[rescue] Slightly OT: Bad Cap Saga

Geoffrey S. Mendelson gsm at mendelson.com
Mon Aug 18 15:36:04 CDT 2008

On Mon, Aug 18, 2008 at 12:17:51PM -0700, Curious George wrote:
> I don;'t care *where* the number comes from -- as long as
> the vendor stands behind it (and we have recourse as to
> how to respond when/if this ever becomes untrue).
> When we meet with Japanese vendors, it is very unnerving
> trying to get them to give you specifics about design
> limits.  They always want to know what we "want it to be".
> Perhaps this is a cultural issue -- I think Americans are
> used to working to specifications whereas the Japanese
> seem to be geared to working to *your* specifications!

Not at all. They are following the time honored system of
selling to spec. They make an item and sell it to you based upon
your specs.

For example, let's say capacitor A has a failure rate of 100% at 50c,
10% at 40c, 1% at 35C and .01% (1 in 10k) at 25C or lower. That's
all they make.

However, they know you will pay 10 cents for a 25C unit, $1 for a 35c unit
and $10 for a 40c unit. They will sell you the same capacitor with different
ratings and different warranties. 

Everyone used to do that with memory chips. At one particular time, no
one made 200ms memory chips, they made 150ms ones. The ones that passed
testing at 150ms were sold as 150's., the ones that passed at 175 were
sold as 175's, the ones that passed at 200 were sold as 200's, and the
rest were sold as 225's.

> Not sure why I should consider that "racist"... are you
> oriental?

Not, but I was just told that there is some Mongul blood in me. :-)

> Yes.  Exactly!  Now, what *are* the limitations in these cases
> where you don't test product, can't rely on whether or not
> your vendor has given you a product that conforms to a (dubious)
> specification, etc.?  Please look at the context of my reply.
> I *really* don't know how (without lots of historical
> data to rely upon) to tell my boss "we can make these products
> and expect no more than N% scrap (which we'll have to eat)
> for a cost of $X".  I have *no* experience in that sort of
> manufacturing environment.

Sure, but it's something you learn in the consumer business. You 
can always ask what their projected failure rate is. If you are
smart, you double it, and if you know what you are doing, you tripple
it. :-)

> When I started designing products, I used to factor in a 3%
> warranty cost (i.e. 3% of DM+DL -- so the actual factor
> was fairly less than this).  Over the years, experience has
> taught me how to work that down to a fraction of a percent.

But at what cost? If you are buying Matsushita components, you are
paying a lot more for them than entire boards from the "Long March DVD
Player and Hoisin Sauce Company". 

> I don't have that experience when the components, labor,
> assemblies, etc. I am given are of unknown quality.  Given
> time (years?), I imagine I could apply the same statistical
> processes to *learn* what those new factors would be -- but,
> in your scenario, it seems likely that they could vary
> widely from vendor (supplier) to vendor.

Usually not as much as you think. Unless it is defective, cheap crap
has the same failure rate world over. However most people don't even
bother, they find someone to manufacture it for them, and often they
design it for you.

I prefer Flextronics (the world's largest manufacturer of cell phones) 
personally, but obviously companies like the "Long March DVD Player and
Hoisin Sauce" company exist and do well.

> So, presumably, people (actuaries?) at these firms have developed
> their own characterizations for *their* products using *their*
> vendors/suppliers.  Are they wed to key suppliers?  Or, do
> they take a (statistical) gamble each time they opt to
> purchase a subassembly from some new/other firm?

Pretty much. So does the consumer. One of the things you find out living here
is that there are many subcontractors designing and manufacturing laptops.
If you buy a Dell or HP in the U.S., it may come from any one of them.
When you bring it here, you find that submodel was never imported here and
there are no parts for it. :-(

Obviously parts which are subcontracted out, e.g. hard disks, RAM, batteries,
chargers, etc are all the same, but internally they are very different.

However spreading out your manufacturing spreads out you risk.

> Of course!  But, if my role as consumer is one of VAR, OEM, etc.,
> then I am *very* concerned about where that subassembly I just
> purchased for use in my product came from!  And, the likelihood
> of it being able to meet its specifications (performance and
> reliability) necessary for *my* product to meet likewise!
> (since *I* have to give a warranty as I am selling to an
> "end user" -- or, VAR who will hold me accountable for same)

But in the low end business you would not even be in the loop.
The units are boxed in China and put out for sale by Wal-Mart. No
one touches them in between, except in case lots.

> Of course.  But, where did they get their numbers?
> If you're WalMart, you probably have a deal with your vendor
> whereby you just *tell* them how many you trashed and are
> compensated.  *Or*, threaten to stop doing business with them
> (and, since you have lots of clout, they comply!)


> Or, if you are like me, you find a product/brand that has given you
> satisfactory performance and stick to that.  Conversely, avoid
> products that give you *poor* performance (or, perhaps, poor
> customer service, etc.)

It only works if you care about quality and not about price. In the
100,000 unit game $1 per unit is a lot of money. In the 10m game,
1 cent is a lot of money.

> Remember, all consumers are not John Q Public.

True. But most are. 

> I approach a Taiwanese vendor to outsource some aspect -- perhaps
> the entire product -- of a product.  I am a consumer/customer in
> the eyes of said company.

Sure, but there is a good chance in the consumer market, you never
touch the unit.
> By your comment, they don't test their work before they sell it
> to me.  I pay real money for their products and then resell
> or integrate them into my own products.  *I*, dealing with the
> end user, give a warranty (since that is expected, even if
> a silly 90 day wonder).

Well I'm sure they would gladly test each unit if you wanted them to.
How much are you willing to pay for the service? You might even find
someone who would actually test them instead of writing a computer
program that fakes the test reports. :-)

> I then discover that this company has produced total crap!
> I see 10% failure rates.  *I* eat that cost (or go belly up).
> Now, I reask my question:
>    "Or, do these folks operate in an environment
>    where they never have to "pay" for their mistakes
>    (i.e., through repairs and/or lost business due to
>    bad reputation, etc.)"
> When I go to said Taiwanese firm, do they just smile and
> say, "So sorry..."?  Do they never have to pay for their
> problems?  Sure, *I* will stop using them as a supplier
> and will probably gladly recount my less than wonderful
> experiences with them... are you saying life just goes
> on for them without any repurcusions?

And who would you tell? Are you going to call the buyer at the competition?
Are you going to call the buyer at Wall-Mart, or Costco? 

> I.e., they *have* to somehow factor this experience into
> their business model/pricing/methodology *or* just hope
> there's another sucker qaiting behind me...

Well, you said it, I didn't.


Geoffrey S. Mendelson, Jerusalem, Israel gsm at mendelson.com  N3OWJ/4X1GM

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