In about 2003, North Central Ford of Richardson Texas agreed to sell me the lst 2004 Ford GT that they got, at MSRP. That was going to be ~$150K and in about 2 years. At first, I had to explain to the Sales Manager what a Ford GT was, show him article in the back pages of AotoWeek, including the first picture of it that he’d seen, and a picture of the Prototype I took at Pebble Beach in 2002.

He said he figured I was a legit buyer because I showed up there in my BMW Z8, a comparably priced limited production car, that he did actually recognize. He figured out that I was not going to be in the market to buy a Taurus or a F-150 pick-up that day.

On my next visit, I got the Sales Manager to sign a 1-page (3–4 sentence) agreement letter. Afterwards, I dropped in the dealership (about quarterly) to see the sales manager and to follow up on the car’s highly anticipated delivery, and to remind them of our agreement, which he always acknowledged verbally. On two such visits, I brought along different car-guy buddy as “witness” to our agreement. Some of these meetings were simply quick meet & greets in the hallways where the terms of my deal were discussed briefly, which were: I pay the (t.b.d.) MSRP within 48 hours of them getting it.

In late ’04, when I became aware that the 1st cars were being shipped and in transit, I went by the dealership again, for about the 5th time, but I was told that the former Sales Manager no longer worked there, so I asked to see the new Sales Manager, and someone took me upstairs to his office.

I made the new Sales manager aware of the details of the deal I’d made with the dealership before he worked there, and he said “well, that’s bullshit. There is no way we’re gonna do that. That car is all over the press. We are going to sell that car on EBay Motors for $300K.” I re-iterated that we had an agreement in writing signed by his predecessor, and, at his request, showed him a copy. He read it and said “Well, the agreement says what you said it does, but we ain’t going to do that.”

I said “Well, you leave me no choice but to pursue this by other means.” and he said “Good luck!”. As I turned to walk out of his office, I turned back briefly and said “I assure you, luck won’t have anything to do with it.”

I found a young freshly-minted SMU MBA/JD-grad lawyer, and when the car showed up 2 days later, my newbie lawyer filed a lawsuit and got a judge to put a Temporary Restraining Order (TRO) on the car. It prohibited the dealership from offering it for sale, removing any of the shipment protection materials, and dis-allowing anyone (including the dealership employees) from driving it, until further notice. Even the mechanics in the service department were not allowed to put a wrench on it.

I went up there, and went to the service department where the Service Manager greeted me in their shop in the back and said I could look, but not touch. This was the 1st or 2nd Ford GT delivered in the DFW metroplex. This was a big deal. There was a story on the cover of the Dallas Morning News business section.

There were dozens of people back there in a service bay, ohh-ing and awe-ing, including a a new car salesman that didn’t know me. I told him I was ready to pay cash at MSRP, but he said that “well, the car has a little legal cloud hanging over it” but as soon as that was cleared up, he could sell it to me for $240K, and wrote that number on the back of his business card without even writing down my name. The car had my TRO court order taped to the driver-side door glass.

The judge in this case made us go to mediation before it could go to trial, and so me and my young lawyer met with the recommended licensed mediator (a former Dallas judge) and the dealership brought in 2 suits from the headquarters that owns the dealership — Sonic Automotive of Nashville, TN (same guys that own the Texas Motor Speedway Indy/NASCAR track in Fort Worth), not to mention owning about 200 other car dealerships. They claimed to be representing the 2nd biggest car dealership company in the nation, after Auto Nation. So bring it on.

After polite introductions in the main conference room, the parties were situated in separate conference rooms, and the mediator started playing shuttle diplomacy, going back and forth between us, giving the other party’s argument and pushing for a settlement. As one point she told me and my lawyer that they knew I had high-end cars, and at trial they would show that I was an “opportunist, not a genuine Ford product buyer, and and they would characterize me as just an exotic car flipper hoping to profit unfairly”.

I told the mediator to tell them that my rebuttal, in court would be: “I have an 11 year old Jeep, a 6 year old BMW, a 4 year old BMW and a Yukon Denali. Furthermore, I haven’t sold but one car in the last 5 years. But at trial, and I will insist on a jury, I will characterize them as … car dealers … and as redundant as it may sound, dishonest ones at that. And I will make it stick.”

When the mediator came back about 10 minutes later, suddenly it had become a price discussion. I agreed unilaterally to add $10K (good faith, for a total of $160K), but they insisted on the $300K number. Then, I let them know that they had quoted $240K to me, and I could prove it. We went back and forth on whether or not that was a bone fide offer, and I then provided more information — that $240K was also what they quoted a friend of mine who went by to look like I did but later in the day. He would be called by me as my first witness. They caved, and agreed that $240K was their “best & final” asking price. Yeah, right. I rejected their new offer. And I wasn’t done with them yet.

After a few back and forth rounds about how rock-solid my MSRP deal 1 page agreement was, they offered a cash settlement of $20K for me to just abandon my lawsuit and walk away. I said “Tell them no, and that if I see them again, it will be in a downtown Dallas County courtroom”. The mediator tried to talk me out of taking such a hard stand, but carried the message to them anyway.

The mediator came back in about 10 minutes and asked if we could agree on a cash settlement somewhere in the middle, and I said yes, of course, but it would have to be smack dab in the middle between my best offer of $160K and their best asking price of $240K. In other words, we were $80K apart, and if they want to write a check for $40K, I’ll go away and abandon my claims to the car. Otherwise, I’d pursue my rights to buy the car for the $150K list price in my 1-page agreement.

The mediator came back and said we had a deal, and we signed a settlement agreement that they were able to prepare quite quickly. That vaccination took, and two hot-shot Nashville lawyers went home with their tails between their legs, probably more concerned about catching their flight.

Three days later, I got a $40K check, and paid my lawyer $6K for about an hour of prep and 2 hours of an arbitration meeting that had left his head spinning.

And literally the next day, Ford recalled all the Ford GTs nation-wide due to upper-A-arm cracks, so the initial Ford GT owners had to put their brand-new cars back in the shop and wait about 6 months to get them retrofit with yet-to-be-designed beefier A-arms.

That was the best car deal I ever did. No tax, no title, no license, no insurance, no gas, a normal amount of new car buying bullshit, and a nice financial result for me (and my new lawyer buddy). I bought a 1/18 scale model Ford GT that’s on my trophy shelf, with the Ford Dealership sales Manager’s business card tucked under its tiny little windshield wipers.

We had a nice Christmas gift-giving episode that year.

Is that crazy enough?

Footnote: Regarding my short agreement with the dealership, their agreement for me to take the car off their hands, sight unseen and at a price unknown, was determined to be plenty adequate consideration to solidify the agreement. The sales manager actually refused my $1,000 deposit offer, gave me back my $1,000 check, and marked out that number in the agreement, and initialed his strike-thru before signing the agreement. There WAS an agreement of the parties.

All told, I have about 50 watches. I still have every watch I ever owned (but one), including the one I rescued from the Fort Worth pawn shop in 1969.

Never have I anticipated owning a watch like I did the Apple Watch. I have spent 15 years transitioning from Toshiba MP3 players to iPods, from Motorola StarTacs and Casio Cameras to iPhones, and from Win/PC laptops to an iPad and a MacBook. It was really excited to be getting a version of the device that pioneered wearable technology a century ago, to be fully integrated with the other Apple technology that I’ve so happily adopted.

Without a doubt, the Apple Watch is a technological piece of work. It does everything that Apple claim it does, and clearly represents the state-of-the art. It has an incredibly rich feature set that I never fully explored. And I really liked the precision mechanics, although I thought the brushed stainless band clashed with the highly polished body.

But, I think watches primary function is about the convenience of timekeeping for the wearer, and I was not ready to surrender the kind of basic watch convenience to which I had become accustomed. After 6 months of wearing it almost every day, I quit wearing it. It was headed for the same junk drawer as the Toshiba, Motorola & Casio gizmos. And here’s why:

1. Charging it every night is small a chore, but a chore nonetheless. I was never able to go two days on a single charge. Nightly recharging means that it has to become another part of your daily/nightly routine.
2. You cannot wear the watch to bed. Monitoring my night-time restlessness is something I’d like to do in order to identify lifestyle patterns, diet and schedules that are more conducive of restful sleep. Plus I like to check the time when I’m snoozing in the morning. But no-can-do either of those with an Apple Watch: the watch is on the charger at night, if I remembered to put it there.
3. Unlike every other electronic tech item I have, it cannot be charged while it’s being used. If your Apple Watch runs out of juice before you do, like on a long international flight, you end up with a fashionable but otherwise worthless trinket on your wrist. So you need to carry a back-up watch.
4. It’s another charger to keep up with when I travel. That’s a critical chore in and of itself, at both ends of a trip, and a non-routine chore that’s easy to forget. So there’s another reason for carrying a back-up watch.
5. The coil charger is an electromagnetic hazard. A simple mistake like I made by letting it lay on top of my Passport 1TB drive caused me a catastrophic loss of valuable data on a flux-smoked drive and forced me into a time consuming database restoration process.
6. The watch is virtually illegible in direct sunlight. No amount of squinting can resolve this issue. The only solution is to find or create shade, which may involve the use of the right hand as well. This is highly inconvenient.
7. The watch would occasionally go into “VoiceOver” mode inadvertently, no doubt caused by “cockpit error”. So I’d have to un-do whatever I did with “Accessibility” settings on my iPhone. Tedious, but a reminder that the iPhone will always tell the time without quite so much fussiness.
8. The watch was poor at stopwatch functions, something tech people actually use to measure thing like latency. The display blanks out, so you have to anticipate the “stop” event by activating the display in advance of touching the stop button. Not so easy if you don’t know when the “stop” will actually occur.
9. There is no such thing as sneaking a glance at your watch. You have to rotate your left wrist to activate the display. In a conference room meeting, if you want to keep your left hand below the table when taking a glance, that gauche maneuver may cause some embarrassment.
10. Reading the display when driving a car is downright hazardous. You have to take one hand off the steering wheel for the repositioning and rotation of your wrist, not to mention dealing with the slight delay before the display comes on, when fractions of a second matter.

I’ve not enumerated other issues that are unrelated to the basic watch function, but I will address this one about Apple Pay: I have to enter 4 digits if I enable Apple Pay on the watch, but not if I use the phone only, with its fingerprint scanner. So I turned off the watch link. It’s just plain easier to hold the phone up to the terminal with my thumb on the thumbprint scanner than it is to fritz around with 4 digit pin numbers.

So I sold my $1,100 Apple Watch on E-Bay, for about $650, and my life got a bit simpler. I’m back to wearing the TAG Heuer. It tells time — accurately, and easily. And the back-up Swatch watch is back in the safe with the other watches.

Until a little over a century ago, watches were generally pocket watches. Some versions of horological history give Cartier credit for creating the fasionable wrist watch, with a design for an aviator named Santos, who wanted to be able to check the time at a glance on long journeys without letting go of any of the flight controls. Troops returning from World War I popularized the wrist watch, which they had used for similar reasons: the quick and easy reference to time.

Maybe Apple should have waited to introduce a wristwatch until they could avoid the abandonment of its fundamental raison d’être.

I have toured some of the best factories in the world such as BMW’s versatile 5/6/7 plant in Bavaria; Texas Instruments’ state-of-the-art semiconductor plant in Richardson; Lockheed’s mile-long jet fighter plant in Fort Worth; Volkswagen’s highly-automated “Glaz Faktory” in Dresden, and Coors mega-brewery in Golden. These facilities are sights to behold. Large scale manufacturing is quite impressive. There are great economies of scale in these factories, and “lean manufacturing” is facilitated by impressive automation and leading-edge business systems that smaller companies simply cannot afford.

But with regard to world-class production capacity, who says you have to own it in order to use it? Maybe you can engage it when you need it, and only when you need it, via subcontracting.

Knowing that large factories can be relatively lean, one might wonder how well things can possibly work on a much smaller subcontracted basis. Can a process be lean enough to be cost effective when launching a single, relatively simple product that only utilizes a portion of the factory for only a portion of the time? Yes, with the right design considerations and the right subcontracting partners.

But it’s not just about manufacturing. It’s also about managing the supply chain. Can processes be developed such that ALL the resources can be managed by one person who negotiates the agreements and places the purchase orders? Yes, with the proper business systems.

And can it be managed with no headcount, no facilities and no travel, by relying solely on suppliers’ resources and utilizing the internet with its myriad of cloud-based tools to manage the information and the communication thereof? Possibly.

I got just such a challenge, as a contract supply chain consultant, and it turned out that the answer is — it is do-able — partially through the careful selection of the suppliers based on their process capability, but mainly about having precise product information, the means to share it easily, and a cohesive team in the supplier base.

Here’s how it was done.

In April of 2014, I was given a set of Computer Aided Design design files like these — adequate to make prototype versions of the product, primarily via a 3-D printing of the plastic parts. The 3-D CAD files looked similar to this example:

Those CAD files drove the tooling process, and were the subject of video and voice calls to China nearly every night for a few weeks. As a natural outcome of that, there were a few times we altered the design for tooling simplification and “manufacturability.”

Three months and several supplier contracts & purchase orders later, there was a team of suppliers in place that could make the components from which “pre-production” units could be made.

Here’s what those parts looked like, spread out on my living room coffee table:

The first few units were built by hand, to make sure that everything fit together properly, but having been kicked out of the living room, I took over the dining room. Here’s the view of the “pre-production” factory where the first 15 units were hand built, by yours truly. Notice the bottle of champagne, with which we celebrated the fact that all the parts fit together.

Finally, there was finished product that could be submitted to the customer for the “first article inspection” process. It looked like this:

And of course, the product needed packaging. It’s not just about the pretty-boxes, the foam inserts, the printed manuals, or the over-pack master cartons, etc. With retail, it’s also about the information printed on that packaging, and all the marketing and creative work that goes into that process. Here’s a look at the printing press that ran the pretty-box.

With production capability, pretty-boxes, foam inserts, instruction manuals, over-pack boxes, etc. we had all the “ingredients” in place and were good to go for volume production.

Also in parallel to the production process, the retailer started including the product in their mass-mailed series of catalogs, and on their web page, shown below.

With the “recipe” finalized, and the product on the “menu”, it was time to ramp up production. Here’s the product in the subcontracted factory in which we went into volume production.

A month or so later, the product was on the shelves in stores all over the country. Here’s the display from one of the stores:

The product was also exhibited at the 2015 Consumer Electronic Show in Las Vegas. Here’s what that looked like:

So, to recap, the elapsed time from design release to retail shelves was less than 6 months. And it was managed by a company with zero headcount — just suppliers responding to contracts, design files, purchase orders and shipping instructions.

The key is having good, stable design information, careful planning, good cloud-based tools, and lots of attention to detail.

Having a factory in today’s world is like having a car in New York or Tokyo or London. You don’t need a car — but occasionally you need a form of transportation. And we didn’t need a factory — but sporadically we needed a transformation process referred to as manufacturing.

And of course, you should plan on providing a fair amount of “mission control” and Skype to keep the virtual team focussed.

Paul Peck

In medieval Europe, at the death of a King, the high priests would announce the passing of the monarch and the ascension of his successor in the same breath: “The king is dead. Long live the king.” The proclamation indicated the replacement of a king with a king.

Telecom had been considered “king” in this region for a long time. The brand “Telecom Corridor”, trademarked by the Richardson Chamber of Commerce, has been used to describe a technology intensive region within Richardson, and has generally been used to characterize the broader surrounding tech-based economic development region. At one point, the telecom industry had been often referred to as moribund and the telecom era as having ended in a “bust”.

In light of the volatility in this industry, the validity and worthiness of the brand “Telecom Corridor’ is occasionally called into question.

But in fact, the last 25 years represents real growth in telecom jobs in Richardson.

In 1991, the top 10 companies in Richardson employed 25,120 people. Five of those top 10 were telecom companies, employing 14,830 (59%) of the top 10 total. (1)

Generally, telecom companies are of two types: service providers and equipment makers. In 1991, the service provider segment was an oligopoly, which, despite partial deregulation, was still dominated by a few large companies (mainly ATT, MCI, Sprint, WorldComm, etc.). The same was true of the equipment makers segment, dominated by a few large and (predominantly foreign-owned) telecom equipment manufacturers including Alcatel (of France), Ericsson (of Sweden), Fujitsu & NEC (of Japan), Northern Telecom (of Canada), Siemens (of Germany), and the remnants of the trust-busted ATT manufacturing subsidiary, Western Electric (of the USA).

In the last twenty years, there have been several factors that have restructured the industry, and in some cases, have dramatically impacted job destruction and creation, including:

· the relaxation of the telecom regulatory environment to promote innovation and encourage competition,

· the evolution of protocols from circuit switching to digital switching, and then to packet (internet protocol),

· the re-engineering of land-line facilities from metallic wires to optical fibers for the purpose of higher speed transmission,

· the explosive growth of the internet, enabling the “convergence” of voice, data and video, etc. (multimedia),

· the rise of “killer apps” like social networking, photo/video sharing, Internet TV and gaming that drive the demand for bandwidth,

· the deployment of broadband technologies to provide greater bandwidth to nearly every business and home,

· the widespread adoption of cellular phones, and the development and introduction of full-featured mobile devices,

· mobile “apps”, effectively a third industry segment, agnostic to the equipment maker and service provider segments, and,

· churn within the telecom industry employee base arising from intense merger and acquisition activity.

These disruptive factors have enabled the creation of thousands of new companies in the “telecom” space, which in turn has enabled huge advances in telecom technologies with new products and services, and have also given us a much more diverse “ecosystem” of telecom companies with literally thousands of new telecom jobs that could not have existed before the enabling technology existed.

Consider the Business Week magazine cover at the top of this article. “Telecom — Back From the Dead”? Really? That hand is holding a flip phone from 2007 — published the same summer Apple introduced their first iPhone. I’ve got news for you — telecom is not back from the dead — because it never died - and it never will.

The road has been rocky, to say the least. The telecom industry has been the classic example of “creative destruction,” with the destructive process getting much more attention (due to its abruptness) than the creative process (which is more evolutionary). The telecom industry has been forced to continually “re-tool” itself. Layoffs, and in some cases, bankruptcy, have occurred when the companies couldn’t react as fast as the technology and markets evolved. But new telecom companies keep rising from the ashes of the old, resulting in far more telecom companies and more telecom jobs in the Telecom Corridor than ever before.

As of 2011, the top 10 companies in Richardson employed 24,850 people, and accounted for more of the top 10 (six), employing 16,150 people, significantly more than twenty years ago, and quite a bit more (now 65%) of the top 10 total. (2)

And it’s going up from there. More importantly, today, unlike twenty five years ago, there are literally hundreds of telecom companies that may rank well below the top ten, but in telecom industry segments where very few such telecom companies (and telecom jobs) even existed before. These new companies employ thousands of employees in all sorts of niche markets being addressed by an amazing assortment of emerging telecom technologies.

Additionally, the Telecom Corridor region has become home to a plethora of data centers, both dedicated (corporate) and shared-facility. The Internet and Cloud Computing make this possible, and telecom makes cloud computing possible. Admittedly, this new approach to computing adds only a few jobs to the employment picture, but it greatly enhances the area’s tax base, thus contributing to overall prosperity of the region due to the high concentration of taxable assets.

That brings us back to the question of branding. Brands need to be memorable, but also durable, to be effective. They must stand the test of time. Coca-Cola® no longer uses coca in its recipe, and has thus lost its literal meaning, but the durability of the brand remains. The same can be said for brands like “AT&T”® (one “T” originally meant telegraph) but the brand endures nonetheless. The 7–Eleven® brand no longer describes their hours of operations, but it endures as well. “Silicon Valley” has installed less semiconductor capacity than Richardson in the last few years, but the term Silicon Valley remains a strong brand for California’s Bay Area tech region.

The Greek-based word “telecom” is timeless, and technologically agnostic. Telecom will never lose its literal meaning. Telecom, at its most basic definition, is simply communication over distance, whether those distances be vast (as in satellite or optical) or small (as in Bluetooth or near-field communications). Telecom has become integral to computing, data storage, entertainment, television, radio, internet, housing, transportation, automotive, space exploration, healthcare, energy, crime prevention, and … even politics. There are few, if any, individuals or organizations that would be able to develop and/or deploy emerging technologies without telecom. Telecom is to technology as water is to life. Indispensible.

And let’s not be misled by the commercial office building boom in this region in the mistaken belief that that the knowledge workers that will be concentrated into those new facilities are unrelated to the telecommunications industry. It’s inreasing clear that we are moving towards a knowledge and service based economy made possible by four processes: collecting, archiving, processing and distributing information. And at the core of those four processes are: telecom, storage, computing, and telecom, respectively. And managing those processes creates better jobs than the old “big iron” telecom factories of yore.

The beauty of the brand Telecom Corridor is that it has both figurative and literal meaning, accurately describing the region in terms of a dominant industry, which is bigger than ever — alive and well — here in Richardson, and elsewhere.

Long live the king!

Paul Peck

References:

Footnote #1: “Telecom Strategy for Economic Development” showing 1991 employment levels for top 10 companies in the Telecom Corridor, as reported by the Richardson Chamber of Commerce.

Footnote #2 –Top 10 companies in the Telecom Corridorm as shown on the Richardson Chamber of Commerce’s website in 2011.

Protecting intellectual property is crucial in a competetive environment. And it’s hard to stike a balance between accesibility and security. There is a long history of extremes to which organizatios have gone to protect their own and/or exploit other’s intellectual property. Here are a few interesting anecdotes about IP and the control thereof.

When the pyramids were built thousands of years ago, the slaves had their tongues cut out so they couldn’t share the secrets of the pyramid’s configuration and the location of the secret compartments of riches contained therein. I guess that worked OK until that papyrus thing came along and people could write stuff down.

In the early 1800s, a man named Lowell spent 2 years in the English textile industry for the sole purpose of replicating their loom designs in New England. Some say he used his photographic memory, others claim he smuggled drawings. He was very successful, if not an IP theif, and his namesake town, Lowell, Massachusetts, is considered by some to be the birthplace of the textile industrial revolution on this continent.

Hollywood wouldn’t exist if east coast motion picture makers were not trying to avoid royalties (or worse: injunctive relief) lawsuits filed by a certain Mr. Thomas Edison, who claimed to have invented the motion picture camera. The Californians figured that 3 time zones and 3 thousand miles insulated them from the slings and arrows of Edison’s New Jersey lawyers. And it did.

In the 1990s, in the Telecom Corridor, misapropriating IP devolved into “dumpster diving”. In one case, documents retrieved from a dumpster were ruled property of the originators, but in another case, they were ruled “public domain”. It came down to whether the dumpster was on company property or the tenant’s landlord’s common area.

In the late 90s, there were many lawsuits filed in Texas claiming “inevitable disclosure”, which alleges that an individual cannot avoid sharing whatever he knows when he changes jobs, and is therefore is potentialy guilty of theft of intellectual property. The doctrine of inevitable disclosure puts forth the notion that your employer owns all your work during your term of employment, even if you developed it “off-hours”.

The concept that your employer could actually own what’s in your head was upheld in the infamous Evan Brown case, where a software engineer claimed he developed (on his own time) a reverse-compiler for COBOL to fix Y2K date fields. Brown was denied the ability to sell it on the open market by his employer. Brown ignored the court ordered “motion to compel” and at one point was jailed for contempt of court.

At the SuperComm trade show in Chicago in 2004, a Chinese manufacturer’s employee was caught red-handed taking digital photos of the insides of competitor’s equipment after the trade-show floor was closed and the exhibit hall supposedly locked up. I think he did get a good look at the inside of Cook County jail.

So how do you use IP without over-exposing it? Simple: Comprehensive Product Lifecycle Management, aka PLM.

In 1999, the founders of Monterey Networks (where I worked) totally believed Dr. Vint Cerf, father of the internet, who (besides saying All Gore WAS a big help) declared that the internet was doubling every 100 days. (I think it was true, for about 200 days.) Alcatel sued Monterey Networks under the doctrine of “inevitable disclosure” because we had hired several of their engineers and developed the world’s largest optical router in less than 9 months. In legal discovery, we had to convince the court that we didn’t steal anything, and that our architecture was a clean slate design. When our new owners, Cisco, asked how we did it without stealing Alcatel designs, we had a one-word answer: PLM.

We demonstrated that the newest genre of PLM software facilitated collaboration and supported rapid design re-spins to the extent that we would crank out “big iron” telecom equipment designs in unbelievably short intervals. Alcatel’s case was dismissed (on summary judgment), and Monterey/Cisco kept after them on the counterclaim “tortious interference through abuse of the courts”. Cisco/Monterey clearly won the legal clash of titans. At the victory dinner, our lawyers gave us bumper stickers that say “Texas is Bigger than France”.

PLM is clearly becoming a competitive weapon. With PLM, we can quickly evaluate the latest technology, generate prototypes faster, reduce the number of design re-spins, collaborate easily, and effectively become the “techno/social network” for some of the industry’s best telecommunications experts. We can get product to market so fast that our competitor’s heads spin. And with PLM, we can keep our intellectual property locked up tighter than a drum.

I’ve heard people express concern about all the intellectual property being so readily accessible via PLM. The notion of giving suppliers access to our intellectual property is worrisome. Having everything in one place seems like a risk exposure, and I suppose it can be if it’s not managed properly.

It’s not like IP has been so well managed up to now. Take a look at what’s being done all too often today. Drawings and design databases are put in big file/directory systems, sometimes with no check-in/check-out capability, and often without any form of revision control. In far too many cases, the “single version of the truth” is on somebody’s C; drive, in a laptop PC being hauled around by the designer, or left on the front-seat of a car easily in the crosshairs of a smash & grab thief. In many cases, files are sent as email attachments, essentially “published” into the “ether” as stored & forwarded mail, or worse yet, random files on some thumb drive dangling off of a lost keychain.

With a comprehensive PLM system, we have all sorts of control, both at the individual level, and at the product level. We can make the case that with a well-managed security implementation, our intellectual property is actually more secure in a central repository. With comprehensive PLM, there’s no reason to have all these uncontrolled copies floating around. I think most would agree that red-lined drawings on the shop floor, or for that matter, uncontrolled printed copies, email attachments and files on thumb drives are unnecessary, and even discouraged, when you have a central repository with “the single version of the truth” safely under a virtual lock and key, but easily accessible by all with the “need to know.”

My advice is to lock up your IP in a comprhensive PLM system, carefully manage change control, and have a “single version of the truth.”

Now, if we could eliminate printers, we could eliminate shredders, and then stop worrying about what ended up in the dumpster.

I’ve been in the manufacturing business my entire career. When anyone asks what I do for a living, I just tell them I develop processes to improve “how” and “where” manufacturing gets done. That “where” part tends to get people excited, because they know that it usually means out-sourcing. And out-sourcing conjures up images of container ships hauling products made by Chinese laborers who ended up with what used to be American jobs.

In the manufacturing world, we make decisions regularly regarding “make vs. buy.” And every time that the answer changes from “make” to “buy”, we are out-sourcing. We are taking a task that we consider do-able, and getting someone else to do it. Sometimes it’s based on cheaper labor, but more often it’s based on enabling technologies for which we don’t have the economies of scale to justify the capital expenditure. For example, very few product companies have their own printed circuit board assembly lines. Most of them out-source that kid of work to electronics manufacturing services companies, and the biggest of the EMS companies have their operations off-shore.

The semi-conductor industry is even more interesting. Take Texas Instruments, for example. About 90% of their sales is international. Why? Because the products that use TI chips are typically built off-shore, based on out-sourcing decisions made by TI’s customers. But you can be sure that most of the products that use those IC chips end up right back here in the good old USA.

The “buy” decision is tightly coupled with automation. Sometimes the thing we are “buying” is access to capital equipment as an alternative to labor. For example, surface-mount technology printed circuit board production lines are not cost effective if you can’t keep them fully utilized. So most companies send that work to contract manufacturers and thus avoid the utilization of capital problem entirely. That’s intelligent out-sourcing.

Sometimes in the process of out-sourcing, companies get to narrow their focus to their core competencies, by off-loading the non-core work to those that have better means of doing it. By out-sourcing, companies maintain a competitive edge via specialization, which facilitates innovation.

A lot of jobs have disappeared as civilization has transformed from tribal to agrarian to industrial. Industrialization has given us mass production of things like food and textiles. There was plenty of resistance along the way. In the industrialization of the textile industry there was a group known as Luddites, whose lower skilled jobs were being out-sourced to equipment owners that could operate that equipment with low-skill labor. The Luddites became famous for destroying equipment. Today the term Luddite is synonymous with those that stand in the way of progress by opposing automation for the sake of employment.

We regularly hear, especially during the political season, about manufacturing jobs that are being lost. A hundred years ago, the complaint was that agricultural jobs were being lost, but no one complains about that anymore. No one really wants to work in the fields. Indeed, industrialization eliminated many jobs in the food processing industry, leading to low-cost mass production and convenience for the consumer. You can see the impact all the way to the most detailed micro-economic level.

Have you ever heard the saying “it’s the greatest thing since sliced bread”? Clearly, the outsourcing of this chore has been greatly appreciated by all. You will probably be surprised to hear that during World War II, pre-sliced bread was outlawed briefly by the Secretary of Agriculture, apparently a Luddite himself. The argument for implementing this legislation was that sliced bread consumed too much in the way of scarce packaging resources. But job preservation perpetuated the silly statute. At one point, a New York official threatened enforcement, saying that those who were continuing to slice bread should stop “to protect the cooperating bakeries against the unfair competition” and that the government was “prepared to take stern measures if necessary.” The law was repealed, and wartime housewives were allowed to continue outsourcing the menial task. Making sandwiches got easier, and wax paper sales took off.

Some of you may be thinking “Yeah, but that’s about personal convenience — business is different”. Not really. A hundred years ago, most large industrial companies had a VP of Power and a department concerned with power generation. Then power became as convenient and ubiquitous as a wall outlet. That function got out-sourced so completely that the job title went away entirely. Let that be a lesson to today’s Chief Information Officer, to whom the same dynamics are applicable — convenience and ubiquity of the resources make CIOs somewhat redundant. We see this in the form of payroll processing, which led to info tech giants like Ross Perot’s EDS. For that matter, entire HR functions are now regularly out-sourced, as well as legal departments. And factories are often sold “lock, stock and barrel” to contract manufacturing firms like Jabil, Celestica, Sanmina-SCI and Flextronics. I confess — I’ve helped numerous companies out-source manufacturing to those firms, and that meant that the jobs went elsewhere. And I have no regrets — I helped make products cheaper, which made my employer stronger and better able to compete in a world market.

Some of you may be thinking “Well, outsourcing is inevitable, but off-shoring is the real problem, because of the loss of domestic jobs.” Again, I have to confess. I once helped a company off-shore an entire product line. The electronic circuit boards jobs went to one country, and the final assembly work went to another country. We out-sourced about 250 jobs. That’s a bad thing, right? What if I told you that the product was being built in my employer’s home country of Germany, the circuit board manufacturing was moved to a California firm, and the final assembly was moved to a Romanian firm. And as a consequence, the increased sales volume and profits from the resultant cost/price competitiveness funded more design engineers in the Texas design center for developing the next generation products? Now, is outsourcing all that bad after all? Or is out-sourcing OK as long as you are on the receiving end of the jobs equation?

Sometimes global political and economic imperatives drive the out-sourcing agenda. In the 1970’s, the US Air Force decided they needed a new low-cost light-weight jet fighter, and after a fly-off competition, picked the F-16. But like most big military programs, much of the cost is in the development. To better amortize the development cost, and achieve unit cost targets, the Pentagon actively sold planes to our NATO partners. To win the business, General Dynamics had to “off-set” co-production to the partner country’s aerospace industries. As a program manager at GD, I confess to helping the Danes, Norwegians, Belgians and Dutch get job-creating business for Terma, Kongsberg, SABCA and Fokker, respectively. The more planes they bought, the more off-set work they got. Thanks to off-set and co-production, our Air Force and our allies got a bargain on the air-superiority workhorse we call the Fighting Falcon, and there were plenty of jobs left for the machinists in Fort Worth. (Footnote: all forward fuselage/cockpit sections were made in Fort Worth — with English/Imperial dimensions. Fokker made all center fuselage sections — in metric dimensions. There were a few off-color “play on words” jokes in the factory on that first “fuselage mate” event in 1978, as you might imagine, but things fit perfectly.)

Sometimes the outsourcing story goes full circle. In the 19th century, plenty of Yankees were upset when work at their textile mills was out-sourced to the lower-cost mills in the South. In those days, sending jobs south of the Mason-Dixon line wasn’t any more popular than sending jobs off-shore today. The South benefited greatly, for about a century, until Chinese mills came up to speed. Now, nearly all towels and linen come from plants in Asia, and those mills in the South are shut down. But after a period of high unemployment, the industrial South has re-emerged, especially in automotive. Foreign car-makers like Toyota, Mercedes and BMW have gleaming new plants in the the South. The cars cost less, and local employment has gone up. My wife also has to confess to out-sourcing — she drives a BMW for which the production was out-sourced — people in Munich had to give up their jobs to people in South Carolina (descendants of former textile workers.) She could buy a Chevy Volt (with an engine from Austria and an electric motor from Japan) or a Ford Fusion (assembled in Mexico), but that would be out-sourcing US jobs. To maximize US content, she needs to buy a Honda, the car with the highest US content of all US-built cars. Who would have thought that buying Hondas creates more US jobs than buying Fords?

And while we are talking about out-sourcing, off-setting and off-shoring, let’s deal with the fact that the sword swings both way. There is such a thing as in-sourcing and on-shoring. Sometimes it makes sense to do things in-house even though the capabilities are better elsewhere. There is no doubt that Dell Computer in Round Rock, Texas could perform final assembly in Asia much cheaper, but with a lean supply chain and a factory-direct fulfillment model, they can offer a vast array of product configurations, assembled-to-order, supporting two-day delivery and thereby virtually eliminating their exposure to large inventories with product mix uncertainty.

For one of the best examples of in-sourcing enabling mass customization, combined with rapid delivery, look at the eyeglasses industry. Traditionally, the work was “out-sourced” by the optometrist, to a central lab, where lenses were ground to the prescription and cut to fit the frame. But some clever French guys looked at those two steps separately. Pre-grinding the blanks to a relatively finite number of prescription gradients was changed from a “lab” function to a “mass production” function, and the machines for cutting the lenses to fit the frame were improved and cost reduced such that the optometrist could in-source that step. This re-definition of out-sourced vs. in-sourced re-vamped the entire eyeglasses industry and gave us vastly improved service.

I read that Foxconn, Apple’s out-sourced manufacturing partner, is buying a million robots. They will be replacing Chinese workers that make, at the most, $10,000/yr. So don’t be looking for a whole lot of manufacturing jobs to move back on-shore. Those jobs are gone forever, unless we can find people that will work for far less than $10,000/yr. And by the way, much of the work building robots will be automated (ie: robots building robots.)

So where am I going with this? Out-sourcing is here to stay. It’s as inevitable as the advancement of technology itself. Things we could do manually will gravitate to lower cost regions, as the world approaches economic “flatness”. And then the manual labor will become automated, either through robotics or product architecture. It is a fact of life, and the companies that are best prepared are the ones that have the best definition of their processes and products.

Development processes are also part of the out-sourcing rationale. I can’t tell you how often I’ve seen contractors engaged to do PCB layout, design analysis, certification testing, and industrial design. I sometime think of the term “non-recurring engineering” as being redundant. Engineering is non-recurring by its very nature, especially if it’s being done right. And what better way to engage and collaborate with engineers across company lines than a comprehensive out-sourced ecosystem supported by a comprehensive Product Lifecycle Management (PLM) system.

The best prepared companies have PLM tools that enable them to engage developers from all over the world, to design products that can be built all over in the world. The degree to which the product data is comprehensive should not hinge on the “make vs. buy” decision. If it’s important information when your company builds it, then it’s important when a contract manufacturer builds it, and vice versa. The most important concept is that the sourcing will almost certainly change to some degree during a product’s life, and that process will be easier and less risky if the product is well documented in a comprehensive PLM system under revision control.

And I cannot avoid mentioning the concept of time-based management. We all compete on the time domain. Most advancements in technology save time. The best companies use time to their advantage, and well-organized PLM information systems can make them time warriors.

So here’s my message: Be able to design anywhere, build anywhere, and change anytime. Concentrate on the product and its configuration the way our Air Force controls the configuration of a jet fighter, and don’t worry too much about sourcing — that will sort itself out in ways you cannot predict, through automation, integration, investment, divestment, economics, and sometimes even politics.

Now I’m going to go make myself a sandwich, with pre-sliced bread. Thank God for automation and the out-sourcing of menial tasks.

Paul Peck (Feb 2015)

We should stop worrying about the physical location of venture capital firms. VC firms rarely launch companies. Usually, the opposite is the case: successful startups eventually have liquidity events that fuel the VCs’ funds.

My personal experience with VCs seems to indicate that the money comes from elsewhere, more often than not. (see my blog “The Geography of Venture Capital”.)

A while back, at a TeXchange “One to Watch” event at the 6th Floor Museum in Dallas, we heard from Brad Feld, noted successful entrepreneur from Boulder, Colorado, on the subject of startups. We got coupons for his E-Book entitled “Startup Communities” in which I found this interesting passage:

“Almost everywhere I go, people talk about venture capital and startup communities as if they are the same, or worse yet, that the former causes the later. It is a lazy and convenient way of thinking and is a myth that inhibits a lot of progress…While businesses need capital, it is not the capital that creates the business. Pretending otherwise is reversing the causality in a dangerous way…Venture Capital need not be located in your city for it to find opportunities to invest in…We operate in an increasingly flat and mobile world, one where investors quickly hear about interesting opportunities, no matter where they are located.”

Simply put, the proximity of capital is becoming less relevant. What’s important is the proximity of creative individuals that find this region to be the home of a nurturing and supportive ecosystem for their startups.

When you’re following the money, you’re working backwards. That approach may have helped Woodward and Bernstein develop the Watergate story, but this is not about going back in time with investigative reporting. This is about entrepreneurship, and we are moving forward in time, so let’s develop reasons why the money should follow us.

Paul Peck

There is no doubt that economic development in the Telecom Corridor and surrounding north Texas region would be enhanced by the presence of a more active VC community. But it’s not the source of funds, but rather, the use of funds that should be our primary concern. We tend to focus on the lack of local VC and PE firms, but I’d like to make the case that it doesn’t really matter as much as we seem to think it does. In fact, we may be astonished to find out that proximity to the fund manager’s offices may in fact be a handicap. More on that later.

From an economic development standpoint, we should be more interested in the location of the investees (hopefully here!) than we are in the location of the investors (often elsewhere). Economic development occurs on the receiving end of those wire transfers.

Here’s a synopsis of companies that I’ve worked for (or consulted for) over the past 35 years, and information about where their money came from. In short: elsewhere.

Danray (located in Richardson & acquired in ’78 by Northern Telecom in Toronto) and effectively launching the term Telecom Corridor, was funded by Xerox (Connecticut) and Bechtel (San Francisco).

TBS International (located in Richardson & acquired in ’87 by Davox in Boston) was funded by private equity investors from West Palm Beach, Florida and Columbus, Ohio.

Digital Switch, aka DSC Communications (located in Plano & acquired in ’98 by Alcatel in Paris) was originally funded by private equity investors from Washington, DC.

Monterey Networks (located in Richardson & acquired in ’99 by Cisco Systems) got its A-Round from Mayfield, Sequoia Capital and ComVentures (all from Silicon Valley) and Sevin Rosen (Silicon Valley/Dallas).

Navini Networks (located in Richardson & acquired in ’07 by Cisco) was also funded by Sequoia Capital, as well as Austin Ventures (Austin), and Granite Ventures (San Francisco).

Covaro Networks (located in Richardson, & acquired in ’06 by ADVA Optical Networking, Munich) was funded by Sequoia, Interwest & Centerpoint (16th Floor Dallas) but also Centennial Ventures (Denver).

Convey Computer (located in Richardson) is also funded by Interwest & Center Point, but also by Braemar Energy Ventures (New York), and Rho Ventures (Silicon Valley).

Menara Networks (located in Dallas) got its VC dollars from Sigma Partners (Silicon Valley) and Spark Capital (Boston).

Wham Inc. , now known as Biscotti (located in Allen) was funded by Palomar Ventures (Los Angeles).

OnAsset (located in Irving) was funded by Main Street Capital (Houston).

Just to show the sword swings both ways, Pivot3 (in Houston) is funded by Dallas-based Interwest and Silvercreek Ventures.

So what’s the point? Investment capital comes to our region from all over the world, and can be moved here at the speed of light. Economic development occurs at the receiving end, where the funds get deposited, where the innovation occurs, where the talent exists, and where the money is spent. Regional economic development is all about where the money ends up, not about where it originates. You could think of it like solar energy, which originates 93 million miles away. The main thing is that it gets here!

For more about the geography of venture capital, here’s an interesting blurb from MIT/Sloan, which contains a link to a well researched paper which indicates that the investees outside the VC’s region typically do better. In other words, distance may be better than proximity!

From the paper’s abstract: “Outperformance of non-local investments suggests that policy makers in regions without local venture capitalists might want to mitigate costs associated with established venture capitalists investing in their geographies rather than encouraging the establishment of new venture capital firms.”

http://sloanreview.mit.edu/improvisations/2009/06/29/understanding-the-geography-of-venture-capital/

We don’t necessarily need more VC firms — it would be nice, but what we really want is to attract more VC money. So let’s think of ways to make it more comfortable and less costly for distant VCs to invest here. Through the use of the internet, cloud computing, WebEx, Go-To-Meeting, telepresence video, Skype, etc., it’s getting easier every day to manage the distance between the the funding source and the funded destination.

In 1995, Frances Cairncross coined the term “Death of Distance”, a concept that epitomizes globalization facilitated by information technology. What better location is there to be the final resting place of electronic funds transfered to early stage companies than the Telecom Corridor and surrounding region?

Let’s face it — investment capital generally comes from elsewhere. That’s why we generally refer to the fundraising activity as a “Roadshow.”

Paul Peck

I think a lot about time. It’s incessant, unstoppable and irreversible. It’s integral to the measurement of distance, whether it’s the ping of sonar, the blip of radar, or the clocking of GPS data. And it’s often the denominator in measures of performance, be it the 40 yard dash or the quarterly accounting period. I measure things with time every chance I get, because it’s such a universal benchmark. There’s no English time vs. Metric time, and no Euro time vs. Dollar time. And everybody knows the exact meaning of seconds, minutes, hours, days, weeks, months, years, etc.

At a recent Indianapolis 500, I sat in the Turn 1 “Penthouse” (not as fancy as it sounds) with a camera in my hand and a stopwatch hung around my neck, and watched an interesting element of the greatest spectacle in motor racing. Coming at us was an anachronistic squadron of warplanes: 2 P-51 Mustangs, a F-16 Fighting Falcon and an A-10 Warthog. I couldn’t help but wonder how they timed the exact moment of the fly-over to synchronize with the final stanza of the Star Spangled Banner. As the planes roared (and rumbled) over the speedway, I noticed the sign on top of the JumboTron — “Official Timekeeper: TAG Heuer.” At that moment, I was reminded of the role Swiss watchmakers played in the advancement of mass production with the imperative of strong product data management brought about by an industrial revolution that started over a century ago.

Long before there was a Silicon Valley in California, there was Watch Valley in Switzerland. Central Europe had advanced metallurgy, mechanical engineering and manufacturing technology to the point that the world’s first pocket watch, the “Nuremberg Egg”, had become a popular jewelry fashion statement as well as an instrument of timekeeping. Swiss craftsmen flourished in the watchmaking trade, because it suited their need to be productive with indoor activities when they were snowed-in during the Alpine winters. Demand for watches was increasing dramatically, but the craft-mode production techniques were not keeping up.

Around the period chronograph watches were introduced by the likes of Heuer, there was a new approach to the manufacturing industry in which craftsmanship gave way to specification compliance, and “interchangeable parts” were introduced, especially in the making of firearms. The watchmakers adopted this principle for their products too, realizing that it was key to mass production. With interchangeable parts made to a precise specification, the watchmakers could maintain quality, engage sub-suppliers, allow for best-of-breed specialization, achieve economies of scale, and ramp-up production.

Documentation became paramount, and tolerances really mattered. With detailed and unambiguous design specifications, the various pieces of a watch movement, from escapement wheel to winding wheel, from hairspring to mainspring, could be outsourced to an ecosystem of craftsmen scattered across the Swiss countryside. The entirety of Switzerland became noted as masters of precision, and as we all know, the root of precision is in the specifications.

The cycles of nature drove the release control cycle. In the Autumn, the various watchmakers would come to a place like La Chaux-de-Fonds to get their finalized drawings and specifications, and then return to their various villages and towns for a long and hopefully productive winter, during which time the designs were “frozen.” After the thaw in the Spring, they would meet again, submit their components to the final assembly process and prepare for the now famous Basel and Geneva watch shows. The designer/brand-owner with the best specs and tolerances had the best opportunity to achieve the highly desirable “Chronometer” certification, indicating that they were the world’s best devices for the measurement of time.

Which brings us back to timekeeping in general. Indy cars race against time. So do companies. Competing on the time domain is like playing on a level playing field. Everybody has the same amount of time. But with effective comprehensive Product Data Management and related Product Lifecycle Management, some companies do more with their time allotment than others. They consume less development resources, have more predictability, and are able to take more market share.

Be one of those companies — improve the collaboration process, promote design re-use, and shorten development cycles to accelerate product launch and gain market share. Eliminate the physical meeting configuration control board “signing party” and replace it with the “virtual CCB.” Prepare to design anywhere — build anywhere. Use time to your advantage. You can’t buy more time — so use it effectively to optimize your development process, clarify your communications with production, put discipline into your product plans, and help your company run like a Swiss Watch.

For manufacturers and distributors, we need a way to track the “widgets & gizmos” that flow through our books. To sell those items, we need to buy them and/or make them, and our business systems need to track them along with the cost associated with them. In some form or another, we need to keep track of the Product Data that describes these things, and we therefore have some form of Product Data Management.

When we set up Product Data Management (PDM) systems, we are thinking a lot about drawings, documents, files, and product structures. We might even be thinking about complete product life cycles, and how the items we buy, make and sell will be evolved over the long run. We know that the item information that we convey will be the key driver in the Enterprise Resource Planning (ERP) system.

But probably not enough thought goes into the design of the part number itself. Maybe we should give it a very close look. It’s “key” to how we interface CAD, PLM, ERP, etc, and it deserves careful consideration. As it turns out, the lowly “Part Number” has a history of its own, being a “key” driver in the evolution of “relational” database technology by being the “lingua franca” enabling modern business systems, including ERP itself. Here’s how that happened.

Prior to the advent of computers, components and products were identified by various means: sometimes description, sometimes drawing number, sometimes vendor part number, etc. Typically, inventory was managed on a minimum/maximum re-order methodology. When the stock balance of an item got low, near the “min”, it became time to order more and replenish inventory up to the “max”. Theorists even went so far as to use differential calculus to determine the “economic order quantity” (EOQ) whereby non-linear-per-unit ordering costs were balanced against linear-per-unit carrying costs. But there was a fundamental flaw with the min/max/re-order point method and the goofy EOQ formula. The assumption of steady-state demand rates and steady rate component consumption was unrealistic. Demand was not steady state — it was “lumpy”.

In the 60’s, long before the days of “Big Four Consulting”, the computer giant of the day, IBM, was engaged by numerous large companies to solve this material requirements planning problem. One of the challenges was going to be to convert inventory information to “electronic data”, but there was a huge problem: file systems, up to that point, had been “decks” of 80-column punch cards with “fields” of punched holes. The cards would be fed into the computer sequentially, at the beginning of the “job” by the job control language ( JCL) commands. These card images with their fields of data would later be moved to tape drives and disk drives, but they were essentially big flat files (decks) with records (cards) that could be evaluated (read) into the machine one at a time, sequentially, and had to be processed in one pass.

In manufacturing, there is no set number of components per assembly, and so there could not be a set number of “fields” to show the parent-component relationships. (The key word being: relationship). So there would need to be a separate flat file that listed components, and a way to “relate” the two files, thereby linking the components to the assembly. Enter: the relational database. At about this time, IBM developed one of the first one-to-many relational database programs named DBOMP (Data Base Organization and Maintenance Process). It embodied, among other things, the concept of the record “key”, a special “field” in every record that made it possible to electronically look up a particular record without having to read the entire file each time.

Also at this time, IBM had a manufacturing consultant named Joe Orlicky, who was helping companies like Toyota, Black & Decker and Case Tractor with the requirements planning problem. Of course, Joe knew about IBM’s DBOMP. He knew that the records would all need a “key” to tie it all together. So, he created a new “field” to become the item record’s “key.” This “key” would be a unique identifier for each item — necessary to “relate” items to their parents and their components in the DBOMP relational database environment. This “key” would also be necessary to “relate” an item’s supply to an item’s demand. At Black & Decker, the first company to use IBM’s MRP, they called this strange new field the “IBM Number”. Without these new “IBM Numbers” in the world’s first relational database system, the data couldn’t “relate”. We call that “key” the Part Number today.

So with the addition of a “key”, big Joe (my hero) was able to use the new DBOMP database as the world’s first bill of material processor, and developed what is known today as MRP — Material Requirements Planning. With DBOMP, IBM mainframe computers could handle the one-to-many relationship between assemblies and their components, thus making it possible to calculate exactly how many parts were needed as demand changed over the time domain, and the information could be used to generate replenishment plans accordingly. Orlicky became famous, and wrote the original book on MRP. MRP evolved into ERP, and became the framework for modern business systems. The rest, as they say, is history.

Which brings us to the structure of the Part Number itself. It is crucially important to get this right. It’s the “key” to the product record, fundamental to the ability to “relate” components to parents, and supply to demand. There are serious considerations regarding Part Number when setting up Product Data Management system, the source of product data for MRP/ERP systems.

Form, Fit and Function. We hear these terms, and sometimes have different opinions about what it means. Literally, it means that if a new or changed item is of a different form, or doesn’t fit in all the same applications, or performs a different function, it should have a different part number. An easier way think about this is by asking the following questions:

• Can we take the new/changed item and use it interchangeably with the old/unchanged item — whether it is used on a Sales Order, a Work Order, or a Purchase Order?
• Can the new or changed item be used as a replacement for any item that shares the same part number?
• Will we always be able to “co-mingle” the inventory, such that we don’t care which one gets used, whether for new shipments, or for repairs to older product?

If you can say yes to all the above, keep the part number the same, and just “bump the revision”. No bill of materials needs to be changed, unless you simply want to show a rev bump” at the where-used assembly level(s) for change traceability — could come in handy if you are wrong and find out later that you should have used a new part number! But if the answer to any of those questions is “no”, or even “maybe”, a new part number is called for, every time.

Fixed Format and Length: This is not required by most system software, but is highly recommended. There is a huge benefit to all North America phone numbers being 10 numeric digits, chunked up 3–3–4, and all social security numbers being 9 numeric digits, chunked up 3–2–4. When a strange format or alpha character appears, or if there’s a missing character, it’s clear that there’s a mistake. A lot of thought and ergonomic study went into these formats. The same concepts apply for part numbers. I strongly recommend against variable formats, variable lengths (makes it hard to tell if you have it all), and mixtures of alpha and numeric (causes confusion like I vs. 1, or 0 vs. O, etc.). Keep in mind that a hyphen, a dot and an underscore are characters themselves, not equivalent to one another, and will affect how things are sorted. The demand for item 12345–678 will not be matched to the supply of item 12345_678.

Avoid Over-Intelligent Part Numbers. Don’t get fancy. There is no way a part number can codify all the intelligence in the item/product record. That’s why God gave us PDM/PLM systems and relational database systems. Every citizen of this country has a Social Security number, and 9 unintelligent numeric digits (chunked up 3–2–4) allows for a unique number for a billion citizens. Let the intelligence be with the Social Security Administration, not in the SS# itself. Fed Ex tracks every package it ever sent with 12 numeric digits (chunked up 4–4–4) with no intelligence whatsoever. If you want intelligence with that, simply enter it in their tracking system. The North America telephone network has operated with 10 digit telephone number for 40 years (chunked up 3–3–4). Most of the difficult challenges the telecom companies have faced in coping with these 10 digits has centered on the need to remove the intelligence originally baked into the system that required things like a “0” or “1” in the middle of the area code. Undoing this “intelligence” cost the industry millions and delayed feature deployment by years. Let that be a lesson to us.

Revision is Not Part of the Part Number. If a revision is “baked” into the part number field — then every time it gets changed it’s a whole new part number –which means that it is going to be unrecognized by the Bill of Materials and treated as a brand new item with regard to the inventory system. If that’s what you want (a new “thing”) make it a new part number. What revision means, by definition, is that you have “revised” the item, but the part number remains the same. That means that the parent’s bill of materials does not have to be changed, and that the item, despite being revised, and is still interchangeable with any other item that is being tracked with this part number. Don’t forget the Form/Fit/Function rule above. If you know that at any time in the item’s future, the new revisioned item will not be interchangeable, go ahead and give it a new part number. Think about inventory — will you ever want to segregate by Rev? If yes, then Rev is not what you want — you want a different part number unless you want people to be digging in stock bins reading revisions visually.

Software Makes Hardware Different. There are some that think that software doesn’t matter when it comes to part numbers. After all, it’s just bits, not atoms, right? How could bits change the item? If this were this simple, then Windows version software and Mac version software could be sold under the same part number. If software didn’t affect part numbers and revisions, then motherboard makers could change the BIOS at will, without telling their computer manufacturer customers. And disk drive users wouldn’t care how their devices were formatted. Of course, software does matter — just ask the guy trying to jail-break his phone. All software, firmware, micro-code, etc. that differentiates product must be put under the control of part numbers and revisions, just the same as if it were a physical component. Most Product Data Management systems have a special classification for intangible items — you can call it “document number”, but the concept is the same — any change is a Revision, unless it causes the item to not be interchangeable — in which case it needs to be a new Part (or Document) Number.

So raise a glass and toast the lowly Part Number. Give it the respect it deserves. It drove the development of business computing. It was the “cause celeb” for the development of the relational database systems by emphasizing the importance of the one-to-many relationship. It is largely responsible for enabling materials management and engineering to get on the same page with computing power. It’s not the house, it’s not the car — but it is the “key”. Design it thoughtfully, just like you would your products.

Paul Peck