Lean production can matter more than adding factory robots

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 1:03:09

   Can we double click on drone manufacturing? I remember a couple of years ago hearing from a lot of the defense tech drone companies that they didn't have an onshore supplier for small drone motors for little quad rotors. Everything had been offshored. There was one company I found in Washington that had been sort of hollowed out and offshore their manufacturing, and I was sort of loosely pitching, like, oh, someone should do, like, the American Drone Motor Company of America or something, one of those startups specifically focused on that.

2. 1:03:42

   But what have you seen in the drone supply chain that is interesting or tractable or the biggest unsolved problem? Like, what is the state of that supply chain? Because a lot of the actual founders, you know, they can't exactly go out and say like, oh, yeah, we're particularly. trouble on this part because they have a business to run. It's a great point. So actually, on the motors, which are called BLDC motors, which are used on these drones, that problem is largely being solved, actually, in a pretty short period of time. That's great. So it turns out you could import a lot of the machinery, the winding machinery, and so on. And a lot of the machining is quite conventional. And those are not ultra hard products to make. The actual trick there is the rare earth magnets in those motors. Oh, yeah. And today, that is still a very difficult supply chain issue. There are a number of companies

3. 1:04:29

   looking to build that capability in the US, but the motors themselves, a whole bunch of companies ran into that space and there's actually some danger there'll be overcapacity. Oh, interesting. Yeah. I remember looking up like how a drone motor is made and it's, I don't want to say it's easy, but it's like a pretty simple to understand. Like you wind the wire around the magnet, it spins, and it's something that if you had like any degree in engineering, you could sort of like work up to with the right machinery. So good to hear that's going to be solved.

4. 1:04:58

   well understood and the capital needs to get into it are not ultra high right that's great now as you get to bigger motors and bigger drones like group three drones larger drones that changes but the biggest challenge in drones is still that you know someone like dji in china can make a group one this is like a small quadcopter drone and deliver it in the u.s for under two thousand dollars and a typical u.s made product is more like five to eight thousand dollars using U.S.-based supply chain, electronics, et cetera.

5. 1:05:26

   And as you can imagine, in a military context, it's all about affordable mass. So you want the maximum number of drones at the lowest possible price to win. And so that price difference is substantial. We've been developing actually what we call a drone core. Think of it as a platform that others can put various payloads on, whether those are energetics or various sensors or whatnot, that we think we can sell in the U.S. wholesale for about $1,600.

6. 1:05:51

   dollars. So the real radical change there is the development of the production system. How will it be manufactured? And developing that plant at the same time that you're developing the product, because if you look at a traditional drone, again, even from China, they might have 100 plus fasteners. And each of those fasteners requires a person or a robot or some kind of automation to make it. So if you can design a product that eliminates, for example, 100 plus of those fasteners, you can dramatically cut the production cost, the production time. And that's the kind of thing that we need to do if we're going to compete with not just low labor costs, but everything costs less in China. How are you thinking about your supply chain? How much, how much were robotics part of the pitch in 2020? Was that like, was that a core part of the first five years? Or was that

7. 1:06:41

   always something that was a bit farther out? Because I'm thinking like, there's one situation where the u.s ends up and where we do sort of like reshore manufacturing but then we don't we can't make the robots at scale so then we have a new dependency we have to import you know so it feels like both those things we need to have the manufacturing here but also we need to make the robots here that will actually do the manufacturing that's true but i have a little different perspective on robots which may not be that popular which is that there's a lot of hype around them and the problem with robots is that they're attacking a pretty small part of the total production cost. It's largely the elimination of direct labor. And actually, most of the cost and most of the time involves everything around that, a lot of waste. So the reality is that

8. 1:07:27

   bringing robots in might take a few percentage points off your total cost at a very high capital expense. You're much better off, much better off, excuse me, trying to implement something like Toyota's lean production system to eliminate all the steps along the way that are wasteful, that don't add value to the product but in the u.s we're very techno centric and we like big step change improvements yeah and so robots are fun and so we want robots instead of grinding it out and every week just pulling a quarter percent or a half a percent of the cost basis out by getting a little more our fish.

9. 1:08:00

   which the Japanese, frankly, and other cultures are better at. So we need to adopt more of that kind of ongoing bit-by-bit approach versus, oh, I'm going to put robots here, get rid of all my labor, and all of a sudden I've solved my problems. That won't happen. Yeah, yeah.