β€Š πŸ“ Have you ever had an idea for a physical product that you just knew had the potential to change the world? Maybe it was something you dreamt up in your garage or a solution to a problem you encountered in your daily life. Whatever it was, you knew it was a winner. If only you can turn that idea into something... You are not πŸ“ alone! Countless entrepreneurs and innovators have stood exactly where you stand filled with passion and drive, but unsure of where to begin, and that's where "The Builder Circle" comes in. My name is Sera Evcimen and I'm a mechanical engineer, hardware enthusiast, and hardware mentor. I've had the privilege of working with numerous hardware companies that are passionate about solving some of the biggest challenges in the world. And I will be your host as we explore the exciting and complex world of physical product development. β€ŠAll right, welcome to the Builder Circle. Today, I have Ying Liu with me, and we're going to dive deep into outsourcing, manufacturing, supplier interactions, specifically overseas, and I'm going I feel like the conversation is going to be incredibly helpful for a lot of startups that are working on hardware products that are looking to outsource and how they can engage with manufacturers, with OEMs raw material suppliers, all of the above. So I'm super excited. Thank you so much for being here, Ying. I can't wait for the conversation. Oh, thank you, Sarah. I'm so excited to be here. Thank you. Okay, could you please tell our listeners about your incredible background and why we're talking about what we're talking about today? I'll try to keep the long story short. Hi everyone. My name is Ying Liu. I'm the founder and CEO for Blue Lake Packaging, a sustainable packaging company based in Silicon Valley. I started working on this since three or four years ago when I have a wake up call just looking at piles of plastics, in the they call the Merv material recovery center waiting to be landfilled somewhere in the Bay area. So I felt like we need to do something for the products that, you know, in the world and also for the supply chain as well. So that's my current role. I'm sure we'll talk about sustainability at some point in this podcast. But prior to that, actually, I had a stellar career with Apple, I spent the 12 years with Apple, basically doing a little bit everything in the worldwide operations from product operations to materials management to planning, and even supplier responsibility. I was the very first expatriate from Cupertino, California, which is Apple's headquarter to Shanghai, China. I basically single handedly built the Apple China operations team from scratch. There was literally no employee, no office. And I built the team, I built the infrastructure, like IT, HR, Finance and also ramped numerous products before I came back to Cupertino again. So that was my history with Apple. And I have always been I felt like an entrepreneurship in my in my heart. And I always love to make things happen. And actually. Also another entrepreneur project I did was a software company I did a trip itinerary planning to for average travelers like myself. Okay, so I think that's a probably give you a brief overview of my background. That's excellent. Being a part of the operations and manufacturing of one of the most One of the biggest inventions of the century, really, and being able to ramp that up from zero and Apple, although had computers and such, it was still a pretty early stage at that point. And so that's I'm very excited to get your opinion and perspective on all that is to set up manufacturing. So to kick it off directly, I always say that when. Startups are thinking through the manufacturing of their product. The first question that comes about is whether it's supposed to, whether they should insource or outsource. Obviously, both have pros and cons attached to them. But I guess from your perspective, what has been your methodology in determining whether to outsource or build in house? Yeah. Okay. Yeah. Thank you for this question because I feel this is a very classic supply chain management question. But the answer could vary from person to person, from company to company. So let me share with you my perspective. The way how I look at this is actually, I think the answer could be, very complicated. There are so many things to be taken into consideration. So for instance, when we're talking about, the stage of the company, you know that I know that this podcast is particularly focused on startups, but also their sort of medium sized, company and then their large company like, when we talk about like Apple and other companies. So the way how I look at this is, as I said, one is really the stage of the company. How big or small the company is in terms of the resources. And then secondly, is also the product assessment. It becomes a matter of how complex the product is. Sometimes they're very complex products that, require a lot of resources to even prove the concept. But also there are products that are relatively simple to make. However, it requires a lot of attention to the quality in order to compete in the marketplace. So I feel like the product assessment is very important. And also the stage of the development normally my view is probably look for local suppliers for very early stage in terms of concept review or concept proof of concept. But look globally we're outsourced, to scale. And another thing, probably the fourth item on my checklist, I would say is a team assessment is also depends on the skill sets and experiences because sometimes, they're probably supply chain expertise already readily available. And people are more familiar with the outsourcing model rather than build in house because build in house requires a lot of know how and the manufacturing skills. But on the other side, there could be. Something easily to be built in house where you want to maintain the IP control the IP in house. We're only outsourcing things like, there's commodities for instance. So the team assessment is also critical. And needless to say, I think at any stage of the company, any stage of the product, people are looking at a cost as well. So in terms of, materials costs and manufacturing costs, even packaging, logistics and even repairs. So there's a cost definitely be part of this considerations. Another thing I would say is schedule. So it depends on how fast you want this product to go to market. Because if sometimes if you have the expertise, like people only make, a handful of them and then it probably easier to build an in house because you can just purchase components and build an in house. But if you really need, tens of thousands of those in a short period of time probably outsource will make it, the scale a little bit easier. And Lisa say, I think I mentioned a little bit about, the sales channels is a matter of the fulfillment, how the product that will be delivered to the customers is that, consumer customers or is enterprise customers will that be only like, one stop shipment to our warehouse or it needs to be distributed, all over the world. So I think that's also. Probably will lead to a different answer in terms of all sorts or built in house. Oh, what a phenomenal way to start. That was an excellent answer. I think you hit the main points of the well one, I think you gave so many metrics that people should be thinking about that. In turn, express how serious of a decision this is, because it really impacts multiple facets of a business and the product itself. And I think one addition that I would add to your list personally would be, the level of risk that the technology has potentially and how much you want to build that core competency in understanding those risks and being able to mitigate them. And I think that actually slots right under the stage of development piece that you said, because that stage of development is really important to think of because sometimes it's like an outsourcing decision on manufacturing. It has to come after the technology development has come to some level of maturity. You don't want to, you definitely want to think of it early on, but not too early where you're approaching these suppliers and you are not ready to pull the plunge. Yeah, I absolutely agree. I think actually I think it really becomes a matter of how much control you want to have over the supply chain. It's becomes the IP part, like you said, I like the word maturity, how mature the technology is, because if the sort of the owner of the business, the company is now ready to even make it the first a few then how would you teach or educate your supplier to do that? So there are definitely a lot of sort of interactions and collaborations between the company and potentially the supplier. But on the other side, I feel like yeah, clearly, if the technology is not there, it's not ready there will be hard or maybe set to fail if that outsource too early. That is such an excellent point. I think one of the most important things, there's this there's this concept where a lot of startups believe that suppliers are not on their team or certain suppliers just really don't want to work with them because they're a startup and they come from a low leverage standpoint, which to a degree, this is true for suppliers, customers have they do a risk assessment or probability assessment according to what they're projected and expectation of revenue is and how willing and potential is the conversion of the customer. How how possible is it that they actually pay us and like all of those things. So there, of course, there is a little bit of bias that suppliers have towards startups, but the excellent point that you made is that. Looking at the maturity of your of your product coming to the table to suppliers prepared and with all of your documentation and all that, and that comes with maturity of the product it will just lead to more successful engagements whether it's whether it's a supplier that you are buying raw material from or a contract manufacturer that you're actually having integration efforts with excellent point. So I guess. You mentioned also from a stage of development, maybe early on you use local vendors because you want that quick turnaround. You want to be able to have control over and maybe the schedule will be a little bit quicker. Costs will likely be high. And then transitioning over to potentially the global market. Could you talk us through how you would go about that or how you would advise startups to go about that? Yeah, absolutely. I think it really depends. Sometimes it becomes a timing of outsource. As I said, probably the first few were maybe a few hundred were particularly during the early stage people want to build locally. So to have Quick feedback and also quick turns and proof of concept really discover all the issues make design improvements. But very soon hopefully very soon that people start, looking at, oh, they're definitely a market fit. There's interest from the penetral customers. So they want to cut an order, cut a PO. Very soon, as long as you can scale, you can make tens of thousands very soon. So people start looking at, who will be our sort of the partner for manufacturing at a scale. For that, I really, I think you're absolutely right. Like a lot of cases, the supplier will look at a startup and say, Hey, I never heard of you before. Do you have, the funding to really support the manufacturing? Do you really? Where you pay me, in time, for all this, or do you have to know how and for your technology really understand what you're doing. Is there a market, for your products that there are so many questions from the supplier side, but the other side, I think, as the. Business owner or the entrepreneur, I feel like it becomes a matter of when people start looking for a supplier to be partnered with for this manufacturing. The way I look at this is, I think it becomes a matter of Really, what's the strength and the weakness is become a assessment of the supplier. What's the strength and weakness of this supplier, and how we find this because a lot of times, even we're in the U. S. and then they're a vendor in, say, China, Japan, India, or Vietnam, or other places like, Taiwan or Korea, it will be hard to have a face to face conversation. Sort of sit down meeting and a walk through the factories, right? How you'll be able to make assessment of the supplier. So the way I look at this is I felt like, really have the supplier give examples of what they have done in the past, show, you know what exactly they've done and how they do it. So I think that's one thing. And then secondly, is equally important, I think, is the project management skill. So really understand who will be the team players, on the supplier side, because a lot of times, like the supplier will send their sales executive, to talk to the company but then the salesperson probably very good at sort of Selling the bright side of the company and then not really understanding some of the other issue they encountered in the past when they execute some of the the product. I feel like the project management, it will be really important I would say to really understand that their project management. Process and who will be the players on the team? And how they do about it. So I think that's super important. And another thing, at least for me, even for my own company, I look at is, I think, a willingness to change meaning that, I'm sure there will be design changes. There will be. Manufacturing changes and things like that, you know how weeding they are how flexible they are to deal with, changes because some of the companies that they are probably very good at, making millions of. Something, but they're not very good at cope with, ECN's engineering, change requests and things like that. So I think that's really very important for small to medium volume of products and how we choose vendors. Another thing I would look at is I felt is that the quality mentality. Because a lot of people were a lot of companies are probably making the same thing. We're serving different customers. But also, just to have this quality mentality. What's their quality plan? What's the testing plan? What kind of fixtures that they're using? Are they really paying attention to details? Or are they coachable to really train them to be attentive to the details? So I think, The quality is sometimes it could be make it or break it. Because, anybody can make, say, something, make an iPhone, but, not every company will produce the same quality, even product may look at the same, right? So I felt like that's those are the few things that maybe I felt like that's a super important to the success. I'm sure there are many more when it comes to evaluation of a supplier. Absolutely. Oh my goodness. I love you. This is amazing. The in depth practicality of what you're just saying is so useful. I'm just, I'm giddy right now at how great of an answer that was. So absolutely excellent points. I was, I like to take notes while I'm listening. And I think one of the things that you mentioned that really hit home for me is willingness to change, which I feel like not a lot of people think about when going into discussions with suppliers, specifically It also really depends on what you are getting from the supplier. It like really does depend on that. If you are getting say a raw material and they have dials that they can play with that changes like the chemical composition or the stiffness or something like that, like getting steel extrusions say that might be quite easy. That might be a really easy ECO but which is engineering change order for those Who might have not heard of the acronym but I think if you are working with a supplier that's building an equipment for you there, you also need to know what their margins are potentially just know how much money they're going to make out of it. And every single ECO ends up delaying when they can get paid because usually payment terms are milestone based. And even the structure of your contracts and the nature of what they're building for you can affect the change willingness to change character of a supplier. But then also there is like the inherent character of the supplier where some of them just want to have very robust requirements. They will make it to the T, but they do not want to hear from you ever again. And that is. Such a critical component that a lot of people just assume that suppliers will be willing to make changes because you're like I'll pay for it. It'll extend my timeline. It'll be fine, but it doesn't work that way because they're working with multiple people and you're a Tetris in their Gantt chart in their project life cycle. So that's that. I think is such a good call out. I fully agree with you on the project management side. I think that is one of the harder things to evaluate because it's rainbows and butterflies in the beginning with your sales rep and they give you like an account manager and they're Painting this beautiful picture but then actual tracking of your project and actual tracking of your manufacturing, that can be pretty dicey. So looking into how they're presenting it and how they intend to track and how they're going to report to you and all of that stuff I've been a program manager, so I personally appreciate that absolutely. I think those are super critical. I really felt I'm glad like you, we share the same perspectives many things like, the project management, I cannot emphasize enough, how critical it is, like to me building hardware products are. Extremely challenging, extremely difficult. Project management in terms of managing the resources, managing the communication, managing the timeline, managing the documentations, those are extremely critical to the end success. And also, I think as you're talking about, willingness to change, I also there one more thing actually came to my mind. I want to mention because I feel like that's also important to consider, which is willingness to share, because a lot of times we want to make sure the supplier is willing to share their cost of structure, willing to to share, some best practices in terms of, Probably material selection were manufacturing processes and things like that because more than times like we rely on suppliers know how they make, that's a sort of their how they make a living. They better know more, than I do in terms of how to. Making that a machine or something like that, so I felt like a willingness to transparency is also very important, you for we give them a cost of structure, especially that they are willing to fill it out to tell us. Okay. This is how much. Material will need for you to stab. And this is the cycle time. This is the yield. This is whether or not whatever the residue materials can be reused or recycled, so they can recoup some of the money and now just a claim a 30 percent of yield loss or anything. So I feel like those are very important. And also you touch on the technology and part of that. I feel like the respect for NDA agreement that's also important, non disclosure agreement. Because I have to say there are times like I visit to the supplier, ask for some questions and immediately the supplier start talking about another client and how they solve, the problem or how the other client has solved the problem and things like that. Then that become a red flag to me because I felt like if they can talk about other clients openly They'll talk about you. my very first visit, I'm sure they probably will talk about my project at some point with other clients. So anyway, so those are the things I think are also important to mention. I have an edge case question for you and feel free to if you don't have an opinion on it, that's totally okay. But I've seen a few times now where there are these suppliers that do end to end turnkey solutions for startups where a startup has this IP or idea and they go to a supplier and that supplier has potentially done something of a variation of it for years. Yeah. But the, there is innovation on it. Basically there is IP that people own and they go to a supplier and say, could you build me this innovative version of something that you've done before? However, so there's this issue that arises. It's interesting, a conflict of interest that arises where the startup itself could potentially in the future. In house manufacture this but because of this kind of early stage of it, they are going to a supplier and they're outsourcing it and I think it's really important for them to become like an inherent competitor if that makes sense, have you ever had to navigate something like that? And how do you do that? Question. Yeah, I think you can definitely see how that happens. And and if there's any sort of work around or anything. I feel it really depends on what the business strategy is. Because in a sense, I think that's back to the outsource and the in house question, because normally, in a sense if it is a more efficient and well, costly, efficient and also logistically it makes sense I would say normally people would choose to do outsourced rather than in house because people would be willing to focus their time and energy on selling, rather than making. So that's one point, so when you say there's a potential a potential. Opportunity for the company to do a similar version in house. So then I probably would first question whether that will be the case if they have already find a vendor that capable of doing that, and they can scale. So that's one thing I want to mention. And secondly, I also felt if the vendor has a capability of doing something, but it's a like improved version of something that they have been doing then I would just say there, I have to say they're always a risk in terms of the vendor will pick up that technology and build that into their future product, because we cannot just, rely on the NDA, even though, I just mentioned, I said, respective for NDA but the other side, I don't feel like purely rely on the NDA. It's gonna the work in the long run because it's a even like the IP, people say, Hey, I patent this, I have an IP on this but I think we all know that the IP is to protect, but on the other side, how much time, people would have to fight, over this. So I felt like if there's a risk. And and it's too obvious that the supplier may copy the technology and take it with them and become a competitor. Then I would say just don't go with them. Because you know that's just, that, you know too much probably headache down the road. Makes a ton of sense. So thank you for exploring my edge case weird scenario. I'm just curious because it has come up a few times and I maybe it's not as much as of an edge case it see like it seemed to have happened to you even with. Insights into materials and vendors not being able to share that. So I'm sure that it happens to a lot of people. So going back on just traditional outsourcing and insourcing what are some common pitfalls you've seen Startups do when they're trying to set up their supply chain and how do you feel like they can avoid them? yeah, I think that's a very challenging and the tricky question because I've seen not only startups, but also even I would say, with a lot of resources, could bet on something that may not yield the result they're looking for. The way how I look at this is, again, it becomes a matter of, I feel like, When we're building supply chain when we're, looking at supply chain as a whole. It becomes a matter of, are we thinking too far ahead. were not far ahead enough. So because it really depends on as I said, the stage of the company, the stage of the development, the stage of the product, and also even the stage of the market, whether or not the market is mature enough to take the products or not, the people need to educate the customers, or this is just a replacement of existing product. So people, there's a demand for it already, but just need a different version or improvement version of something. So I think what I mean is it's really a matter of we talk about so many different factors when we're looking at a supply chain. But then, I think I have a clear assessment of where we are is super critical because people may, choose something like, say, three or five years down the road. I really want to see, how this product that become millions of, The product idea of the day, but, they haven't even built 100 yet versus, they have already built 1000, but they haven't thought about, what's next for them. So I feel like they're definitely people definitely need to strike a balance in terms of what's good enough. In terms of cost, the quality but at the other side, it becomes a matter of the whether or not the partner is a long term partner, even if they have already made a tens of thousands, but are they able to make tens of million war when they're and what's the switch cost, whether or not, better on a run supplier than if we switch to a different supplier whether it takes to get there. So I think yeah, so when you say like a pitfalls, I feel it vary from case to case, but the other side, there's You know, I'm a very sort of a matrix, framework person, develop your own framework and the matrix really understand, out of a zillion things, probably on your list, what are the top three and top five things you think that's super critical to the success of the supply chain, to the success of the product, to the success of the company. So I feel like we all need to be very Objective driven. So if those are things like aligned with the company, the supply chain goals are aligned with the company goals, then that's good, because even at each stage, you need to align those goals and not have a mismatch. Yeah. So I think yeah, I think I set up the goals and really understand where you are with the strength and the weakness of each supplier you're betting on. And I think those are probably more important than many other things I couldn't put on the list. That makes sense. And we talked a little bit about expanding into kind of the global supply chain and I really want to pick your brain on that because that's something that you've actively worked on for years and you continue to go and visit and build insight into that. So in your mind Knowing that most of our listeners are hardware entrepreneurs that are working on many different systems from consumer consumer products to industrial systems, utilizing plastics metal in large, in large aspect ratios and form factors to small would you be able to just recite industry specific examples of where you're at? Folks could find certain things and what the, I guess in global supply chain what the strengths of suppliers are in different regions, because I don't think that's super common. I know textiles are great in Turkey, but that's . That, that would be one example . I'm sure that you have many more. . Yeah, actually that's a very interesting question. Because from my past experience, I I primarily focus on Asia and after apple actually I start exploring different vendor. Like even when I was at Apple, like I. Primarily focus on a mechanical and a system level components and the vendors but after that, I started looking at, for my own company equipment and the raw materials and things like that. So I look at a lot of European companies and and companies in Brazil and in us and Canada. So the way I look at this is I really feel they're probably Supply chain to my knowledge every country in every region in terms of, we'll say, fabrics or were plastic injection or, rubber where, bio based material where flex cables or motherboards and, all things, all kinds of things. I felt there's definitely a regional and the local supply chain in most areas. And what makes a difference is I felt becomes a matter of the business owners personal relationship and the preferences and also becomes a matter of, as we talk about the project management, the cost of the quality and, and things like that. And I will start with I feel like a lot of times. As I said, I felt like the trust is very important. It becomes a matter of whether or not the owner of the business has developed the trust, over a certain supply chain some regions and areas. So for instance, like for me I probably could find a vendor of pretty much, anything in China, that's I spend so much time there developing supply chain myself and have so many networks there. So I know what the boundaries are, what, the suppliers in China can do or where I need to push them to improve, I have to say. But on the other side, I feel like in India, Vietnam, Taiwan. Even Korea and Japan. There are many quality vendors, in those regions as well. When they come to say plastic injection, or, build a motherboard or even electronic system or testers and things like that. I feel. As I said, and also you mentioned this, like the turnkey, the one stop shopping solution. I think one probably specific things I want the business owner to consider is whether or not it makes sense for them to start with, A turnkey solution when the when the company's small and then start building their own supply chain. After that the reason why I'm saying that is because for a small company, say they only have 20 people or even 10 people. Sometimes it will be hard to source every single component all by themselves. They can source at the critical ones. But will be easier to have a turnkey vendor to help them. Based on their vendor database and the know how, or even the scale the volume of the product that they buy it may be cheaper. A lot of people say, even in the past, I have encountered the issue people say, Hey, for the resistor capacitors, if we buy it from the from the retail market, it's a lot more expensive than, electronic. OEM (Original Equipment Manufacturer) they buy for every single customer and then they buy in volume. So it's a lot of cheaper there. So back to your question about, the industry where the specific items from each country, I have to say I probably would not give. A matrix to say, hey, you buy, this wood from this particular region. I'm sure people will find a quality wood and also their different specs. I like now I'm in the plant fiber business. I know like each type of fiber has different characteristics, physical characteristics. So I wouldn't be as specific as that. But on the other side, I would just say build the network and then build that kind of trust because normally people will be able to find components from each region. But what make a difference is is the the cost of the quality the the willingness to change as what we said. I think those are more important probably than than the regional question. And in, in your mind, if there are startups that haven't had networks or experience in diving into vendors in Asia or specifically China do you have any, resources or how they can how they can do that? Because I feel like for some, it feels like a black box at times. Yeah, I think that's a really important thing like for as I said, a lot of cases, if people just started doing their own sort of passion project, they want to really do a hardware project, then they can always start, from local. So look at, what's really in the region, even that's in us, I know they're like manufacturing, Facilities are here to do motherboard. To do yeah injection molding to do sheet metal and things like that to do even anodizing. So I felt like maybe start from local to begin with, to test and approve the concept. And then, once they get into all this supply chain and the industry, they will start building their network. And also there were no more names but of course, there, I know there are turnkey solutions in the U. S. basically in the U. S. or basically in Asia. So if they could find one of those companies probably will make it a little bit easier. And of course, I'm, I wouldn't say I'm readily available, but I'm willing to help if anyone has any particular questions feel free, find me on LinkedIn. I'll be happy to give some. Referrals or answer some questions. Excellent. And when going into supplier selection, we talked about all of the metrics that you mentioned around, their ability to hit project management targets, where it's schedule, cost their quality culture, their just in, in general, how many examples they can give of the work that they've done and so on and so forth. How do you go in your mind, how do you go, how do you go a around selecting the correct sized supplier? Because if you're a super small company and you're going for the big boy suppliers then you might not have a great chance. The relationship key elements that you mentioned start to change a little bit because they might be more willing to make changes for big clients, but not so much for small clients. How do you select the correct size and how do you have a rule of thumb of just, you should be making up, I don't know, some percentage of their revenue to make it make sense. Yeah that's a tough question. I have to say I felt they're probably hard to give a perfect answer. But the way how I look at this is, there are a few things. I normally would take into consideration number one is, as I said, is, a lot of this business relationships are based on trust. So definitely build and expand the network. It's very important, get referrals. It's almost get a, do the fundraising, a lot of times is really based on the referrals and the friends of friends and colleagues of colleagues. So I think that's really important. I'm sure, for those people who are doing hardware, particularly in the startup world their account, their idea is not coming out of nowhere. They probably have done that in their previous career where they have seen other people doing it. And so I felt like it's super important to, to get ready for the supply chain challenge even before the company. I felt the supply chain needs to be part of the consideration, Even from the very beginning from day one. In terms of, choosing the the right size supplier, as I said, one is the network and the referrals. And the secondly is it becomes a matter of when you look at, the revenue or not, I think it's become a matter. I probably would have more looking at Sort of the know how and the strength because a lot of times like the supplier may also be interested in working on a interesting like on a innovative project. Totally. to improve their knowledge and skill because there are so many I, some printers, for instance, and they're I wouldn't say so tired of doing the same thing every day. This is their moneymaker, but the other side, they're really looking to see, and they wanted to have a change as well. So I think it really, it's a little bit like, The storytelling part of the entrepreneurship or the company, provide that vision, share the roadmap, and then let them understand how this product will make a big impact in the industry. So I think get that kind of passion aligned. It's also important sometimes to motivate the supplier. I understand. I think the underlying challenge you mentioned is Hey, I like this supplier, but I'm too small to this supplier, how I can, have them develop interest in me and then we can work together. So really depend also, as I said, it is a a matchmaking. In terms of the vision, in terms of the the passion for innovation and things like that, I think, try to sell it not only from, hey, I can only cut a PL for 10, 000 this time, that's a transactional. I think painted a a rosy roadmap and a picture after the first launch or something, I think that's equally important. Yeah. From what you under from what I understand, if it's a large, potentially larger supplier, they still might have reason to work with you because it would expand their portfolio. And they might, and I do see a lot of appetite in recent suppliers of, we want to expand to startups. We want to do new things. We've basically gotten really good at this and any improvement that we do in our current kind of technology portfolio is just small percentages. Whereas there's other markets that are emerging and they want to be a part of that shift. And startups actually play a really critical game of also educating suppliers in that and having them develop those skills. So that becomes a strength in going into that conversation. So that's a good point. When it comes to setting up payment structures, do you have any kind of rules of thumb that you've used that have come in handy and provide a little bit more leverage than a normal kind of payment term would? Yeah basically, I think that normally when the startups or any companies that are working with a new supplier the first couple of transactions more likely like a prepayment, people want to get cash first before they ship the product. So that's the expectation from the supplier. And then after that I felt when people talk about like sales agreement or service agreement also need to set up the expectation, like maybe after the first transaction you will become like Net 30 or, best of being Net 45 yeah. So I think that's normal. In terms of just setting of expectation, even before the very first assignment because of the supplier definitely understand their get very used to, having a payment term, I want to say is even for startups that don't be. shy of asking for a payment term and say, Hey, let's do 945 to begin with, or even 960 and then negotiate down. So that's very important because I always felt even for startups, so we're they're working with large companies people may feel like the startups are at a disadvantage for many things. But the way how I look at this is, a startup, we own the IP, we have very innovative sort of ideas, so the relationship should start from, we're. Equally important, between supplier and a startup. So let's not, first, consider, hey, I don't really have too much money. And I only have three people working on this. And believe it or not, even for large companies, like I work with For before for some of the new projects, there are only a very limited handful of people on a single project. So it's by itself. It's a startup, right? So it's a luxury, even for a large companies to have 20 people work on the new product from day one. So I feel the startup owners should not really be shy, asking for favorable terms for a volume. Reductions and inventory management storage or something like that. And then how it goes, right? Just a set of expectation. But if people don't ask, it probably will never happen. Exactly. That's such a good point. I feel like there is this shyness that comes with not knowing, potentially and not wanting to piss a supplier off. And there's a way to do it. There's a respectful way of explaining and you said it really well of just like the storyline of just like we're trying to make this happen by this time and we're trying we just raised this round. We are, like, more than happy to pay this, but in order to do that, we are a startup and we want to keep it lean. And is there any way that you could do these favorable terms? And that's how negotiations begin. You Go to what would be ideal for you and they will tell you what would be ideal for them. And those will usually be in the polar opposite zones of what an agreement can be. And then you meet in the middle and that's just, that's common practice. So I think that word of encouragement of just, you can ask, they can say no and then you can go and ask another supplier and they might say yes. And so it goes. I think that's great. Before we go into our podcast break where I'm going to ask you about a hardware horror story or multiple if you want to share I do want to dive into a little bit of How you went from this like kind of low quantity to high quantity production at Apple, because I'm sure that a lot of our listeners would love to know the journey that took. I'm sure it's maybe even a podcast episode of its own . But I'm curious how that was. Yeah thanks for asking it get all my good old days back and remind me all my days and nights in the factories. Yeah, I felt scale has never been easy. I had a, I've been fortunate to witness and also be part of this Apple supply chain expansion. So when I arrived in China back in 2004 literally there as I said, there was no employee, no office in China. And then only small factories probably doing some second tier components or something like second tier suppliers in China. And I really felt if we're talking about from low quality is low quantity to high quantity. It's a probably the way I look at this is probably similar to anything we're trying to do in terms of scale, because I really felt the key is people, so really get the right people on the team and also help people to understand, the goals and objectives, understand the, like in Apple cases, Apple culture and the criteria, the way how Apple thinks sometimes they're very different from other suppliers, where other brands have to say is super critical. So I, in my early days, I spent a lot of time just hiring and interviewing people. I probably during my three and a half years. Working in China. I probably interviewed over 6000 people or Oh, wow. was our 6000 resumes and over probably 600 people at minimum. Wow. Yeah, so there were just so many things like we need to go through for on the people side. And then also in terms of scale, I felt the attention to detail what kind of equipment and what kind of fixture what kind of testers, the test program the SOPs, the quality inspection plan and the criteria whether or not they have the right tools, even the right lighting when it comes to quality inspection. And this is to say, I always put a safety and environment as a highest priority, when they come to manufacturing safety environment, how they do with water management, how they do the solid waste. And then how they deal with their packaging material, even. So those are very important. And also, if we're talking about, it really how we'll be able to ensure, all the things like we just talk about, machining equipment, process quality, even environment and safety will be executed to the plan. I think another thing very important is we need to have people on the ground in the factory. So with the pair of eyes and the mindset from the kind perspective. Because a lot of times we may receive a report from the factory and say, Hey, the yield is 99. 9%. But then when you're really there, you found oh, they're not really using the right lighting. We're not using the right tester where the software program has already been outdated, had never been updated, and things like that. So I feel like At some point, even for startup, it is critical to find some affiliation not directly. Related to to the supplier, higher quality people on the ground or PM on the ground or even share, somebody from another company or something if they can find. I know there's this kind of companies that are providing services, But I think it's critical to use third party perspective to look at the situation. And also I feel like when it comes to scale if you're thinking about have a one production line and a scale to 50 production lines, hopefully every single startup will will face that challenge at some point that means that their products are really successful. I think it becomes a matter of practice makes perfect because qualifying one line and a scale to 50 lines are not exactly the same scale. Finding 200 people working on one assembly line versus, finding, 10, 000 people can repetitively doing the same thing over a course of 250 days in a year are different challenges, I have to say. So I feel like those are my good old days, I have to say, and a lot of stories and a lot of experiences. But in the day as I said, I think what really makes things happen is really people. I think always start with finding the right people, training them, talk to them, communicate regardless of supplier or a third party inspector or your own employees. I think that's a really important. That's excellent. And I do I do see your point. Specifically, the highlight and emphasis you're putting on quality makes a lot of sense to me and it's very obvious to me. I just want to, add a note to it is that what quality, sometimes quality is an afterthought because it's something that, A lot of people say, oh we'll put quality checks at the end of manufacturing. We'll do this, we'll do that, but that's and the reason I feel like that happens is because sometimes people don't understand the tie of what quality actually means to them. In practice, and I think one of the most important things is quality. Obviously, number one gives you confidence around the performance of your product. That's like the most obvious one. Second, it provides brand integrity which is super important specifically as a startup, because I always say to all of the startups I work with is that you're building a company. A product and a reputation all at the same time. Quality really contributes to the reputation and product side of things. And then third is that I think with you mentioned this with yield, for example that's a really clear tie into your unit economics because if you have poor yield, you're still paying for that time on the manufacturing floor, they're just basically. are not able to promise you that all of the products off the line are going to work. So improving that through proper quality implementations and checking and tracking will also improve your, Further down the line, downstream, unit economics, techno economics, and even just like sales pipeline and who you sell to. So they're all, in my mind, they're all systematically connected to each other, even though it might not be inherently obvious. So I greatly appreciate your emphasis on that. Yeah. Thank you for mentioning that. I love this podcast. I really love it because to honest with you, I've been on some interviews and and people ask me a question, but never to the depth as what do you have to ask? I felt like you demonstrated a great understanding of manufacturing and hardware and you understand the startup. That's great. I love you. Emphasize on the quality because I cannot agree more because I felt like particularly for hardware. If people only make mediocre products, and even that's a very innovative idea it's not going anywhere. I think the quality has always been the number one thing, like any of the startup to think about, that's the competitive edge, even before the innovative idea, people can make something happen, but, if it doesn't really last, it doesn't really perform the function that the customer would expect it to perform then I would not call this success. But back to the quality thing. You're absolutely right. But one thing actually does remind me I always like to mention, some other occasions I call the design for quality because I think you said it could be aftermath, type of thing but the reality is actually quality need to be. Prioritize and considered from day one. So when people start doing the product design they need to think about how this product will be tested and also what's the sort of the life lifespan of the product. And also there will be a lot of they call it the female is like a design for affiliate analysis, it's a matter of, how people will use it and how the product will fail. So there's a lot of aspect. People need to take into consideration when it comes to quality and then also so they're the design quality. There's an incoming raw materials quality. They're called the IPQC, the in process, quality, and then the OQC, the outgoing, quality, and then there's a reliability, right? There's a reliability test. There's so many different aspects that people need. To take into consideration when it comes to quality and this is say, I always emphasize on people, but throughout the whole the quality management process just to train the inspectors to train the quality engineers to understand the criteria that's. Also, very important because I also see their companies develop, perfect quality plan. Everything is in blueprint, is a 20 page document, but nobody reads it. When it comes to factory, they're still using their own sort of criteria where they're, they feel like they understand, but they don't really understand. Yeah. Thinking about operators online, how they use this 20 page, particularly if that's in English, how they use that document to do their day to day job. So I think there are a lot of details that need to be πŸ“ checked. Yeah. Absolutely. Absolutely. This episode and podcast are brought to you by my consulting company, Pratik development, where every startup receives a tailored approach in transitioning their ideas or research. To an innovative hardware product. I'm dedicated to helping with strategic execution, product development, scaling manufacturing, and optimizing supply chains to bring your vision to life. I believe that hardware should be accessible and successful. And that's the whole reason that the podcast exists. So if you value the podcast and you'd like the episodes and you appreciate the insights. Please support us by sharing rating and leaving a review at your favorite podcast platform, your engagement is crucial in helping us reach more visionaries like yourself. Thank you so much for listening and being a part of the community. Hardware Horror Stories With that, I do want to go into our fun podcast break to hear about some hardware horror stories that you would be willing to share, because I feel like those are one, the most fun to listen to, and also you learn so much from. Failures. I feel like there's always case studies on successes. I like to flip it on the head and say, what did you fail at? And, or what did you see someone else fail at? And how can we all learn from that? Yeah. Thank you for that question. That's something. That's probably the most challenging question on this product so far, because I felt like I've seen so many hardware startups and I'm actually working on one myself. There are a lot of things could go wrong, particularly when it comes to hardware. As I mentioned, I I did a software startup prior to this one, and I felt like software is when you make a mistake, in coding is a lot easier to correct and then test, and much faster than doing that for hardware product. But I think what makes this a little bit challenging is I don't want to give too many specifics so then people know which company I'm talking about and things like that. Let me make it, I hope you don't mind, let me make this a little bit more generic. Sure. Go for it. Really, I think for for horror stories, I like that. I I think that there, I really feel like for the hardware company one of the very important thing is to to really understand the market. I even see, for instance, like I'm in the packaging business. I don't think like I, I would even call myself the expert in everything that the the packaging industry does. But I found but sometimes I found maybe somebody who is a material scientist and thinking, okay, this material can be used for packaging but this person has very little knowledge about how packaging industry or even packaging works. So I think that could become a potential issue because I do see some of the companies are struggling to find customers. Simply, they don't really understand the market, they thought the material can be useful for packaging, but then that's another way how the packaging works. So I think, yeah, just to really have that kind of experience or a clear path to the market. It's extremely important because a lot of times people normally take it for granted and say, Hey, I know there's a market for this, but the reality is the way it is that there's a reason for the way it is today. And when people want to change it, they definitely need to understand what's the pain point and why, what motivated people to change it. It's not just a marginal improvement. Will. Flip the coin. So I think that market fed is one thing like I often see the startup fail. I do have a few examples, but I, as I mentioned, I think I would just did. I won't name them, but I felt that's one thing. And the secondly, I felt like people become overconfident in their technology. I also have experienced in the past there could be a PhD from a very prestigious, university where somebody they feel like they have the technology and then they can really market it or materialize it. But when it comes to manufacturing, a lab work. is very different from the work in the manufacturing environment. So people feel like even they can do zero to one, then they can do one to 1 million. I think that's a wrong sort of perception. Because there's so many different things that as we have already discussed over this podcast, I think people need to take into consideration. So even if they demonstrate that they can do one or 10 of those how to make them consistently in the same quality at a cost of that can be accepted by the market is a completely different challenge. So I feel like people normally underestimated the challenge of turning a technology into a hardware product and the scale from there. So I think that's another thing I've seen. And then the third one, and I'll stop there after the third one, which is people do their fundraising in order to probably generate to the the concept of the proof of concept product or where some initial samples but then they did not really leave much room for errors for hardware. I have to say, I have never seen a hardware product that hit, will hit the market with their first run, first round of delivery. There will be iterations of changes and modifications in order to make it even sellable. So I feel like people definitely need to budget and Take the errors into consideration. And then live a little bit runway for for the changes. So I think those are the three things that the market fit the lab to factory transition and also leave room for errors. I think those are the three things I would say that would haunt me probably in my nightmare, if I don't do it right, but I've seen some failures or, from other In those areas, that was such a academic approach to, to the to the hardware horror stories. I like it. It's on the meta side of what could cause a hardware horror. And so I do appreciate that. And I definitely have seen that happen. And also, I think like when you launch something into the market, if it's working Absolutely. Perfectly. It means that you probably waited too long because even if something works perfectly, it doesn't mean that it's going to be received that way. If, especially if it's a consumer product and users always change the game. And so getting that feedback early on is always something that comes up on this podcast all the time with most of my guests. Diving right back into the questions as we near the edge of the end of the podcast so often the most often forgotten or not even a metric at all in manufacturing is sustainability and unfortunately, because everyone's trying to get product as quickly out as possible, this metric doesn't even make it to spreadsheets, it doesn't even make it to conversations at times in your mind, how can startups or even bigger companies do their part To make manufacturing more sustainable. Is that. That's my passion right now. And I can see this for the foreseeable future. Because I really, like you said, I, when I was working more in a manufacturing environment it wasn't the first priority, 20 years ago, when I started my career because people always just wanted to make it faster, make it, even the quality and then, make it the function work well. But now I think when we look at the climate change crisis, when we look at the plastic pollution crisis, people start realizing, oh, we need to do things differently. And then take sustainability as part of the metrics. Yeah, so there are a few things I think from my side, this is where I can share my experience. And I feel what we do as a startup, and I know for big companies even like Apple, they, They do this, as well because again, back to the design of the product, the concept of product. So like for me, my company, we always advocate for plastic free products. At the stage of material selection, we're looking at, a wide range of materials that doesn't really contains plastic, like a petroleum based ingredients and then, what, and then so that's the material side and then the manufacturing side, and then that's the functional side. So we look at sort of the product from both end from the And the user how the user will use it. And also from the perspective of, what kind of technology and the materials that we can use utilize to scale as well. So I think to me if I may, I'll just use one of the product that like we're making. So it's a tape product and with actually it's a a cellulose tape and then with a molded fiber dispenser. And so the whole product is plastic fray and people, after they use it, they can either refill it, change it, change the tape where they can throw this. Into their the recycle bin. This is basically a recyclable paper product. So I think but the whole concept is, I think there one thing we pay attention to, one is we call it less is more. So how can we use fewer materials like, fewer ingredients, like number of materials. And also in terms of the volumetric, efficiency keep the product smaller. And also when it comes to manufacturing, how we can reduce the number of steps. In the manufacturing, keep it a simple because, when it comes to carbon emission and with the material treatment, really, we're looking at the from both ends, how we can use less to generate more. And then, secondly, I think a very important when it comes to sustainability is I called it. Design for end of life. So it becomes a matter of how people dispose it, whether or not, any of the product or any part of the product, or even the packaging can be will be any part of the waste stream. That can be utilized in the circle economy. So I think design for end of life is very important. And and from my side, I always encourage people, just like how we do at my own company to prioritize the biomass because we have a slogan within our company called a from nature to nature. So we want that to use renewable. Materials, and then this can circle back into the economy or eventually even, get down to the kind of the soil where, it's biodegradable or, composable or recyclable with paper. Those are sort of the criteria we use. For kind of material selection and design for end of life. Yeah. Yeah, very good question. And I think a lot of companies now started looking at, yes, she there. Yes, she goes in terms of carbon emission, carbon neutrality with treatment and things like that. So I'm very happy to see that trend. Yeah. something that when you are buying from a supplier, because I still haven't yet to come across this, I wish that it existed, but is this something that we can expect that suppliers will give the option to? Because I feel like when it comes to packaging, it's this Untalked of part of any procurement process where it's like the packaging just comes and it's like we do packaging. Usually it's plastic. Usually it's a lot of plastic. And do you feel like it are, is your company also trying to tackle that and maybe be like an add on service to suppliers of just Oh, we're You can pay like 25 percent more for packaging, which may be like you're purchasing something that's, I don't know, 300, 000 and the packaging is going to be like 3, 000. But if you pay 4, 000, then it could be completely plastic free or something like that. Do you feel like that is going to be a part of the conversation when it comes to supply chain? Or is that, like a future that you want to see? And is it active right now? I'm not sure. Yeah, very good question. Very good. Actually, I have to say I have very similar experience. When, it comes to asking a supplier to provide packaging where even you ask an OEM to do the whole turnkey solution. They will just grab and go with whatever readily available and whatever. Sort of cheap enough for them to make a profit, right? Because normally, like even before I started my packaging company I felt like a packaging, that has never been on my radar screen as an issue, like it's always readily available regardless of what but when I really peel off the supply chain, I was definitely appalled by just looking at I would just surprised to see how much. Sort of pollution is generated and how much sort of carbon emission and probably hit involved. Which normally been have been ignored or by many people. Back to the question. Yeah, I think for us, like my company, we're doing plastic free packaging is all platform based. We do functional packaging in terms of like protective film and things like that. And also we do expanded fiber foam. And we have actually a series of other protective materials, like all made of plant fibers. And nonwoven material, molded fiber material and things like that. So for us, we're more like a turnkey for we call the sustainable fiber based packaging solutions. And yeah, I think another I think question earlier, you mentioned that we as a supplier, they probably don't normally first offer any of those sustainable solutions. But to me, I felt like it becomes a matter of you need to ask. You really need to demand, say, Hey, I want a plastic free packaging. Can you find alternatives? So I think that's super important when it comes to ask a turkey to provide the total solution. And also to your point about, Hey, the cost. Yeah, I think for us we try to make it. Cost effective and cost equal to the current plastic based packaging solutions, for instance, but because of the scale is not there. They're definitely as a premium on top of that. But we normally tend to design. As I said, less is more, so we can get rid of few like items in the packaging and make it the total cost of packaging the same as, probably other some other solutions, because, as you can see, sometimes if you open a box that there's so many different bags, so many different tapes, Yeah, it's not necessary. Yeah, and they're probably not necessary. If we, keep the design clean and then we only use the structural material where it needs to be and the protective material where it needs to be, then the total cost shouldn't be higher than what it is today. Okay. That makes sense. In that case, as we close off the episode, I would let, I usually ask my guests to provide, like last parting words and advice to hardware entrepreneurs just, like words of affirmation and encouragement as they're embarking on a difficult journey, but such a rewarding one. Yeah absolutely. I think first of all, I want to say congratulations to those hardware entrepreneurs. I definitely admire your passion and the courage to even start their journey. Because from my past experience, I found like it could be super, super challenging as it has more. Sort of dimensions that need to be taken into consideration. There's so many tradeoffs that need to be made throughout the process. But at the other side I firmly believe, I I look at, many things on the AI, on the software side, but I also look at so many things on the hardware side. I really felt for us to make the life easier and the more sustainable for future generations that, that, that. We cannot get away from hardware, regardless of the computer, regardless of even the TV or phone, or like what I'm doing right now, even a tape and dispenser, we cannot get away from those. But but I think what's more important is really team up with the right people, team up with the people who can complement your skill sets and experiences. Turn your dream turn your ideas into a technology scalable technology and a scalable product. And I think that's very important. So I cannot emphasize enough on the people side. And then secondly, is I also feel like when it comes to manufacturing. Always start with something like manageable, I love the concept of MVP is a minimal variable product. So don't try to have all the features in one product. It's just, too challenging to build everything. So have really keep it a simple and and also cost of competitive is is something need to be designed for from day one. Yeah, I think to me yeah, for any of this if people have questions, as I mentioned find me on LinkedIn send me questions I'll be happy to give you some referrals from my network. And if people have questions about the packaging I'll be more than happy to answer questions. Questions or where provide you solutions particularly from the early stage. Because I felt design something right in the first place easier than make changes later on. Because I hope like all the entrepreneurs, you focus on designing and improving your product. And then later you can focus on just selling the product and make millions of those. And that's more important. Yeah. And I truly appreciate it, Sera, for the opportunity you give me. I honestly did not expect our conversation would be so deep in the hardware development and the supply chain. And I really appreciate all the thoughtful questions you ask, wonderful job. Thank you. The responses you gave are going to be dramatically valuable to the entrepreneurs that listen. So thank you so much for being so generous with your time and your thoughts. Thank you so much. Thank you. Welcome to our two long didn't listen segment, where as always, I give you the key takeaways of the episode so that you don't have to listen to the entire thing. If you don't have the time. And when you do, you can just go back and listen to it and get all of the details and everything that our wonderful guest talked about today. Today we discussed supply chain management, manufacturing and sustainability in hardware startups with Ying Leo. It was such a great conversation and we really dove deep into how to make supply chain. Decisions manufacturing decisions. And she was really anchoring off of her experience of building Apple's entire supply chain infrastructure in China. So it was a very valuable conversation. So without further ado, I'm just going to go right in to all of the key takeaways. And what you need to know. So we discussed outsourcing versus insourcing. Ying stress, the importance of evaluating your company, stage product complexity and available resources. When choosing between outsourcing and Insa house production. She recommended that you start small and local then consider scaling globally to minimize costs. She emphasized supplier relationships and said establishing a trusting relationship with your suppliers is the key. Evaluating them best based on their track, record, flexibility, communication skills, and commitment to quality and told our listeners to see it as a partnership that requires clear expectations and shared goals. So making sure that you set that up from the beginning. Third takeaway was that quality is king never compromise on quality integrate quality checks throughout your production process to ensure your product meets high standards, which in turn bolsters your brand's reputation and reliability. That's where I came in with the classic saying that I usually do with my clients, which is. You're building a company, you're building a product and you're building a reputation. So quality really integrates with all of those things and it's important to integrate it and keep it very core to the product development culture. She gave some scaling insights. So a drawing from her apple experience seeing emphasize the importance of meticulous planning, quality control and on-ground oversight when scaling production. It's about getting the details, right? Ensuring safety and maintaining standards. Then we pivoted into talking about sustainability and she, her current passion is regarding sustainable packaging. So she was talking about how to embed sustainability in your manufacturing from the get-go opt for renewable materials, designed with products end of life in mind and strive for minimal waste footprint. This is something that we can all do. And all of the daily decisions that we make with our product development. So I think it was a really good call-out and she talked about some actionable ways to do that. She mentioned Some just thoughts on financial wisdom. So be prudent with your financial planning. Hardware development can be unpredictable. So allocate resources for unseen changes, iterations to keep your innovation on track without financial strain. And then she ended on making sure that you leverage your community and engage with really great people and really build a people culture. She recommended to engage with other entrepreneurs to seek advice. And don't hesitate to tap into your network for support and collaboration opportunities. So with that. This wraps up our quick recap whether you're in deep trenches of hardware development, or just curious about the field. These are some insights from yang. All this doesn't even scratch the surface of all of the things that she provided in this episode. So once you have time please go back and check it out. And. With this. Before I sign off, I do want to say that I want to take a moment to acknowledge the journey we've been on together. So this episode marks the end of season two. And it's been incredible, crazy, wonderful showstopper. I really don't have enough positive adjectives to describe how the. Energy and feedback I've gotten on the podcast. I really want to take. Thank each. And every one of you that's been tuning in sharing your thoughts, being a part of the community, reaching out to me. I always appreciate the messages I get. So if you're ever too shy, please don't be, I really appreciate it. Your engagement and curiosity and support have made this podcast so incredibly special and bigger than I ever thought it could be. So thank you so much. And yeah, this season from the in-depth interviews with industry leaders, to diving deep into the nuts and bolts of hardware entrepreneurship, we've covered a lot of ground and. There's still a lot. I have a lot of ideas. I have a big mind map go on for season three. So rest assured I am definitely gearing up. I want to continue doing this and I'm super open to ideas. So as you share this podcast, like it, common tonic, give feedback on it. Please share with me some ideas. I'm always happy to incorporate them into the strategy of the next season. And please don't hesitate to reach out. Until then I wish you the best of luck with your hardware endeavors. And I hope that the podcast episodes always act as a partner and a whisper in your ear. So that you can avoid as many risks and pitfalls as possible and have a super successful hardware development journey. Until the next season I say goodbye or more so. See you later. And keep on innovating keep working on hardware. It's super important. That's the reason we're all here. All right. Take it easy. The opinions and information shared on this podcast are for informational purposes only. We always recommend that you seek professional advice before taking any action related to your business or personal ventures.