Section 5 Production viability

January 30th, 2013 Leave a comment Go to comments
WINNERS = Products which can be easily and cheaply produced, anywhere, by unskilled workers, with several choices and sources of materials.


Even if the Proof-of-concept model works great, you must be able to produce the product in volume to make money.

Producing a product requires:

1. Proper documentation

2. Materials

3. Labor

4. Controlled procedures

5. Reliable sub contractors and suppliers

Lack of one of the above items can bring your product to a standstill.

When I worked for a large defense contractor, we used to joke about “unobtainium” being the best material to use when building an armored vehicle.  It was great stuff, lighter than air, stronger than steel, undetectable on radar, ferrous yet anti-magnetic, and self hardening.  The only problem was you couldn’t get any.

Make very sure there is no “unobtainium” in the product you are evaluating.  Check with metal suppliers, plastic suppliers and component suppliers.  Be sure suppliers are available in the area where you will be making the product.  You can find manufacturers and suppliers of almost everything in a set of books lovingly referred to as “the Tomcat” by buyers from coast to coast.  I’m speaking of the Thomas Register, which you can find in your local library.  Or, you can get a free regional version of the directory (about two inches thick) or receive it on CD by contacting:

Thomas Regional

Five Penn Plaza

New York, NY 1001


You can fax them at 1-212-629-1146

You can email them at

You can visit their website and source, quote or buy what you need on line at

Secret: If you are in the process of designing a new product on Autocad® or other popular drafting programs, you can save literally hundreds of hours of design time by using predrawn components supplied on CD by Thomas Register.  Their programs, PartSpec® for mechanical designers and engineers, PlantSpec® for facilities designers, and CADBlocks® for architects, builders and plumbers, give you millions of scalable drawings you can quickly insert into your designs.  Best part is they are FREE for the asking and Thomas Register will send you FREE semiannual updates.  To request the CAD CDs visit

Before you make any final decisions about how, where, or with whom you will produce the product, even if you are planning on producing the product offshore, be sure to have another “vendor education program” with respect to manufacturing equipment and processes.  When all is said and done, review all of their suggestions, use the best overall plan or a combination of them, and give the business to the supplier who can deliver the best product and service at the best price.  You must take advantage of this opportunity.  No matter how much you know about manufacturing methods and equipment, you will never be able to keep up with all of the new equipment and methods constantly being introduced as well as the people who are in the business of selling the equipment.  Even the sales professionals from “company A” may not be thoroughly familiar with the product available from their competitors, “company B” and “company C”.  This is why you have to have all of the different vendors come in and tell you how thay would do it!  Then you can make an educated decision on how YOU will do it.  To fail to take advantage of the vendor education program is to miss out on one of the least costly and most beneficial methods of determining the most viable equipment and processes of producing your product.

Secret: If your product will be made offshore in a foreign country, you should always check with the U.S. Customs office at the “port-of-entry” closest to you or where the product will arrive, and find out the “customs classification” of the product.  With some products, if they are brought into this country in a completely assembled or finished state, the import duties and fees can be so high that your cost-of-goods-sold will climb radically.  Many companies then try to get the product reclassified into a classification, which results in less import duty fees.  If it is impossible to reclassify the product, the next step is to have the product partially assembled offshore, bring the product into the country as “unfinished goods” and do the final assembly and packaging in the U.S.

Be aware that offshore manufacturing can be a nightmare for the uninformed or naive, yet it can be very profitable for those who choose their suppliers carefully, and control the quality of the product before it leaves the country of origin.  On my last trip to Taiwan, there were 30,000 “trading companies” and only 6,000 actual manufacturers.  You must be sure you are dealing directly with the factories that will produce the product or you will be paying too much and you will not have firm control over the quantity and quality of the product.

Secret: There are firms in Japan, Taiwan, Korea, Malaysia, Hong Kong etc. that specialize in quality control of your product.  These firms will go to the factories and be sure that the quantity and quality of your product is to your specifications before the product is packaged for shipment to the U.S.  If you are manufacturing offshore for the first time and you do not have an established relationship with your prospective manufacturer, I highly recommend you use a quality assurance company for at least your first shipment.

Secret: Different countries have different customs which can “bite” you soundly if you are not aware of them.  For instance, Taiwan and China all celebrate the Chinese New Year in February.  The problem is they take their celebrating very seriously, and it practically wipes out production for the month of February so don’t count on getting anything done during that time period.  Experienced importers plan their production schedules around the idiosyncrasies, rainy seasons, special events, and customs of the countries in which they plan to manufacture their products.  Call the Department of Commerce and the country’s embassy to find out about the country you plan to manufacture in.

If you are planning to use an outside manufacturer, you may want to build in a performance guarantee with punitive damages in the event the manufacturer is unable to produce the goods as promised.  Believe me, failing to ship a product to a buyer who has contracted for it is one of the best ways to kill a product.  Many stores plan for the arrival of your product well in advance by scheduling in-store promotions, advertising space in newspapers, television ads etc., and they all want to stand in line to strangle you if you do not deliver as promised.

I have gone so far as to pay a bonding company the “bonding fee”(approximately 10% of the guaranteed amount) if the manufacturer would agree to have a performance bond placed on his agreement to ship product by a certain date.  It can be money well spent if there is a chance of selling lots of product in the future.  That way, if the supplier fails to ship as agreed, the bonding company pays you the full amount of the bond, and then goes after the supplier for it.

If a supplier or manufacturer is unwilling to agree to any type of performance guarantees, and you have a lot riding on the shipment date, look out.  Most store buyers build in cancellation dates on their purchase orders, often in small print on the back, and if the goods do not arrive by that date they cancel the orders, even if the orders are presently in transit to the store.  If you are unable to sell the goods quickly to another buyer you may end up in deep trouble.  You will have to “eat” all the freight costs in both directions, sit on the goods until they are sold, and pay the supplier whose late shipment caused you the problem in the first place.

Once a large store buyer has cancelled an order because you were late, you can pretty well kiss-off selling them that product, or any other products, while you are using the same last name or company name.  The buyers “blacklist” you immediately because they have to listen to their boss lecture about how much the store lost on advertising and promotion expense, how upset the store’s customers were at reading an advertisement and then coming in to buy the product and it wasn’t there, and how the buyer should have checked your ability to ship the product on time before ordering it.

The moral here is you better be sure that you can produce the product in quantity AND on time!

Secret: If you are planning on building a facility, or hiring a large number of workers, you can get lots of valuable information about the overall resources available to you in a given area by contacting the “Economic Development Office” or association for that city or county.  Usually, the city or county Chamber of Commerce can give you the phone number and address of the economic development offices in their area.  Once you reach them, ask them for a “Community Data Summary”.  This informative report lists:  the location and its distance from major cities; the population, with race or nationality breakdowns; the labor availability, total labor force and employment statistics; entry level wages for selected occupations; property taxes and assessments; major manufacturing facilities located in the area; military installations; number of hotel rooms, hospitals, nursing homes, doctors, and churches; the median household income; the median homes sale price; the form of city government; the form of county government; the government’s primary source of revenue; agricultural products of the area; who controls the planning, zoning, code inspection, and licensing; the source and cost of electricity; the source, availability, and cost of water; the source and cost of natural gas; the source, cost, and capacity of the sewer system; transportation services including air, trucking, rail, bus and taxi; major highway routes; climate, including the hottest month, coldest month, average temperatures, rainfall and snowfall; tax rates, including corporate, personal, sales & use, unemployment insurance, and workman’s compensation; new business tax credits and incentives; cultural attractions; parks; golf courses; news media; libraries; shopping centers; major banks and financial institutions; schools, including public, private, vocational, community colleges and universities; and any other special attractions of the area.  As you can see, if you are planning on setting up a manufacturing facility anywhere, it pays you to send for this report.



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