Thursday, February 11, 2010

Learning Points when dealing with a contract manufacturer

I have received an initial 25 pieces of my product from the factory in China, and to my dismay, its wrong. It's one thing that was done incorrectly and it makes the entire product feel cheap. Now I have to argue with the contract manufacturer to redo the product with no cost to me. I am unsure how that conversation is going to go.

LEARNING POINT!

When you go to order your product, find out from your contract manufacturer, how to deal with mistakes in manufacturing, and in particular, labor the point, that you will not pay for product that is manufacturered incorrectly. I have a call with them tomorrow to discuss how to solve this issue.

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Saturday, December 26, 2009

Samples and production

As I had talked about earlier, I had found a contract manufacturer I was working with to create my product. Since I have posted, I have had two samples created. The first one, done from drawings I had created. After receiving the initial sample I made changes and had a second sample created.

Needless to say I was blown away with the quality. Of course with that quality comes a higher price per unit, plus import duties and shipping. I have put in my first order of 1000 units, which will take 30 days production time and 30 days on the water.

Realize that you, as the small guy, will get less "love" from the contract manufacturer then their established clients. You need to push and push to get them to get back to you. Its a test in the way, as until you order something, you are a cost center.

Keep persevearing and you will get your product made. As I get closer to launch, I will let you know how it goes.

Microsoft Store

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Friday, September 25, 2009

Hurry up and wait

So as you noticed I haven't written in a while. I had the contract manufacturer look at the drawings and prototype, answered their questions and they have sent off to the factory in China for initial pricing. I am still waiting! Ughh! How frusterating.

One thing to remember is when you find a qualified factory to do your work, you will also be the smallest customer they have. I know they have not received one dime of revenue from me yet, but have also indicated how serious I am at the moment.

My advice, is don't get steamed up. I have to calm myself down as I am trying to maintain a schedule. Take the time to work on other things. Meet with your attorneys and understand your obligation for sales and use tax, for filing your trademarks or tweaking your corporate structure.

I am trying to meet with a trademark attorney next week, a sales and use tax attorney and a couple CPA's to do my sales and use tax filings. I will let you know my experience with that and my cost when it is said and done.

I am trying to have a working prototype by the time I leave for a wedding in Napa a the end of October. It is important to have prototypes as I will have a working session to get everyones take on the product and changes.

Microsoft Store

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Monday, September 7, 2009

Contract Manufacturer - Update

As you reach out to contract manufacturer's, there will be up days and there will be down days. Frankly, my conversations with the first two contract manufacturers, left me disheartened about this project.

The first company I talked to said, go find a designer to make a prototype then we will see if we can make it for you. And oh ya, budget $5,000 for tools, dies and forms. Hmm, if I am gonna go out and have my own prototype built, then I will bid the business to the lowest bidder. At best this was a, if you run through all these obsticles, maybe we can do business with you.

The second company, I had more hope for. This is a product they are supposed to specialize in. Their website was beautiful. I provided drawings, and they came back 3 days later and said, sorry, we are not going to bid this project. To complicated. At this point you start to second guess your idea. Stop! This is normal, but will admit, I was at a low point.

Finally, I found a local company, in all places a state manufacturing directory. It is close to where I live too. Sent an informational request, and set up a time to go in and see the sales manager. Already I got good vibes.

The sent me a copy of their Non Disclosure Agreement that was surpringly in my favor. I made some slight changes, and prepared for my meeting. I created cardboard prototypes and sent an agenda for the meeting.

I sit in the meeting, we each sign the NDA, and frankly, it was a breath of fresh air. The salesperson knew what I wanted, we talked about minor changes, material selection, and marketing strategy. We discussed the pro's and con's of various materials, and even better, I got him excited about the product as well.

It doesn't stop there. As we discussed more, he mentioned since it will be a virtual business (no storefront), they can warehouse the product for me at a nominal charge, and even handle mail fullfillment. This is great as I had planned to fullfill myself until I had enough volume to talk to a fullfillment company.

Even better, he offered to put me in front of third party retailers that order through them already, with the hope of getting a spike in sales volume early. They mentioned bringing the product to trade fairs they participate in. They do this to show their manufacturing abilities, but it is also free marketing.

At this point I am completely stoked. I couldn't ask more from a partner. Right now, he is having their designer take a look at my crude prototype and drawings, to figure out pricing. Once that is determined, it should cost me a few hundred dollars to make a few production prototypes and then it is off to the factory for production.

Meeting in person allowed him to see my passion and seriousness. It allowed us to talk about the design philosophy, target customer, and for him to see I did my homework. Go into the meeting, with a crude mock-up. The salesman told me, people seldom come to meetings with them, and it is very helpful at determining intent. It also shows you are serious.

While production costs are important, find a good partner, and try not to nickel and dime them. Be honest and upfront as they may be able to help you more then you think. As for payment, he mentioned a deposit up front. I agreed we had not progressed enough to look at trade terms, my only request is to pay by credit cards to get my points.

As it is, I should hear in a week about initial production cost estimates. We can then tweak design or materials to lower costs. Once we have agreed, they will build a shell prototype, and send material samples. I will then decide on material, and have a production sample created. I expect this to take a month so will update you as things change.

Charge ahead and conquer!

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Tuesday, September 1, 2009

Contract Manufacturers - Update

I have now talked with three contract manufacturers. Of those three, one essentially will not be able to do it, but was good enough to put me in touch with their independent design person if I wanted to pay them to design a prototype. One is currently having their product engineer take a look at the idea and figure out how and how much it would cost to produce. The third one I am meeting in person at their design center this week.

The one mistake I did make with the first two, is not getting a Non-Disclosure Agreement in place. It is quite easy and you can either 1) find one online or 2) alot of companies have general ones in place that they will sign with you. This is particularly important for companies that produce product overseas.

The biggest thing I underestimated was tooling and die costs. One company quoted me close to $5,000 just for tools and set up which surprised me. I will see what the other companies have to say. I will keep you informed.

iBuyOfficesupply.com Inc.

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Wednesday, August 26, 2009

Contract Manufacturers

After much explorations I made my first outreach to contract manufacturers. While I found several on the web, it was old fashion paper that helped me out the most. I went to the local library and found a manufacturing directory. Don't discount your local library's reference section. This was in a local township library that I found it, not a huge big city library.

I proceeded to look up the companies and see if they have the ability to create my product. I have a lot of faith in one as on their website they have link directly to OEM/ODM services. You have all heard about OEM's, Original Equipment Manufacturers, think companies like Dell and Apple that make a product. What most people don't realize, is many times behind that OEM is an ODM.

ODM stands for Original Design Manufactuer. Ever notice that a lot of your electronic products look very very similar? That is because they are all made by the same "Original Design Manufacturer" in China. Foxconn makes a majority of the cell phones as well as the ipods and iphone. Quanta makes a majority of the Laptops for companies such as Apple, Dell and Acer.

ODM's are different than a contract manufacturer, because the ODM will actually take your drawings or concept and design your product for you. A contract manufacturer will just build to particular specifications. ODM's are key for those of us starting out early in business.

I will be calling the manufacturers over the next couple of days to ascertain whether they can build my product and for how much. Currently I have asked the question of:

Do they provide contract manufacturing services?
Can they build and develop protoypes off drawings?
What is the cost per prototype development?
Material costs?
Manufacturer value added if not included? (MVA is a fancy term for labor and B & C components like wired and solder.)
Set up and tooling costs and whether existing tools can be adapted? (If they can adapt your tooling and set up costs should be less.)
Minimum lot sizes
Pricing on small and large lots?
Acceptance of payment through the use of credit card? (Important since they would not provide trade terms for a "new company". Might as well get the points.)
Shipping (Understand how they will ship your product and when you take risk of loss. Especially important if shipping internationally.)

Other questions I will ask is whether tooling and set up can be amortized over a particular production run. I will let you know what I find out so you can ask the same questions of your contract manufacturers. Wish me luck!

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Sunday, March 8, 2009

Contract Manufacturers

So I did some research and have found several companies that may very well be able to make my product. In particular I found a company that looks like it does small lots. I have to admit, I procrastinated and never set up a PO Box. I am stopping tomorrow at the UPS store to see how much a box is. I don't want to start out with a home address.

I also discovered I need to do a write up and drawings of my specs for some of these companies to get a quote from them. I will try working on that this weekend. One of my friends is in graphic design school so I am tempted to have her do the work so she can use it in her portfolio. I also want to put in the Provisional Patent Application so I don't lose control of my product.

Once I get that done I can reach out to these contract manufacturers.

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Saturday, February 28, 2009

Shipping Terms

So when you get to the point where you have a product built and shipped, you will need to pay attention to the shipping terms. Unlike when you buy your dell computer and the computer comes damaged, and you reject it, on the B2B side that doesn't happen. Most items will be shipped FOB or Free on Board.

FOB is what is called an Incoterm or International Commerce Term. Wikipedia has a great synopsis of the various Incoterms and what they mean.

http://en.wikipedia.org/wiki/Incoterm

It is important to realize that shipping terms and conditions are litterally centuries old. Lloyds of London was originally set up to insure spice shipments. Risk Management departments litterally spend weeks negotiating, shipping terms, conditions, and even the definition of Free on Board. If the crain drops the container and it hits the railing, was it considered "on board"?

Since in all possibility you will not have a cargo insurance program, evaluate the risk of product being lost or stolen in transit. While it is a big money maker for sellers (think Best Buy makes money from selling a TV? Nope just the insurance on it.), it may make sense for you to have them cover the cost of the product.

This becomes a bigger deal on high value items where the truck driver, stops to use the bathroom, and "forgets" to take his keys out of the truck. Oops, the truck is gone. And yes, it does happen! It is sometimes less of a deal when you use a common carrier like Fed Ex or UPS but try and understand the terms you are accepting from your manufacturer.

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Friday, February 27, 2009

Contract Manufacturing

The misnomer many people have, is they have to figure out how to make their product. No such thing, there are firms that specialize in taking your prototypes and making them workable designs. There are multiple places to search for companies to make your product. It all depends on whether you want it built on-shore or off-shore.

http://www.thomasnet.com/ This site was brought to my attention by the 4hww. Great site and it allows you to search for specialty manufacturers.

If you do not mind having product built and manufacturers in china, taiwan and other over seas inexpensive labor areas you want to check out http://www.alibaba.com/ . Alibaba is a public company that is a B2B aggregator.

Right now these are the two best sites I have found to search for your contract manufacturer unless you include google. You would be suprised.

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