Here’s some excepts from an excellent a16z podcast with Chris Power, founder of Hadrian which is building the software-enabled factory of the future:
Chris Power: The other problem that people don’t realize is that no factory on the planet has observability. Maybe Foxconn does, but you can’t simply throw open a dashboard and go “what is my uptime?” “where are the costs for this job?” “how much labor did we spend on it?” It’s all kind of swags and fuzzy maths and people standing around trying to do time studies which have their own psychological flaws.
So a big part of the technology that we’re building is a factory data platform where all of the people and all of the hardware are hooked up to one internal data service.
We assume that the major OEMs supplying defense systems have these exquisite business systems that can track the cost of everything and tell you exactly when something will be late. But most of these systems were created in the 1980s and 1990s if not before, with patches and upgrades. Consolidation has left different business units and plants with different systems that don’t talk to each other quite so well.
But the real problem isn’t the OEMs. It’s that the supply chain is made up of thousands of vendors whose data insight and reliability creates massive inefficiencies. Here’s more:
Interviewer: Right so if you’re a SpaceX or an Anduril buying parts through Hadrian, do they get access to that data, and if so, how does that impact that relationship compared to what they’re used to experiencing?
Chris Power: What customers want is effectively like devops level visibility that’s the world’s best Gantt chart… Even now we’re sending Excel spreadsheet summaries of like, “here’s where we’re at on this production run,” and people are literally responding like “this is amazing, no one’s ever given this data.” It’s completely insane. It would be like AWS not having a dashboard of what’s your like SLA up time. That’s a really hard problem to solve.
That’s what customers want is to is that when things do go wrong, you’re learning about it an hour after it goes wrong, not six weeks down the track when we have to face up to the problem and we can’t ship parts. Which seems crazy from everyone outside the industry but it’s like a magic wand to everybody else in the industry.
… Two big things happen. One is something like 50 percent of the total cost of a product like a satellite, for example, is through delays or inventory levels which you shouldn’t need to have. As an example, if you think about a Gantt chart to build a satellite and you do this piece first and all the parts have to arrive on time – firstly, because the supply chain is super unreliable no one is building that Gantt chart super tightly. They’re building it with about 50 percent of slack in it because you can’t rely on those inputs coming in at the right time. Once we get customers to a point where they know that if we say here is the date, it’s reliable, everyone can compress their schedules around that reliability and because manufacturing time is payroll cost, it’s working capital of inventory, it’s a build rate, if you just compress time in manufacturing you just win on cost. I think that most of the products will be able to drop their manufacturing costs by like 30 to 50 percent not because of cheaper parts but because of the ability to compress schedule around that reliability.
The second point is forward notice of errors. So if you have a manufacturing line down because some vendor was giving you a bunch of satellite parts and you expected them on Monday and then you find out on Monday they’re not going to come from for two weeks — which happens like 30 to 40 percent of the purchase orders that happens — then you’ve literally got people standing around and they can’t do anything which is a huge cost unto itself. Another CEO I was talking to last week basically said — and the way Aerospace works is, you have an order book and then you can’t book revenue until you actually deliver your satellite or your product or whatever. They would have had an extra billion dollars in revenue last quarter had more of their parts being delivered on time. Growth is slowing because they can’t meet their order book because the supply chain is a complete mess.
… When I say we can let companies move 10x faster and lower their cost of manufacturing by 50 percent, the main benefit is that you have this high reliability infrastructure layer so you can compress schedule around it and that’s the huge win. You can make a fighter jet in six months not 12 months and that that’s what makes it $150 million not $300 million.
As a person who spent a lot of time as a schedule analyst, I will attest to the fact that we look at historical delivery times and build in that slack into schedules. No manager wants to find themselves on the critical path to delivery. The realism of cost and schedule is an important factor to getting a major contract underway, and we build in so much slack to minimize the potential cost growth or schedule delay that the whole thing becomes unaffordable.
Check out this past blog post highlighting Chris Power.
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