Tyranny of the BOM

Consumer electronics companies are obsessed with their bill of materials (BOM), and for good reason. A quick scan of retail prices at your favorite big box retailer shows common price points at $19.99, $29.99, $39.99, and all the way up. Common knowledge is that when you go up the price ladder there is a corresponding decrease in sales volume. Given this price sensitivity, CE manufactures spend significant design effort shaving just a few cents off the BOM. This is absolutely the right strategy because other than returns there is minimal support costs associated with consumer electronics. The current struggle with consumer IoT growth can be directly attributed to the high cost of IoT devices relative to alternatives. Consumers just don't see the value for the extra few dollars commanded by "smart" devices. But that's consumer. Industrial is different, for a number of reasons:

1. Industrial end-customers rarely buy equipment without a service plan. In fact, the customer often pays for the service (such as irrigation analysis) and the devices are bundled with the service. For example, as a home owner you buy the washer and dryer. As an apartment owner you buy laundry service, and the service company supplies and maintains the machines as part of the service.

2. Industrial devices have a much longer lifespan- 10-30 years versus the 2-5 years for consumer devices. Solar equipment sometimes comes with a 40 year warranty. Wireless networks have a shorter lifespan than many industrial devices.

3. Consumers, because of their experiences with WiFi and cellular coverage, are more forgiving of connectivity issues- they either move the device to a different location or return it to the store. Industrial customers are not so forgiving- if a device cannot connect at the installation location the whole service contract is voided. 

All these differences necessitate a different attitude towards BOM. This is no surprise. Manufacturers routinely pay extra for more durable mechanical parts to avoid break-downs, which are costly because of the labor involved in replacing equipment and the losses incurred by down-time. They also pay more for electronic parts with a wider temperature range for the same reason. Connectivity components require the same reliability profile as other electronics, but add another level of complexity- connectivity requires a wireless network to function. You can have the most reliable communication component from an environmental standpoint, but if there is no network at installation time hundreds if not thousands of dollars in labor is spent solving connectivity issues. Furthermore, when the network changes and your device can no longer connect (just Google "2G sunset"), even more money is spent updating and replacing the device in the field.  

This is why we built WiviCard™. A highly modular communication system may not be attractive for many consumer IoT devices because there is inherent cost in modularity. However, in industrial use cases the labor costs dealing with connectivity issues are measured in the triple and quadruple digits per device, and far outweigh any single or double digit cost increase in BOM. Everything about WiviCard is designed to minimize labor cost. WiviCard's default HTTP/PPP stack may require more processor memory than do AT commands, but it's a much more robust protocol that minimizes interoperability problems in the field. WiviCard's plug-and-play slot may cost more than a Mini PCIe connector or daughterboard sockets, but allows field replacements in a fraction of the time. The inclusion of RF pins on the WiviCard interface as well as the effort we spend designing internal antennas into our modems eliminates fumbling with tiny coax connectors and cables. We tout "consumer swappable" not because we're designing for consumers, but because we want to reduce effort for highly-paid field engineers.  

The consumer world can continue on its merry way with integration- eliminating memory cards, headset jacks, and screws for aesthetic and BOM cost reasons. In industrial, manufacturers are wise in continuing to minimize labor costs in their device design.

By Alfred Tom on March 6, 2017