Make What You Sell: A New Breed of Manufacturers
BY Mark Dwight
This entrepreneur says now is a great time to be a manufacturer. The secret: Think show business.
Many people who visit my business, Rickshaw Bagworks, ask if they can take photos. They seem fascinated by what we do, because it's something you just don't see every day: We make things.
More specifically, we sew custom messenger bags, backpacks, and fashion totes in a small brick warehouse in Dogpatch, an old industrial neighborhood in San Francisco that is at the epicenter of the city's maker movement.
Our 20-person cut-and-sew operation is an anachronism in today's tech-driven economy, and our location--about 50 miles north of Silicon Valley--makes what we do even more improbable. At $10.55 an hour, San Francisco has the highest minimum wage of any city in the United States, along with onerous business taxes and skyrocketing rents. Fully burdened with insurance, taxes, and benefits, our factory labor rate is $20 an hour--20 times the current labor rate in China and 100 times that in Bangladesh.
It's easy to forget that our city, the birthplace of Levi's, was once home to a thriving garment manufacturing industry.
Still, I wouldn't have it any other way. San Francisco is no place for large-scale industrial manufacturing or low-cost production of commodity goods. But it happens to be an ideal location for micromanufacturers like Rickshaw.
That's because the things that make cities special--and expensive--are the same things that attract people who are interested in the "who, what, why, where, and how" behind the products they buy. At Rickshaw, we open our doors every day and invite anyone who's interested to take a tour of our factory.
Here in San Francisco, you can also visit Heath Ceramics to see hand-glazed ceramic tiles emerging from huge industrial kilns and stop by Dandelion Chocolate to watch chocolate being manufactured, bean to bar. In each case, the drama of manufacturing serves as a powerful differentiator from all other brands of offshored products, and even "Made in the USA" goods that are outsourced to domestic subcontractors. We recognize that the art of making stuff is cool. This isn't just manufacturing. This is show business.
Our country's new breed of savvy micromanufacturers specializes in custom products, small quantities, and fast turnaround. We cannot and do not attempt to compete with high-volume low-cost manufacturers. We acknowledge that some jobs are too large and some price points too low. Instead, we focus on "high touch" opportunities that are too small and specialized for large factories.
At Rickshaw, low minimums, speed, agility, and expertise command premium prices for our bags, which retail for $50 to $100. Typical order sizes range from one to 1,000 pieces, with lead times of three to 30 days. By contrast, offshore factories generally require orders of at least 5,000 pieces, with lead times of 90 to 120 days.
We also observe the "KISS" principle: Keep It Super Simple. By making products to order, we can offer a portfolio of bags designed specifically for our own lean manufacturing process. We don't maintain a finished-goods inventory, and our materials are delivered just in time. We keep our supply chain as short as possible, purchasing most materials from American manufacturers and working with local subcontractors who specialize in the few things we don't do ourselves. We also focus on direct sales, as opposed to wholesale, to improve profit margins and support higher costs.
Perhaps one of the most exciting aspects of the U.S. micromanufacturing rebirth is that entrepreneurial companies no longer have to operate as mere subcontractors in the shadow of master brands. There's never been a better time to develop your own brand name and put it on everything you make. Build a reputation for quality products and friendly service. If you do, you will command premium pricing, rather than the commodity pricing of an anonymous supplier.