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Archives for September 2017

Sep 26 2017

Three Ways To Lower Your Manufacturing Costs

This article originally appeared on our Forbes blog

When you factor in the cost of labor, raw materials, packaging, shipping and quality control, manufacturing a physical product is often more expensive than anticipated. Especially if you’re producing domestically or in small quantities, as many new makers do. While the quickest and easiest way to reduce per unit costs is usually to increase production volumes, not everyone has the budget to scale up. Here we discuss three ways to trim expenses without having to up your order quantities.

Tweak Your Design

It’s natural to get attached to your original product design (they’re called “idea babies” for a reason!), but the design decisions you make while initially developing your product are not necessarily the best in the long-term. For example, you may have chosen a material without fully understanding the cost implications, or opted for a customization during manufacturing that requires higher minimums than you can regularly afford to meet. By selecting different raw materials and components, changing the way your product is constructed, or even eliminating a few bells and whistles, you can reduce costs and increase profit margins.

The best sources of advice on making a product more cost-efficient are your supply partners. Reach out to your main assembly factory and ask them to explain the most labor-intensive aspects of your design. Find out if any of your material sources could be replaced by something less expensive without compromising the item’s integrity. Put their knowledge to use!

Take, for example, my client who has a line of pet clothing. After seeking advice from her factory, she reduced her costs by 5%. All she had to do was choose a less slippery fabric! It seemed her originally selected material was proving difficult to manage on the shop’s cutting machines, requiring more time and oversight, and a higher than average defect rate (meaning, perfectly good fabric was getting thrown away). Until she reached out to the factory, the designer was completely unaware of this issue. You may wonder why a factory partner wouldn’t offer up this useful information to begin with. Though some certainly will, others assume you’ve done your due diligence and research and want them to adhere to your exact specifications. In short, they won’t interfere with design instructions unless asked.

Remove Packaging

Are you mostly selling your products online? If so, removing excess packaging is a simple way to bring down overall costs. The purpose of packaging is to inform and motivate a sale, which, in an ecommerce setting, is accomplished by the marketing copy and great photography on your sales page. Anything the customer sees after receiving their order (such as packaging) is extra!

True, nice packaging adds to the overall perceived value of your brand; however, you can communicate value in other ways. For example, some makers remove all packaging on the product itself and focus on branding their exterior mailers and boxes with a catchy tagline and brand logo. This eliminates the labor cost of affixing packaging solutions to individual SKU’s (such as hang tags, cardboard sleeves etc); boxes and mailers have to be packed regardless, so adding a logo does not increase handling fees.

Remember, it’s okay to use different packaging for your ecommerce inventory versus items that will be physically displayed on store shelves. This may require a little extra logistical configuration, such as having your factory label separate boxes of inventory (one with retail packaging, one without), but in the long-run, it will reduce costs.

Negotiate with Suppliers

Asking your factory point blank to reduce their prices is usually effective only if you have information to back up the request. Before attempting any negotiation, make sure to secure a handful of reference quotes from similar suppliers. This will tell you where your current supplier falls within the overall ‘pricing landscape’ and what type of reduction (if any) it would be realistic to request.

For example, let’s say you’re an entrepreneur making painted wooden photo frames. You would price out your exact design (at the same order quantities you produce with your existing partner) with three other factories. If two of the quotes come back 10%- 15% lower than your existing factory’s pricing, you now have a specific range to shoot for with your current partner. It’s much more powerful to enter into negotiations with a realistic target, supported by competitive research, than it is to make a weak, open-ended request.

It’s okay to share the quote numbers you receive from other suppliers to strengthen your negotiation, but for privacy’s sake, don’t share vendor names and contact info.

Written by Liz Long · Categorized: Manufacturing, Sourcing · Tagged: Costs, Made In The USA, Negotiating, Overseas Suppliers

Sep 12 2017

Planning On Preselling Your Products? Read This First

This article originally appeared on our Forbes blog

Preselling is a great way to launch or grow a new business with physical products. Because customers pay for goods upfront, before a large batch of inventory has been made, entrepreneurs can escape the pressure of funding their own manufacturing expenses. Revenue generated by presales can be used to cover the cost of materials, production, and more.

Though the presale model may sound ideal, it does come with some risks. While seasoned brands have had time to test and refine their manufacturing process, new makers are still operating on a learning curve. Beginner’s mistakes can lead to production delays, defects and quality problems, and, in a worst-case scenario, a total loss loss of inventory. The latter can be disastrous, particularly if a brand lacks the resources to re-make the product or issue refunds.

Thankfully, there are a few things you can do to minimize the likelihood of problems when preselling.

1) Complete the Sampling Process With Your Manufacturer

In my work with clients, I’m surprised at how many people don’t get fully finished samples before starting to presell. This trend is due, in part, to the ease with which designs can be presented before they are actually made. The ability to retouch imperfect samples or create life-like digital renderings means that a concept can be partially flushed out or exist solely on paper, but still make for compelling website photography!

Going through a complete sampling process with your manufacturer of choice will ensure that your design doesn’t have weak spots and that your supplier can make the product at the level of quality you desire, in a reasonable amount of time. Getting semi-finished samples–or worse–waiting to sample until production starts (after you’ve sold inventory) leaves you vulnerable to unwanted surprises, such as poorly performing materials, assembly defects, and slower than anticipated turnarounds.

2) Perform Product Testing

Whether you are sending your finished product to a testing agency or performing your own set of tests, making sure your design functions as its supposed to is an integral part of the making process. Certified agencies are great for tests such as seam strength, material toxicity, choking hazards, and other metrics that require special equipment and precise measurements. Informal tests, such as simply using a product sample for an extended period of time, or repeatedly washing a garment according to the care instructions you’ve set, are great ways to understand if design changes are needed before you produce.

With either method of testing, it’s crucial that you’re 100% confident in the way your product will perform before sinking other people’s money into making it.

3) Build in a Buffer

The age-old advice to build a cushion into any budget or timeline is especially true when manufacturing a product. Add even more so if you are a beginner! Things often take longer and cost more than anticipated, which is fine (albeit frustrating) if you are answering only to yourself. But promising finished products to customers and then either running out of money to make them, or falling significantly behind schedule, will cause extreme stress and strain.

In order to preserve your sanity, reputation, and wallet, build at least a 20% buffer into any time and cost projections. This includes the total investment you anticipate will be required to manufacture your pre sale inventory, as well as the delivery date you set for buyers.

Written by admin · Categorized: Manufacturing, Sourcing · Tagged: Costs, Entreprenuership, Funding

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