viewing size is taken to be (which is probably still 1366 * 788, based upon January 2013 statistics) and to add more components, more options, or more images as the screen size increases from the normal viewing size. You will have to have different scaling rules for images for different screen sizes (as some images will have to not only scale proportionally, but scale in multiples to look good, and only to a pre-set minimum and/or maximum size), return different amounts of data depending on display capability (and, if you can get an idea thereof, processing power), and even adapt the color scheme to the display characteristics. For every component, you end up needing so many rules, to account for mobile screen sizes, tablet screen sizes, laptop screen sizes, desktop screen sizes, and large monitor sizes, that it would have been less code, and less confusion, to just code five different designs. The theory sounds good but the practicality is virtually non-existent.
  2. Delight in Animation
    Just because you can, doesn’t mean you should. The analogy is just because you can down 3 bottles of free vino before you pass out, this doesn’t mean you should. Animations are not only processor-intensive (which is an issue for mobile devices with limited battery life), but they are also bandwidth intensive. Just because the carriers have the capacity, this doesn’t mean the individual does, especially if she’s on the go. Cellular provider data plans are expensive and the last thing we want to do is run up tens of dollars in overage charges for your stupid animation. And yes, many places offer free wi-fi, but usually only have a single low-end 54 MB router that can’t really handle the amount of traffic all of the freeloaders are trying to route through it. Give us a nice graphic if you must, but don’t waste our dollars on frivolous animations.
  3. Creative Typography Explosion
    Some of us like to be able to read what you write and don’t want to spend 30 seconds trying to figure out if the word is ‘moot’ or ‘nook’ because your fancy-smancy psuedo-cursive type-front is so quirky and blurry we can’t differentiate u’s from v’s, a’s from o’s, t’s from k’s, and p’s from q’s. There are a large number of good, old fashioned, type-fronts that have been around for decades for a reason. They work. Use them.
  4. Dashboards
    Everyone should know better than to get the doctor started on this topic. I don’t know how many times I’ve told you that dashboards are dangerous and dysfunctional (which is a message I’ve been shouting from the rooftops since 20007)! Austin got the message. Why Can’t You? (Why do you need to find out for yourself that integrated dashboards are deadly or that dashboards will be your downfall.) Needless to say, the doctor is not pleased by the explosion thereof!

Got any of your own bad design trends of 2013 to share? Leave a comment!