Procurement Poses the Biggest Risk in Product Development Schedules
Project managers (PMs) often draw Gantt charts. This is a chart where each task and its owner are listed in a row, and a bar extending horizontally shows where that task falls in the timeline. A properly trained PM will decompose tasks and subtasks thoroughly and schedule them exhaustively. But in the product planning phase, or at a higher-level schedule that also lays out promotions, sales materials, exhibitions, and other events side by side, the granularity of what gets represented drops. The thing most often overlooked in cases like this is procurement.
In a broad sense, procurement includes things like the lead time for parts and materials, the lead time for sub-assembly items, and even the schedule for tooling manufacturing. What characterizes it is that it’s a task bound by an extremely inflexible lead time, fixed by the existing supply chain structure. So when you build an overall schedule, it can become the top bottleneck.
Take electronic components, for example: there’s generally something called the standard lead time. It’s roughly correct to understand this as the lead time for the entire process of setting up a production line, procuring materials, manufacturing, shipping, and delivery. It’s generally 10 to 20 weeks. But for common electronic components, there is distribution inventory. This refers to stock sitting in the warehouses of distributors or resellers, not the manufacturer. These can obviously be obtained faster than the standard lead time.
But inventory is always being contested in the market, so it lacks certainty, and you won’t know whether you can get it until the moment comes. Also, for electronic components with distinctive functionality, a major manufacturer somewhere sometimes rushes to effectively buy up the entire supply. This isn’t particularly rare and reliably happens roughly once every few years. We’ve repeatedly seen cases where inventory on the scale of millions of units vanishes from the market in an instant because a component was adopted for a new iPhone model.
A sub-assembly is what’s known as a partially assembled item, and this too generally involves a lead time. Take a cable that’s only assembled on one side, for example, or just the front panel of a display. Each time, you have to set up an assembly line, build out the manufacturing process, establish criteria for shipping decisions, build inspection equipment as needed, procure materials, and then actually run it through the line before it finally gets shipped. It’s not something you can just order online with a click and have arrive, so needless to say, it takes time.
Making tooling takes time too, and this is generally well understood. Tooling works by pouring molten resin or similar material into a mold, letting it harden, and then removing it, which makes it possible to cheaply mass-produce resin parts of the same shape. Once the tooling is made, production from there is fast, but making it takes both time and effort. It’s not unusual for the machining alone to take several weeks. This is the work of machining a large block of metal. After that, a test shot is made, and corrections follow. This process repeats several times before a usable mold is finally completed. As a result, it generally takes 1 to 1.5 months.
What’s listed here is nothing more than a typical example. Depending on the situation, you might need extremely hard-to-obtain parts, or a particular material might be in extreme shortage with its price having jumped several times over. Without controlling for various fluid factors, stable procurement is difficult. That’s why manufacturers above a certain scale generally have a dedicated procurement team.
The content of this post is part (the original text) of the following book. If you’re interested, please pick up a copy of the book.
The Shape of a Happy IoT Startup
The Shape of a Happy IoT Startup
Originally published in Japanese at https://clazytech.com/2022/09/1146/. Translated with LLM assistance and reviewed before publication.