It is extraordinarily rare that a Start-up has their own in-house manufacturer. Many of the gurus of the business world teach us that vertical integration is the utopian end game for any company. When a company achieves control over each step in the manufacturing, design and retailing process they have complete regulatory power over their product. However, this is not a viable possibility for most young businesses with limited capital. Subsequently, an imperative step in establishing a high functioning business with a sellable product is sourcing the best possible manufacturer.
At Inventor Pty Ltd, a product design and engineering consultancy firm, we work with a plethora of different clientele with a wide variety of ideas that they want to see built. Not only do we offer product design but we also work with clients to help them fully establish their businesses and market their products. It is because of our “every step of the way model” that we often assist clients with finding reliable and cost-effective manufacturers.
Deciding upon a manufacturer is no easy task. A lot of the success of the business is contingent on the manufacturer meeting the quotas and standards held for them by both the company they are contracted to and the industry as a whole. Accordingly, properly vetting and evaluating the different manufacturers available is a very important step in helping establish a functional business. In this article, a brief summary will be provided of the different considerations that must be taken into account when deciding upon a manufacturer.
Manufacturing’s relationship to Branding
First and foremost, when deciding upon a manufacturer the first thing anyone should look at is the product itself. What the product is and the type of branding the company wishes to achieve are important factors that influence the decision on which kinds of manufacturers should be used. For example, let us take a look at Fender Guitars. Fender Guitars produce multiple different types of guitars predominantly in two different locations. In the USA and in Mexico. The exact same guitar produced in the USA retails for twice the price as the same guitar produced in Mexico. The form and location of manufacturing matters. If the item is constructed in a country that has high labour standards, a strong economy and high minimum wage, the product is perceived as being top notch. Made in China means two things to prospective buyers. One; this company is cost effective. Two; the product is cheap and potentially of less quality.
General considerations when looking at a Manufacturer
When you are deciding on the manufacturer there are a number of different factors that will determine the best source for you to build your product. Here is a list of different things to consider when deciding upon a manufacturer:
- think about the goods needed to produce your product
- the quality of the production necessary
- the reliability different kinds of manufacturers
- the defect rates
- language barriers if there are any
- the customs laws in the country of export and the country of import
Domestic versus Foreign
One of the biggest decisions faced by business owners when they are setting up manufacturing relationships is whether they want to go domestic or foreign. There are advantages and disadvantages to both, with a closer break down you can develop a better understanding of the potential repercussions on both sides.
Domestic manufacturing has a number of benefits compared to going overseas. First and foremost is the communication factor. Domestic manufacturers will be closer, which means that developing a face to face relationship with them will be far easier. This has long been a valued aspect of domestic production because it enables the company to keep a closer eye on the movements within the production process. Domestic manufacturers will also speak the same language, which makes overall communication and transparency better.
Secondly, the standards of production and workers’ rights tend to be higher than those in cheaper to manufacture countries. These facts will lend the product a certain appeal when consumers browse different types of the same product in your industry. As mentioned before it is very contingent on the brand you are attempting to build. In some situations, the made in china label will have no bearing on peoples’ perception of your product but in others it could be the make or break decision.
Thirdly, shipping will be faster and easier with domestic manufacturers. Basic proximity means that if you have a quick moving product that you want to push over the counter as fast as possible, the geographic location of the manufacturer counts for a lot. Furthermore, if the manufacturer is domestic then you will not have to deal with customs and international import/export laws.
Fourthly, domestic markets are often more stringently regulated by federal government. When you are a company operating in that country, the company has a better ability to use the government and its bodies to push through the rubble and extract the reputability of the manufacturer in question. There is higher risk associated with going overseas. Not only will you not be protected by local government, but it would be extremely hard to take legal action if production issues were to arise. There have been many cases of intellectual property theft overseas that are not persecuted due to their immunity to domestic law.
But all of these reasons pale in the face of the really important thing to any company. Profit. In most cases there are manufacturers overseas willing to undercut domestic manufacturing, and that is the Margo Robbie (or Channing Tatum) of business. Everyone wants as much as they can get. Business, above all else, values margins. And an Australian or American manufacturer cannot beat a Taiwanese or Chinese manufacturer for cost of production. Again, this is why it is so imperative that the company develops a clear idea of how they want to brand the product. For cost efficacy, China or another overseas supplier is the best option. But be weary of potential headaches that may be engendered by these dealings. The smooth ride is the more expensive ride, so make the choice wisely.
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