#4 Saving Cost and Time on Outsourced Manufacturing

Design to Product
Design to Product
#4 Saving Cost and Time on Outsourced Manufacturing
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Welcome to the Design to Product Podcast!

In this interview episode, we talked to Dylan Horvath.

Dylan Horvath is the founder and president of Cortex Design, a product design + manufacturing firm. Dylan talked about common mistakes of product builders and innovators that drive up timelines and costs, and tactics to avoid them. We also talked about building strong relationships with suppliers and getting the best results from your manufacturing partners.

Today we talked about:

  • Cortex Design as an award-winning industrial design, engineering and manufacturing services
  • Some medical device products they worked on
  • Decision-making at the design stage and how manufacturing strategy must be highly involved
  • Taking quality into account
  • How to build and manage strong relationships with suppliers/manufacturers, partners and clients for getting your product to market fast

Transcript:

Adar: Our guest today is Dylan Horvath, and I’m pretty excited about this because Dylan Horvath is the founder, president, and chief product officer of Cortex Design. And Dylan, I was really interested in hosting you because you have so much experience in getting a product from design to manufacturing, basically. Doing that for many years now. So maybe we could start by telling us a little bit about Cortex Design. 

Dylan: Sure, yeah. And Adar, thank you for getting in touch, and it’s a pleasure to meet you. 

Adar: Likewise.

Dylan: Yeah, I founded Cortex Design over 20 years ago to create a firm that was really human centered in its approach to product development and focused on the experience that a user wants to have with the solution or the product that is being launched. So you know, typically, we work with early stage companies or Skunk Works within larger corporations that have identified a new technology. They believe they’ve identified a market that they want that new technology to be applied to. And they usually have very strong internal engineering teams. They may have a strong science team, and they’ve at least de-risked it to the point where they believe that this is going to be commercially successful. But now they need to accelerate, they need to design the product in a way that the person that’s operating the product can understand. Looking at it, it’s clear what the function is and creates real resonance in the product market. And beyond that, this year we received our ISO 1345 certification, which is for medical device design. We’re focusing on medical and life science. The reason for that is we’re building better human experiences and there’s such a wealth of bad experiences in human healthcare. We have a huge push on to democratize access to health care services by bringing them out of clinics, out of hospitals, into people’s homes. And that is where we are focused. 

Adar: Wow, fascinating. Do you have, like, any examples for medical device products that you’re excited about?

Dylan: Yeah, absolutely. So the really great example of this is products being launched by Cloud DX, one of our clients. Cloud DX is focused on being able to miniaturize the devices that are used to collect vital signs data, for example. And be able to monitor a large group of people all at once within a clinic without a huge service delivery burden of it. So there’s a wearable that can monitor all five human vital signs that we help them develop. Another great example is the Karie medication dispensing system. This is for people that are required to take multiple medications, often for multiple morbidities throughout a challenging schedule throughout the day. Right now, the standard care of deliveries is to have a nurse actually show up and hand dispense those and make sure that the person takes them. Sometimes that means they can’t be in their home. Sometimes that means the nurse has to travel to a home. So this medication system works with existing multi dose pouch packaging systems that are already universal and being deployed all over the world, and packages that into something that can actually monitor, track, dispense those medications on schedule, and remind the person in the home when it’s time to do that. And the design is very much focused on something that’s going to live within their home without having a stigma of like, having some huge medical device that’s sitting there looking like you’re disabled in some way. So we try to fit our products with lifestyle.

Adar: Right, well, it must be so exciting to work on such products that transform people’s lives in so many ways and I think medical devices are definitely one of the things that there’s so much opportunity there. So, founders, if you’re listening right now, Cortex are your guys for that. For sure. Then I saw on your website something that I’d love to discuss. You mentioned that decisions made at the design stage must be informed by the manufacturing strategy. So, what do you mean here, how can decisions at the design stage be informed by the manufacturing strategy?

Dylan: Well, ultimately, early stage design is very aspirational, and it’s important to be able to visualize the perfect future. How ideally you would like to interact with the world or in some cases with healthcare devices or other products. A person actually doesn’t want an interaction. They don’t want to change their behavior, right? They want to just continue living their lives, but just as an amplified quality of life or diminish pain. So, visualizing that at the outset is aspirational. Then you have to execute. So strategy firms, for example, are great at visualizing the future, but not so great at execution. We do both sides. So we looked at product strategy and how to amplify stakeholder value, so we were leading towards commercial success. Part of that is providing proposals that are achievable in manufacturing. So, it’s very difficult to suggest that something’s going to be successful commercially if you don’t know how to manufacture it. 

Adar: Right. 

Dylan: So, if you’re making proposals for things that either don’t fit within a regulatory framework or don’t fit within a manufacturable product strategy, that is manufacturable at a good cost, that fits with the market from the beginning, you run the risk of showing blue sky ideas. And rather than driving commercial success, you get everybody at the executive level excited. And then it gets tossed over to another engineering firm to deliver, and they find that they can’t deliver it or that promise isn’t kept throughout the launch stages. 

Adar: Right. And it’s highly likely that it will happen if you don’t take manufacturing considerations, because we live in a real world and not in an ideal world. And probably the dreams that you have are not exactly things that you can manufacture, especially if you’re not taking that into account very early on. 

Dylan: Absolutely. And fitting it with something that’s going to pass through product testing as well and that goes hand in hand with manufacturing feasibility. 

Adar: Right. What about quality? Do you also take that into account?

Dylan: Yeah so, at all stages of a new product introduction, you want to be increasing resonance, increasing excitement, and reducing risk. And having a quality system in place is part of that. So at each step, especially in manufacturing, it’s important that metrics for success are defined and those metrics have to be numeric and they have to be measurable, they have to be something that will fit in with the manufacturing strategy as well. So, it’s all well and good to fully dimension apart at the end of the day, if during part inspection, those dimensions can’t be inspected for whatever reason, the parts are organic, the factory doesn’t have the inspection equipments in line, they don’t have the quality systems that are needed, or in a lot of cases, over defining constraints can just drive timelines, drive costs, increase rejections needlessly. 

Adar: So, it’s a delicate balance, basically.

Dylan: It’s a delicate balance and you know, identifying what those really key inspection metrics are, so that you can catch them before they get into an assembled product, and then you’re testing a fully assembled product that has problems. 

Adar: Got it. 

Dylan: You want to check each of those sub assemblies before it goes into an assembled hole. And then you need to define a final inspection criteria before it can be released to a customer. 

Adar: Do you have, like, examples for such criteria? And metrics?

Dylan: It’s really project specific, and the requirements depend on the use case, too. So, you know, for example, we’re dealing right now with a factory that has shipped parts that have the color metric off a little bit. But the challenge is defining what is acceptable. So you know, most people think, hey, I’ve specified it, that’s enough, and it doesn’t match, so that’s a failure. But if you don’t define the range of failure, nothing is perfect. There is always variation at some level, you know. There’s no such thing as 10 mm. When it comes to 10 mm is aspirational, a pantone chip is aspirational. Ultimately, you have to say what a range of acceptability is or that you’re going to follow a formulation and every time you follow that formulation, you’re going to get the same results. So, if you define everything too early, it scares manufacturing partnerships away because they know, oh, this is going to be a problem client, especially when you’re onboarding new manufacturing partners. Part of that startup is getting into a rhythm of establishing what they’re good at, what they’re not good at, and where some of those risks lie. Ensuring they have a quality system in place is important, ensuring they have traceability on their processes is important. We prefer using manufacturers with ISO 9001, but ultimately it comes down to the practice of the individuals within a factory. 

Adar: Right, so let’s talk about that a little bit. You put a lot of emphasis on, also something that I saw on your website on manufacturer relationships, which I can totally relate with. So, do you have any tips for building strong relationships with suppliers, which is basically key for getting your products to market?

Dylan: Yeah, well, I think in all respects of our business, empathy is really important and understanding the motivation of your partners is important. So, we would love all of our relationships in manufacturing to be documented. You know, like, this is the criteria for success. This is the target price that I want. You’re not meeting it. I need you to change this. Beat them up, beat them over the head until they get the price that you’re requesting, because that’s what’s going to define business success for you. That’s a really narrow vision of how to create a relationship. It’s very transactional. Ultimately, we’re all dealing with people. And all people have their own motivations for doing their work and their own aspirations, their own goals, their own requirements for business success within their own business. And being able to understand that as you start new engagements is important. So, a lot of the time when we’re onboarding with a new manufacturing partner, we will ask a lot of questions that have nothing to do with our business or our requested business with them. And we try to see if there’s alignment between what it is that we need and what they would call a successful relationship as well. And the manufacturing partnerships are a really key part of business success, and that’s what it is, it’s a relationship. So you have to be respectful, you have to make expectations clear, but then check if those expectations are reasonable and acceptable for the manufacturer. So I have found that you can’t expect perfection at any stage. What you can’t expect is a supportive relationship where it’s acceptable. It’s known that there’s going to be issues. And you plan for those issues, you mitigate them. 

Adar: With your partner. 

Dylan: Yeah, that’s a partnership, and in some cases, you can’t actually find alignment to go forward. At some point, you got to be brave enough just to say, you know what, this is actually not a metric that we can hit. And that might be something that you have to go back to the customer for. So, if we have a customer that says, hey, we’re going to provide all of the dimensions for every single part, and every single part has to be within this tolerance, or we’re going to reject a shipment once it arrives at our dock that we’ve inspected three months after it arrives. That’s not a relationship that we can support. 

Adar: Right. Yeah, what you said is exactly right. Many people treat manufacturers as transactional relationships, and they miss so much because they try to optimize for, I would maybe say, lowest cost, which is not good, because then if you need their insight, you need to work with them to build the best product. That would not work if you’re just trying to get the best transaction every time. This is a mindset shift that people have to go through.

Dylan: Adar, I totally agree. And the first run is a really bad time to try to beat someone up on price, because ultimately, the first run is almost always the one where the most mistakes occur. The highest rejection ratio occurs, and you need firepower to be able to solve those problems. And if there’s no gas in the tank, you can’t actually do it. My approach generally is to take a quote at face value and accept it. And if we can’t accept it, we either have to move on or ask the vendor, hey, what are the real cost drivers here? Like, where do you see the risks being? Because this is a lot higher than we expected it to be.

Adar: Right. This goes back to the relationship where he can reply honestly and say, here are the risks, here are the things, we want you to profit, and you want to tell us everything.

Dylan: That’s right, that’s right. And managing those relationships, if they’re key to managing those relationships, is key to our success as a business. And we are very careful with how those relationships are managed. We take responsibility for them because we take responsibility for the finished product, and that’s a cost driver. What we can do is once we get past the point of establishing that we have a successful first run, we’re into the second run, third run. That’s when we can start to cost optimize and say, okay, it looks like we have reduced risk now. Our labor costs are lower than we expected them to be, and we need to come back and look at how we can increase our volumes and reduce costs accordingly. So what is the new target? And then you also have to be respectful, you know, sometimes, the cost increases after the first month. No one should be entering into an agreement that they can’t sustain commercially. Because it will fail. It will cost the company money, and sometimes they’re contractually obligated or ethically obligated to follow through on a promise that actually loses the money. It’s not sustainable. 

Adar: Right, exactly.

Dylan: So if you can’t, of course correct or move on, that relationship will fail, and the business that it’s supporting will fail too. 

Adar: Yeah. I would just expect the supplier to tell me, even if he’s obligated to tell me, hey, I’m losing money here, and maybe we can renegotiate that or maybe we can talk about that, because I wouldn’t want the supplier to lose money on my project because they will have to somehow work through it. And you don’t want that to happen. 

Dylan: Yeah, it makes you the least important customer. 

Adar: Exactly, yeah. You don’t want that. 

Dylan: Yeah. And sometimes you also don’t want to be the most important customer. 

Adar: You don’t want to be the one who pays the most, right?

Dylan: Yeah. Well, if you’re the one sustaining the business, you want to be aware of it. Because if that source of funds doesn’t continue or it changes, then the service changes too. I mean, it can be good to be the number one customer, but that does increase the risk. It also introduces responsibility. So if you want to maintain those relationships and build on them and you’re the number one customer and things suddenly dry up, a lot of times, that’s beyond our control. But we want to be supportive of the growth of our vendors as well.

Adar: Right, definitely. Dylan Horvath, thank you so much for being with us today. I really enjoyed our conversation.

Dylan: Adar, likewise. It was a real pleasure to talk to you, I think you have a very interesting business. We’re going to take a look at it. 

Adar: Yeah, definitely. And if people would like to reach you or your services, where can they find you?

Dylan: So the best way to get in touch is through our front door, www.cortex-design.com, and also finding us on LinkedIn search for Cortex design. And we would be happy to have a conversation with you. And beyond seeing whether or not we have leading to a successful business relationship, we’re interested in supporting the ecosystem, too. So, maybe it doesn’t work out for a business relationship between us and people coming in through the front door. We still want to help them and point them in the right direction. 

Adar: Amazing, all right. Thank you, Dylan.

Dylan: Thank you.