Wanting to expand your company's production is a good problem to have, but that doesn't mean it's an easy one to solve. You'll have to balance a host of competing factors as you decide where to manufacture, whom to partner with, and what materials to use. "There's cost, time, and quality," says Jessica Banks, founder of engineering and design firm RockPaperRobot. "You can usually optimize two out of the three, but you can't necessarily have all three at the same time." Banks, who is trained in robotics, launched her New York City business designing high-end technical furniture, including a signature "floating table" made up of magnetized wooden cubes. Now she's going more mass-market, developing a line of tables and chairs that is "still artistic, but highly functional" for hotels, restaurants, and universities. The ramp-up will require "a humongous increase in output," she says--and while her products may be very different from yours, the choices she faces will sound familiar. Following her decision-making process can help you figure out the manufacturing mix that's right for you.
Whether you stay local or go overseas is one of the fundamental decisions of scaling up production. Banks makes a lot of her luxury furniture in her Brooklyn studio, but for her new line of tables and chairs, she's considering factories in farther-flung locations, including China, Vietnam, and Mexico.
8-10x --That's the added cost of staying local. Banks estimates that manufacturing in the U.S. could be up to 10 times more expensive than in China, for example, largely because of higher domestic labor costs.
The majority of RockPaperRobot's chairs and tables would be shipped back to the U.S., which could add one to three months to the delivery schedule. (Some of that could be offset by faster production abroad.) Banks is also budgeting time-- and energy--for traveling to vet manufacturers, meet with partners, and do quality-control checks.
The Bottom Line
Manufacturing domestically can give you more oversight and opportunities to tweak your products--and depending on what you make, there's probably a U.S. region that specializes in it. Pennsylvania's Amish country, for example, is known for high-end woodworking. But if you need high-volume production, it may be worth giving up proximity and convenience for price.
You likely can't set up your own factory until you get very big--think at least $300 million to $400 million in annual sales, advises supply-chain consultant Bruce Tompkins. But outsourcing involves "turning over a key part of your business and product to someone else," he says. "It's almost like getting married." So choose wisely: Banks accepted the suit of a Singapore-based sourcing company.
10 to 20 percent -- The rough amount that Banks's new partner may take on each order, though that percentage could go down as production ramps up. What that pays for, beyond supply-chain expertise, is the partner's local connections and language skills: "They have these relationships already, and they know culturally and financially how to communicate, which I don't," Banks says.
Hiring a production partner probably won't allow you to be completely hands-off--at least not without additional hires. Banks currently spends at least a quarter of her time overseeing the manufacturing process. She's looking to hire an operations manager so she can return her focus to product innovation and design.
The Bottom Line
There are an increasing number of options for makers of all sizes that want to scale up production. For example, in September Etsy launched a platform to help its sellers find manufacturing partners. Like all relationships, make sure you pick someone you trust--even if money is tight. "You might think you can save a couple of pennies with this manufacturer, and over time that's hundreds of thousands of dollars," says David Simnick, CEO and co-founder of Alexandria, Virginia-based SoapBox. But pick the wrong partner, and "between back orders and scrap, that's going to be millions of dollars in losses," he warns.
You might currently handcraft each one of your products from recycled aluminum, but can you sustain that at a bigger scale? High-end furniture designer Uhuru, for example, switched from reclaimed wood to sustainable ash and walnut when designing tables and chairs for Shake Shack and other big customers. Similarly, Banks has picked fairly accessible materials for her new tables and chairs.
Specialized materials add lots of costs--including sourcing and transport expenses. Banks doesn't have to pay for shipping a lot of raw materials overseas, because things like aluminum are widely available in the places she's considering, and "aluminum pricing is not that different between here and there," she says. "I don't want to spend money to ship so much aluminum."
Using cheaper and more common materials can usually cut down on sourcing and production time, too, because "the manufacturers have access to what they need," Banks notes.
The Bottom Line
When sourcing materials, cheaper also usually means faster. That leaves only the question of quality, and how your mass- produced products will reflect your original brand. For Banks, any materials have to make sense with the design: "Think about how the product functions, but also how people are going to install it and how it will ship," she says. "Keep things light, and make sure they can ship without too much damage or too much packaging."