Fourteen factories in three weeks: some incompetent, some inhumane, some overpriced, and one excellent.

Fourteen factories in three weeks: some incompetent, some inhumane, some overpriced, and one excellent.

Slava Menn is a serial entrepreneur and CEO of Fortified Bicycle. He loves biking, building, entrepreneuring, and teaching. In this monthly series, he shares his team’s hard-learned startup lessons with aspiring entrepreneurs.

Our first articles showed you how to ease a pain with a product idea and how to go from idea to prototype. Assuming you’ve proven the concept viable and have a working prototype, it’s time to hit “go”on the production line and manufacture en masse, right? Not so fast – you first have to slay the meanest, nastiest dragon in the startup world: volume manufacturing.

We’ll get into price negotiation, quality control, and supply chain optimization later, but first we must learn to source an honest, quality manufacturing partner to take you from prototype to thousands of products.

Step 1: Educate yourself

Look around: you’re surrounded by volume-manufactured products.  But, if you’re like me, you have no idea how any of itthe pen on your desk, the mug you’re drinking from – is actually made. Before we dropped $50K on our first manufacturing order, I had to educate myself about how bike lights are made so that I could talk shop.

I didn’t need to be a manufacturing guru, I just needed enough knowledge to ask technical questions and know when to call BS. When I stood on a Shenzhen manufacturing floor with a group of die-cast engineers and asked, “Is a two millimeter wall-thickness possible to cast?” I didn’t care about the answer. I wanted to show that I wasn’t ignorant – because if you’re ignorant, they can take advantage of you.

Step 2: Try “Made In America” Before Looking Overseas

There are countless social, economic, environmental, and even marketing benefits of “Made in America” local manufacturing (assuming you’re in America). In contrast, the only reason to manufacture overseas is cost.

Editor’s note: Another reason can be finding the right expertise. Many major bike brands have told us that Taiwanese carbon frame manufacturing is among the best in the world, especially when you need it done on a large scale. Obviously you need to do your research and find a reliable partner. The quality from one supplier to the next can be night and day. It’s also highly recommended you have your own employee or independent rep on sight to manage it and make sure you’re getting what you specified before a container load shows up. So, depending on what type of product you’re looking to make and the anticipated volume, overseas manufacturing might make sense for more reasons than just cost. – Tyler

Because overseas labor is dramatically cheaper, your Bill of Materials (BOM) is typically lower. But looking at BOM cost alone is shortsighted. What really matters is Total Cost of Ownership (TCO).

Overseas manufacturers cost more time –both in man hours and months of production time- because of communication barriers.  TCO incorporates this as well as travel costs and the opportunity cost for shipping a product later.

When you manufacture locally, you’re a short trip away from your manufacturer and you’re speaking the same language. This makes it substantially faster and easier to dial in quality products, all of which can lower your TCO.

In the case of our lights, we tried to manufacture locally, but our substantial labor and assembly requirements made that economically unfeasible.  Making them in the U.S. would force us to sell our bike lights for an unaffordable $200 instead of $50.

Screen Shot 2015-01-14 at 10.39.33 AM

This is what a nasty factory looks like: the air inside gave us a headache within minutes. 

Screen Shot 2015-01-14 at 10.41.34 AM

This is what our awesome factory looks like: clean air and great work conditions.

Step 3: Hunt For A Contract Manufacturer Like Your (Startup’s) Life Depends On It

Because your startup’s life does depend on it!

>The key here is to cast a wide net to capture as many leads as possible. You can read about how we messed this up last year when searching for a manufacturing partner for our Aviator/Afterburner bike light. In short, we started with a long list of 12 manufacturing leads. After a few months of weeding out the dregs and negotiating with the four who remained, we ended up with a grand total of….zero.

Recognizing our error, we went on a spree, calling everyone we knew in the hardware space and asking for intros to everyone they knew.  This time our long list was 30, which became a short list of 14. I visited all 14 and found some were incompetent while others were inhumane polluters. Ultimately, we found one high-quality, fair-priced supplier with excellent working conditions.

In future issues of #bikestartup we’ll talk about what to do once you select a contract manufacturer and how to pay for production. In the meantime, ask us questions.  We’ll answer every single one of them.

22 comments

  1. RobertAxleProject on

    Another advantage to manufacturing locally is the a the relationship with your manufacturer allows for quick prototype work and many other factors that improve your time-to-market which is so critical in this day.

    Great series of articles BR. Keep ’em coming.

    The Robert Axle Project – 12mm Thru-Axles for Trailers and Trainers

    Reply
  2. Greg @ dsw on

    Yes, it is possible to make great things in the USA. We make our advanced triathlon packs right here in the Chicago metro area (you know, sopwamtos). We found that the cost savings to having overseas contractors make stuff for us to be almost trivial in its impact on the price that consumers pay. And, in the end, that’s an important thing, if you actually want to make things that make riding easier, faster, and/or more fun. So why not make our products here? And so we did. And athletes seem to like what we design and make:
    http://darkspeedworks.com/feedback.htm

    (We tried to get featured on bikerumor too, but never got any replies to our messages … )

    Reply
  3. Frippolini on

    Slava Menn, thanks for the article.
    A question, did you take a look at having your products manufactured in some other countries, e.g. Mexico (which would have been far closer to you)? How big did the preliminary cost differences show up for you comparing manufacturing in different countries?
    Could you have sourced in China and assembled the finished product locally?
    Thanks.

    Reply
  4. Slava of Fortified Bicycle on

    @Frippolino: Both good questions. We looked at Mexico but there wasn’t the same abundance of skilled manufacturing and assembly for “consumer electronics” as in China. Assembled in US would be a possiblity but there’s actually a lot of handwork involved. I have friends who injection mold their products in China – different parts from different factories – then assemble it internally. But their products take 15 min to assemble and cost $300. Ours take 30min+ to assemble and cost $50. Different economics (unfortunately!)

    Reply
  5. Slava of Fortified Bicycle on

    Thank you, @Robert Axle. @Ydrea – wish we could reveal factory names but each one of those factories was given to us by a friend on an oath of secrecy. It’s part of their secret sauce (even though some of that sauce is really nasty!) and therefore now our secret sauce.

    Reply
  6. ABW on

    An important point that’s sort of talked around here is the technological capability of the manufacturer. If your product demands a manufacturing process that takes cutting edge technology, your options are more limited. I’m recalling an interview with Yvon Chouinard when he got called out for Patagonia manufacturing overseas (I tried to find a citation for this but couldn’t so maybe it’s apocryphal). He cited a couple of their products that needed welded seams rather than taped seams in order to perform as intended. He then went on to say that, at that time, there were only a dozen machines in the world that could do what he wanted, and they were all in China. At that point, you have another hard decision to make – do you sacrifice performance in order to work with a domestic manufacturer? This is all moot in the context of this product, since I don’t think it requires cutting edge manufacturing technology, but I still think it’s an important consideration.

    Reply
  7. Jon on

    How do you find the cultural barriers? We get iPhone / iPad accessories made in China and find they are great at understanding the concept that a product includes things like assembly, packaging, instruction, branding, laser etching, etc and are happy to organize and produce everything. This differs from manufacturers in the UK that generally only want to make / organise one part. However we do find that they generally do not like to say no even when they can’t really do something and they do not like giving bad news say regarding a delay and often only when they are forced to.

    Reply
  8. Greg McDonald on

    i’ve spent years setting up sourcing offices in Asia, moving volume product to Asia (for large corporate) and visiting factories all over China and India. There are lots of good factories in both, but I would discourage any start-up from engaging with far-flung suppliers. For start-ups, the key is to be able to interact frequently with your supplier(s), so that means same language, culture and time zone are essential. You might have lower margins, but your overheads can be lower as a result, and innovation can be spread to your local suppliers, as they pick up what you’re trying to do, rather than just focussing on getting your product manufactured for the lowest price. You only need to look at all the start-ups on Kickstarter to see how many of them disappoint their (initially) supportive backers, turning them into frustrated backers as delays set in. By local first and then, if you can’t make enough margin when volumes rise, only then consider an extended supply chain. Even then, it’s not an obvious move.

    Reply
  9. Alex @ Hermes Sport on

    Like other people have said earlier, there are a lot of things to be dispelled when it comes to the cost of manufacturing things here versus there. It is really a lot more viable to make a lot of different products in the US than people are likely to think. This is lost on a lot of people; there’s a preconceived idea that US Manufacturing is always ruinously expensive for every product, which isn’t really so.

    Some things do not make sense to make in the US, but more do than one may expect.

    Reply
  10. Jason on

    How did you go about protecting your IP when you made the decision to manufacture in China. Were you at all worried about your lights getting private labeled out the back door and into another market?

    Reply
  11. ah on

    I think one of the most important aspects of subcontracting to anyone, is worrying if they will sell your product (or a very similar one) out the backdoor to anyone who wants it.
    If you have some IP on your product then it helps enormously, but there is a real danger with Taiwan/China based factories in that they see nothing wrong with this and may start giving your ideas to your competitors before you even have your own product out.

    Reply
  12. tom on

    My company builds the highest quality carbon wheels in the usa and we compete with price point product from china although our finished goods are a much higher quality. We also private label for other companies so the take away is that resources are available for reasonable cost and high quality in the usa. You simply need to contact the right people 😉

    Reply
  13. gvc on

    Interesting topic Slava. As far as the search for overseas manufacturing goes, what are the pros and cons of doing the sourcing yourself versus hiring agents or guys like yourself to do the search for a start-up that may not have the resources or the connections. Where can one find an resource for agents and their reputations?

    Reply
  14. Slava of Fortified Bicycle on

    @Jon: great point on cultural barriers. I’ve found the factories we’ve worked with to be very literal. If you give them specific instructions they will follow them perfectly. But if you’re ambiguous or leave things up to interpretation …well.. you won’t like their interpretation. My sarcastic humor also doesn’t work in China 😉

    @Greg McDonald: Brilliant point – I would also “discourage any start-up from engaging with far-flung suppliers”. We got lucky b/c we had good relations but if I did it over again I would def start locally.

    @Jason and @Ah: great question on how to protect IP when you hand all your designs to an overseas CM. It’s all in the contracts but the reality is our small Fortified Bike isn’t going to sue an overseas CM. If we could, we would use different suppliers for components and assemble at a 3rd factory (or in-house). Reality is we’re not big enough for that either. Ultimately it’s a risk we have to take on.

    @Tom: Awesome that you can win on quality and compete on price while making wheels in USA!

    Reply
  15. Slava of Fortified Bicycle on

    @GVC: I highly recommend hiring an agent / trading rather than going directly to a CM. The thought of finding a random CM on Alibaba and entrusting them to make product scares me. Also there’s companies that do the design for manufacturing (DFM) and handle supply chain for you. They’re expensive but prob worthwhile. Check out Dragon Innovation as one example. To find other agents – it’s often secret sauce so ask friends for intros.

    @Tom: sorry, can’t publish the name of our CM. They were shared with us in confidence.

    Reply
  16. Joe on

    @GVC, I know this is probably a little late, but we are a Taiwan based sourcing agency that specializes in high end bicycle frames and parts. Going directly to the CM sometimes is not a bad idea depending on what you are looking for, but if you do intimated by working with random manufacturers on Alibaba, this is where we come in. Check out our website if you are interested.

    Leeche International

    Reply

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