Using Dragon Innovation Product Planner to Manage Product Development
There is a great deal of planning involved in launching a new hardware product and there is a great deal of software available to help you, a product creator, stay organized. You might manage your team’s tasks using something like Trello. Business documents, internal resources, and public facing publications can all be managed using Google Drive. Other cloud storage solutions like Dropbox, or even ones build in to products like Autodesk Fusion 360 can be used to manage product design files. GitHub is used almost ubiquitously to manage source code, firmware, application code, and many other digital assets.
If you are building a hardware product, one of the most important assets you will have to mange is your bill of materials (BOM). A BOM is a list of the raw materials, sourced components, sub-assemblies, parts and the quantities of each needed to manufacture an end product. Among the most important functions of a BOM is tracking how much your new product will cost to manufacture. The cost to your company of producing each unit of your product basically determines its retail cost. When you begin moving your product into the manufacturing phase, the BOM becomes a critical resource in communicating with your manufacturing partners.
As with other assets used in the development of your product, from code, to documentation, to schematics, there are a number of different tools used to manage a product’s BOM. This post will discuss one of the more sophisticated BOM and product tracking tools, Product Planner by Dragon Innovation. But first, let’s take a look at some of the simpler tools used by almost all product development teams, at least initially.
Tracking your BOM with a Spreadsheet
Just about every team or individual working on a new hardware product will start tracking their BOM on a spreadsheet. When I started working on the Wello connected doorbell, the first tool I used to track my BOM was a spreadsheet in Google Sheets.
Spreadsheets in Google Drive or Microsoft Excel or in whatever other software you have available are a great starting point for tracking your BOM. First of all, software like Google Sheets is free to use. Other software, like Microsoft Office, is not free, but it may be a tool you’ve already paid for so there is no incremental cost in using Excel for BOM tracking.
One of the benefits of using spreadsheets to track a BOM is that they are totally flexible and can be configured to exactly match your team’s needs. When I started work on Wello, my BOM was essentially a place for me to keep track of what parts I was using in prototypes. You might notice in the image above that my BOM for Wello didn’t even have a cost column initially.
As your development gets more sophisticated, a spreadsheet BOM can be adapted with whatever information you might need. Later in the process of prototyping the Wello doorbell, I added columns to my BOM spreadsheet for tracking unit costs, total costs, and vendor information.
And it is about at this stage that the issues with using a spreadsheet for tracking BOMs start to creep up. First, while using a spreadsheet offers complete flexibility, spreadsheets are also somewhat labor- and time-intensive to set up. This is especially the case when it comes to running reports on your data. What if you wanted to create a break-even analysis based on your BOM costs and several different options for retail pricing. You could certainly create a break-even analysis like this, but creating this chart manually and the re-creating it with each change to the BOM or new simulation scenario can lead to quite a bit of time spent just configuring charts and not making actual progress on your product development.
The second issue with using spreadsheet BOMs, and this was a big issue I ran into in my work on Wello, is that, if you don’t have much prior experience in product development, it can be a challenge to make certain your spreadsheet BOM captures all the information you will need to transition to manufacturing later on. The longer I worked on Wello, and the closer I got to manufacturing, the more information I realized was missing in my spreadsheet: secondary suppliers, manufacturers for fabricated parts, manufacturer part numbers, procurement methods, lead times, minimum order quantities, manufacturing process types, finishing options, fabricated part dimensions, and many other important pieces of information were missing. For each new column I added to the spreadsheet, I had to spend a great deal of time going back through the entire BOM to obtain whatever new information that column contained.
Along those same lines, the third issue with using scratch-built spreadsheets for your new product’s BOM is that it is somewhat difficult to incorporate fixed costs, and other drivers of your cost-of-goods-sold (COGS). Your new hardware product will have some fixed costs required to bring the product to market. These costs can include tooling for injection molding, line fixture costs, test fixture costs, certification costs, and other, oftentimes substantial, costs required to make and sell the first unit of your product.
These fixed costs are extremely important if you plan to crowdfund your product because these fixed costs essentially determine your funding goal. The danger to structuring your fundraising campaign without fixed cost information is that your campaign might be fully funded, but, when you start manufacturing your product, you find out that your manufacturing partners will require large sums of money – often sums of money well in excess of the money raised by many ill-planned crowdfunding campaigns – to start making your product. When building a spreadsheet BOM from scratch, it can be easy to miss some of this important fixed cost information.
Using a Spreadsheet Template for your BOM
One solution to several of the problems discussed above with scratch-built BOM spreadsheets is using a template rather than starting completely from scratch. There are numerous BOM templates available online, and some are better than others, but the biggest benefit to using any of them is that they will hopefully have been created by a team with extensive manufacturing experience. A good BOM template will include all of the information you will need to transition your product from prototyping to production, ensuring that you do not miss any important information that could determine the success or failure of your product launch.
While working on Wello, after spending quite a bit of time tracking the project BOM in a scratch-built spreadsheet, I transitioned to a template created by Dragon Innovation, the same company behind Product Planner discussed a little later on in this post; the template is called the Dragon Standard BOM. Dragon Innovation is a team of experts on taking projects from the development/prototyping phase to manufacturing. The Dragon Standard BOM is based on years of manufacturing experience from the Dragon Innovation team and it incorporates just about all of the data you will need to manufacture your newly developed product.
You can easily tell from the image that the Dragon Standard BOM incorporates much more information than most spreadsheet BOMs built from scratch. There are several tabs in this spreadsheet BOM that cover all of the different manufacturing categories a typical consumer product will have. Each tab contains columns for everything from part names, to internal use SKUs, to manufacturing part numbers, to specification information. After filling out the Dragon Standard BOM completely, there should be little information left out that your manufacturing partners would need to start producing your product.
However, as discussed in the previous section, BOM templates like the Dragon Standard BOM often still miss critical information about the fixed costs of producing a product. Good templates like this may contain all of the information needed to manufacture a product, but they still do not contain all the information needed to start manufacturing a product. The fixed costs for producing even a relatively simple consumer product can easily reach into the tens of thousands of dollars, so fixed cost information is still vitally important.
Using a Comprehensive Project Management Tool
So that brings us to the subject of this post. Oftentimes, even when using spreadsheet templates created by teams with extensive manufacturing experience, spreadsheet BOMs do not contain all the information needed to launch and manufacture a consumer product. For many product development teams, when the prototyping phase of development starts coming to a close, a more comprehensive project management tool will become much more valuable than a simple spreadsheet. As with spreadsheet templates, there are several software tools available for managing product development.
Product Planner is more than a BOM management tool. It gives you the insights you need from your BOM to gain confidence that you are on the path to manufacturing success.
Managing your BOM
At its core, Product Planner is still a BOM management tool, and tracking your project’s BOM is still the main purpose of Product Planner. The BOM management tools in Product Planner are much more visual than a spreadsheet. Purchased parts, fabricated parts, electrical components, packaging materials, can all be grouped into project categories. If your project has multiple variations or versioning, Product Planner allows multiple SKUs to be created.
As far as its BOM functionality is concerned, Product Planner does not add any additional fields to the BOM compared with those available in the Dragon Standard BOM spreadhseet template, but Product Planner allows for a much better organization scheme for your BOM. One feature that might be useful depending upon the nature of your project is the ability to add pictures to items in your BOM. I found this useful in my work on Wello when presenting to potential investors because the images give then BOM an extra edge of professionalism to grab the attention of investors who may have seen hundreds or thousands of BOMs in their careers.
Managing Fixed Costs
One of the major benefits of using Product Planner as an upgrade to spreadsheets is Product Planner’s much better fixed cost tracking features. Product Planner contains an entire section of the software designed for managing fixed costs, BOM unit costs, and COGS configuration. This section is just as extensive as the BOM management section of the tool.
Fully understanding and accounting for all of the fixed costs associated with the launch of a consumer product is absolutely essential for that launch to be successful. No matter what funding source your company plans to use to fund the launch of a product, traditional investing, angel investing, crowdfunding, funding from friends and family, funding from personal savings, the fixed costs for launching your product basically drive every other important financial calculation you will perform. If you are unable to raise enough funds to cover your product’s fixed costs, your product launch will fail.
This is one of the major reasons I used Product Planner for Wello, a crowdfunded project. So many crowdfunded products fail because their creators manage to run a successful campaign, and bring in a large number of pre-orders for their product, but they do not generate enough profit from those pre-orders to cover their fixed costs. Those projects fail because they do not have the funds necessary to pay manufacturers to produce their product. Product Planner contains powerful tools to making sure this kind of scenario does not happen to your project.
Aside from just being able to input and track fixed costs in a number of different categories, Product Planner also allows those fixed costs to be linked to items in the BOM. This makes it much easier to reduce or optimize your project’s fixed costs by identifying those BOM items that contribute the most to the total fixed costs. Product Planner can also estimate any fixed costs you are unsure how to obtain yourself. This is especially useful earlier in your project development when you might not have quotes directly from manufacturers. The estimated fixed costs Product Planner generates make use of Dragon Innovation’s extensive manufacturing experience.
The availability of tools for managing the fixed and other costs associated with launching a product is one of the ways Dragon Innovation’s Product Planner offers a significant advantage to product development teams over the use of spreadsheets. Easily running reports and simulations is another major advantage. Spreadsheet software can certainly run all kinds of reports on your BOM and costing data, but setting up those reports, and keeping them updated as the data changes, can be time-consuming and error-prone. Product Planner offers a long list of useful reports that can be generated with one click.
Within most of the reports, Product Planner has tools for simulating different scenarios. For example, within the Break-Even Analysis report, an extremely important report for planning a product launch and one that is based on the fixed cost information discussed in the section above, Product Planner can easily be used to simulate the break-even point at different target retail prices for your product.
Using spreadsheets to manage the Bill of Materials for your in-development product is a good starting point and works well for the early stages of a product development cycle. Spreadsheets are often either free or a resource already readily available. Spreadsheets also offer complete flexibility in the way they are designed and with respect to the types of information they can contain.
However, as a product’s development begins to transition from prototyping to production, more powerful and feature-rich tools like Dragon Innovation’s Product Planner help to ensure all the costs associated with launching a product are accounted for, thus maximizing the chances of a successful launch. Product Planner contains tools for managing fixed costs, unit costs, and for easily generating reports based on the data within the software.
Even though Product Planner is not free like most spreadsheet software, the monthly cost of $25 or $100 (depending upon the size of the team using the product and whether or not the product is funded) is well worth the availability of a set of tools that will help give your new product the best chance at a successful launch.