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Does anyone manufacture their own product?

parkerscott

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I have been playing around with numbers while I wait for a quote to come in and, manufacturing seems like a great way to scale far beyond the product I want to offer. I figured if the product may do well producing the product myself may do well also. The product will have to change hands less frequently cutting out shipping expenses and, other expenses that go along with the manufacturing process. If its all being done in a centralized location and, then being sent out to retailers it will equal more profit. On top of that if the product is making great profit you are loosing money if you pocket the profit and, are hit with high income taxes. So me personally manufacturing seems like the best logical idea. You can funnel a large portion of the profit into more equipment making the cost of the unit cheaper and, the process more efficient while also being able to take on more jobs.

So is anyone doing this, or am I missing something on why it may not be practical? I know the barrier to entry is high but, if you can get past that it seems like a great way to grow.
 
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TheSilverSpoon

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I did for a while. Wouldn't do it again though.

You end up spreading yourself too thin.

If you are running a business correctly your time can be used much better elsewhere.

As far as taking on more jobs - I'd do everything I can to limit the number of $10/hr jobs that my business needs.
People that work for these wages are generally unreliable and have high turnovers.

This turns into big managerial headaches for you.
 

parkerscott

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I did for a while. Wouldn't do it again though.

You end up spreading yourself too thin.

If you are running a business correctly your time can be used much better elsewhere.

As far as taking on more jobs - I'd do everything I can to limit the number of $10/hr jobs that my business needs.
People that work for these wages are generally unreliable and have high turnovers.

This turns into big managerial headaches for you.

What are your thoughts on manufacturing for yourself vs having someone in china handling the manufacturing. Is there a huge difference in the cost? It seems like the manufacturers in China would want large moqs and, the shipping and, turnaround time wouldn't be too awesome. Plus you wouldn't have any assets other than the mold and, the inventory.
 

CommonCents

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Mfg is a whole different beast. Depends on the product and how much capital you have. Higher margin potential of being vertically integrated requires more capital. Fixed plant/equipment is fixed even if your sales fluctuate, rather than simply ordering lower or higher quantities from another manufacturer. If you build volume w/ a contract mfg and establish a good sustainable market demand you could look at mfg yourself as you are more familiar w/ the numbers and have some volume to hit the ground running. Or, just try and leverage your volume for better pricing from your mfg. If you think you can be much more efficient then maybe there's some fat/oppty there. If the mfg does a good job there is prob not much incentive for you to plunk down the bucks to capture a smaller ROI increase.
 
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parkerscott

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Mfg is a whole different beast. Depends on the product and how much capital you have. Higher margin potential of being vertically integrated requires more capital. Fixed plant/equipment is fixed even if your sales fluctuate, rather than simply ordering lower or higher quantities from another manufacturer. If you build volume w/ a contract mfg and establish a good sustainable market demand you could look at mfg yourself as you are more familiar w/ the numbers and have some volume to hit the ground running. Or, just try and leverage your volume for better pricing from your mfg. If you think you can be much more efficient then maybe there's some fat/oppty there. If the mfg does a good job there is prob not much incentive for you to plunk down the bucks to capture a smaller ROI increase.

Ok that makes sense. I ran some very rough numbers on the startup capital required and, it wasnt nearly as high as as I thought. Although the sales can fluctuate, the profit margins are higher. I just dont know where the tipping point is where a plant would be more sustainable than having someone else do the work.
 

Simon Ashari

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A good discussion to have. Seems like a fast lane principle to me. Rather than buying from the factory, own the factory.

But as mentioned above, it may not be worth the time, money or effort to many unless the numbers add up.
 

TheSilverSpoon

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What are your thoughts on manufacturing for yourself vs having someone in china handling the manufacturing. Is there a huge difference in the cost? It seems like the manufacturers in China would want large moqs and, the shipping and, turnaround time wouldn't be too awesome. Plus you wouldn't have any assets other than the mold and, the inventory.

Not even a comparison for a majority of products. Hence why most products are produced overseas.

Labor costs are dirt cheap over there. Raw materials are usually cheaper as well. Profit margins are generally in the single digit range.
While over here, labor and materials are expensive. Pile on your employee's shitty $10/hr work ethic and you end up with a big mess.

Personally, I wouldn't want to touch the manufacturing side again.
Unless I was buying an already established, well-running company.

If you're big enough, it probably makes a helluva lot of sense to start looking into owning the production process.
But not early on.
By owning the equipment you increase your risk and capital requirements quite substantially.
If something goes south you not only have to liquidate inventory, but manufacturing equipment as well.

FWIW, I have never placed an order that fulfilled the manufacturers stated MOQ. I've also had many orders arrive at my door four days after placing an order. That's faster shipping than a majority of the products I've sourced domestically.

So don't let MOQs or shipping times discourage you.
Everything can be negotiated.
 
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parkerscott

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Not even a comparison for a majority of products. Hence why most products are produced overseas.

Labor costs are dirt cheap over there. Raw materials are usually cheaper as well. Profit margins are generally in the single digit range.
While over here, labor and materials are expensive. Pile on your employee's shitty $10/hr work ethic and you end up with a big mess.

Personally, I wouldn't want to touch the manufacturing side again.
Unless I was buying an already established, well-running company.

If you're big enough, it probably makes a helluva lot of sense to start looking into owning the production process.
But not early on.
By owning the equipment you increase your risk and capital requirements quite substantially.
If something goes south you not only have to liquidate inventory, but manufacturing equipment as well.

FWIW, I have never placed an order that fulfilled the manufacturers stated MOQ. I've also had many orders arrive at my door four days after placing an order. That's faster shipping than a majority of the products I've sourced domestically.

So don't let MOQs or shipping times discourage you.
Everything can be negotiated.

Very informative post. Starting my own production doesnt even seem that feasible now.
 

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