Did our inventory go through some kind of time warp? ... Did we store them in a 747 that was kept in the air (with in-flight refueling) so as to be immediately available once it was determined where the factory was going to be?
A copy of Jed's (angry, funny, and insightful) memo to his boss, Rick Moncrief, about how stale and incorrect cost information makes it hard for him to design cost-effective hardware.
To: Rick Moncrief Fr: Jed Margolin Re: Regulator/Audio III Costs Dt: 12/20/84 I just received a copy of Rod Peterson's cost information on the Regulator/Audio III. I used the best information I could get, and it was wrong. I used as many parts from inventory as I could and then it turned out these parts had been scrapped. It makes me look bad and I am mad as hell about it. Regulator/Audio III Rod Peterson's cost = $31.95 My estimate in September = - $23.64 ------- $8.31 Total Increase: --------------- 1. Inventory Parts $1.91 2. CTS Pot 1.01 3. PC Board 3.75 4. TDA 2030 1.20 5. Heat Sink .49 ------ $8.36 Item 1 ------- When I did my cost estimate I used the best information I could get, which was the AMPS system before it was turned off. This was in September. As an example take 24-250477 (470 uF 25V Electrolytic Capacitor). According to AMPS we had 71,350 in inventory and paid $0.11 a piece. How could they now cost $0.477? And why do they cost almost twice as much as a 1000 uF 25V part? Was the original AMPS entry incorrect? Did the capacitors somehow increase in cost while they were sitting in inventory? Did our inventory go through some kind of time warp? Did we store them in a 747 that was kept in the air (with in-flight refueling) so as to be immediately available once it was determined where the factory was going to be? Did we sell them off and buy them back? There are 9 items that fall into this category, accounting for an increase of $1.91 . Item 2 ------ The CTS volume control pot (119011-103) is listed as $2.028 . According to the quote I got from CTS, this would correspond to a quantity of 300 pieces. Are we buying our parts in quantities of 300? This accounts for an increase of $1.01 . Item 3 ------ The PC Board used in the Regulator/Audio II is 91 square inches (6.5" x 14") and costs $8.08 . (0.0888/sq in) The PC Board for Regulator/Audio III is 119 square inches (8.5" x 14") and costs $12.25. (0.103/sq in). Why is that? Item 4 ------ The TDA-2030 used in the switcher was listed as $1.50 each. Why are they now $2.10 ? Item 5 ------ The cost of the Heat Sink increased by $.49, presumably by having three more holes drilled in it. ------------------------------------------------------------------------------- It is impossible to get reliable cost information ahead of time. However, critical Engineering decisions are often based on price differences of $1.00 or less. It is no longer possible to base a design on the cost effective use of parts in inventory, because these parts could be scrapped at any time without notice. Atari's system makes parts cost too much because: Atari sells parts from inventory and then buys them back (at an inflated price). Parts that require some amount of lead time are purchased at a premium because parts are not bought until the game is released and games are manufactured as soon as they are released. There does not seem to be any way of buying parts in quantities beyond what is necessary for the next release of 300 games. If you want to avoid a price increase on the Transformer Power Base, Alltronics-Howard is selling them for $10. Ginsu knives are not included. Jed
I REVIEWED THE COSTING MYSELF. I AGREE COMPLETELY WITH YOUR COMMENTS. THE ONLY THING THAT SEEMED ODD TO ME WAS THE ORIGINAL PCB COST; AT 10 CENTS A SQ. IN. IT'S A BARGAIN. THAT'S WHAT WE USED TO PAY FOR PCB'S IN CONSUMER PRODUCTS. OUR TYPICAL ESTIMATE IN COIN OP HAS BEEN AS HIGH AS 15 CENTS PER SQ. IN. BUT IF THE OLD A/R PCB WAS SO LOW, THE COST RATIO SHOULD HOLD AS SOLELY A FUNCTION OF AREA - WHEN PURCHASED AT THE SAME VOLUME. I DON'T UNDERSTAND IT - I SUGGEST WE GET A DETAILED EXPLANATION FROM PURCHASING. D.R.S.
Dec 20, 1984