Today I want to take this opportunity to explain a bit about how Jupiter thinks about manufacturing and what our general approach is when we embark on this often complicated task. To start, it’s important to note that you are in control of your product and who manufactures it so the ultimate decision rests with you when making your product. We do try to make your life a little easier and, hopefully, lower risk by offering help via our manufacturers and partners. You can choose to have us help you with that or do it yourself. Totally up to you.
Here is the general process we follow with our clients when sourcing the manufacturing of a product:
1. Final Design Files
Before approaching any manufacturers, it is critical to have manufacture ready files. Our experience has taught us that most manufacturers will either not give quotes or will not expedite quotes on products that are not in final form when they arrive on their desk. Having files that are ready for manufacturing means that the product they represent is in final form (i.e. the line has been drawn in product tweaking & testing, and no more changes are intended to be made to the product), they are in the right file format (Solidworks, vector art files, CAD, etc.), and the files have been tested and modified for ease of manufacturing.
2. Set Pricing Goals
Identify what price the product is expected to begin selling at retail so we have a direction in navigating quality, materials, costs, and how the product is made. In general, you should expect the landed product cost (in your warehouse) to be no more than 25% of the MSRP of your product. For example, a group planning to sell a $100 MSRP product should budget for the wholesale price to be ~$50 (50% of MSRP) and the product cost to be ~$25 (50% of wholesale or 25% of MSRP). It might sound ludacris at first (and make you second guess ever paying full price for anything) but most products follow this general cost structure with some variation.
3. Determine the Appropriate Order Quantity
This issue seems to frequently be a challenge with new entrepreneurs seeking to make a physical product. It is important to remember that the tooling (manufacturing setup) and moldings required for most products are generally not cheap and, with many Asian manufacturers, usually costs at least a couple thousand dollars. Molds made in China typically cost anywhere from $5,000 to $75,000 depending on complexity and the number of parts. Having the same tooling and molds created in the U.S. often costs 2x-4x those amounts. With this being the case, it is important to keep in mind that most Asian manufacturers require a minimum order quantity that ensures that they make gross revenues of at least $10,000 so it is worth the hassle for them to start (most domestic manufacturers will insist on orders much larger). This typically entails a minimum order quantity (MoQ) of at least one thousand to ten thousand units on the first run.
4. Obtain Quotes for Manufacturing
This step can often be one of the longest to accomplish because it requires us to rely on outside parties to review and provide feedback. Jupiter Design has great relationships with groups in China, Taiwan, several European countries, and the U.S. that we typically rely on when obtaining quotes. Most of these manufacturers and agents are groups that we have done extensive business with so we usually get expedited treatment and favorable pricing. If you decide to obtain quotes on your own, you should be sensitive to their reputation and your ability to trust the group you are giving your product to. “Trust but verify” is a good strategy when it comes to building these relationships so it is important to know who you are dealing with.
5. Begin Sampling Process
After you receive a quote that will work for you, it is time to have some samples made by the manufacturer. There tend to be two types of samples made during this time, the first is a rough and, if applicable, a 3D printed sample from the manufacturer that helps them confirm the manufacturability and that the design is correct. The second type is a first shot from the actual molds created for the product. These first shot samples are often rough and are prior to the final polishing of the mold so modifications can be made to the mold if necessary. Once sampling is completed and approved by you, you are ready to have them begin manufacturing.
6. Manufacturing Payments
Payments for manufacturing tends to be in stages with 25%-50% of the invoice due prior to starting and the balance due prior to shipment of the goods. These terms are especially the case for Asian manufacturers because they often are not willing to wait for a shipment to be picked up from their warehouse and transported over the ocean to your warehouse prior to receiving payments (often a multi-month shipping process). In these situations, it is particularly important to rely on videos and photos of the products to ensure they are what you expect them to be. The groups we work with want to you to be happy with your order so you order again. Everyone is motivated to get it right. As long as communication is open and clear, things are generally smooth in this process.
7. Shipping & Logistics
You are responsible for the shipping and warehousing of your product. There are many great options available to you and we recommend developing a relationship with one of the larger carriers (UPS or FedEx or both) as they have business rates for individual parcels, freight services for truckloads, and import/export services to help you arrange ocean or air freight around the world. Warehousing is often best done as cheaply as possible at first until you know what your turnover will be. Many of our clients use their own storage facility and then replenish a fulfillment house (Amazon, Corporate Disk, retail distribution centers, and other fulfillment service providers) as needed.
8. Quality Control
As you go through the process of providing instructions and feedback to the manufacturer, it is important to be clear about what areas are particularly critical to the success of your product. Often, if an area or part is identified as being critical, it is possible to get added checks or steps included in the manufacturing process to ensure that it has been checked multiple times for correctness and problems are caught before shipment. You will often never be able to have 100% perfection with each piece that is made but, with quality control measures, it is usually expected to be able to have defective units kept to below 1% of the units made. Usually, defects are tracked during the first run and reported to the manufacturer so corrections are made for the second run to ensure better consistency.
These are just a few of the high-level issues that are important to consider when planning for your new product. Creating something new is always challenging but the outcome is often rewarding. We are here to help in that process so you can avoid many of the common mistakes and, with some hard work, realize the success we all want to achieve.