With money and connections
My advice is don’t!
Design Manufacturing is a flawed business model.
Do explain! This is something I go back and forth on, and I’d like to hear your views…
I’m not clued in on this either… I’m assuming it’s because design becomes a loss-leader for manufacturing as a way to incentivize?
Cost savings would be one of the few benefits of going vertical, but there are so many disadvantages that it would seem to only appeal to commodities.
I should clarify, the Design-Manufacture business model can work, but only if the company starts off fully capitalized, has reliable production and has solid distribution channels. Starting small and trying to grow as a design-manufacturer is very very difficult and seldom works.
I have quite a bit of experience with this type of business. Ten years ago my partner and I started a design - manufacturing company. Although we became very well known and quickly attracted top end retail partners across the country and around the world we were completely unprepared for the logistical and financial challenges. It is not the big costs that hurt you it is the multitude of small unforeseen costs such as quality control, insurance, packing and assembly, shipping damage… the list goes on. In the end, to make a profit you have to price your products at such a level that the average consumer can not afford them. Even if you are lucky and everything works on your end there is the inevitable problems with the retailers who are constantly late with payment or even worse declaring bankruptcy (big problem in 2001-2003).
All in all, I am glad to have had the experience of running a design-manufacturing company although I would never want to do it again. It is the quickest way to make a name for yourself as a designer, especially when you are starting out and no other company will manufacture your designs. However be warned, it is very expensive and as your company grows you will do less and less designing and more manufacturing related work. Whether your company succeeds or fails at some point you will have to decide what you want to be, a designer or a manufacturer?
i couldnt imagine being on the receiving end of a retailers leash. have seen companies partnering (if it can be called that) with big players. they get jerked around so bad not even funny. its the 500 lb gorilla issue. with a legal staff.
i personally think there are opportunities opening up for indy designers. but not at volume. and not for the masses.
I tend to disagree, I think this business model can work… if you are in China!
It’s a tough thing - distribution is a major key. I’ve seen furniture products-as-ideas sold into major distribution with just a few prototypes, and the logistics of manufacturing scrambled over after the fact. Distribution can even help you secure funding.
It’s a lot of hats to be wearing - designer, sales, manufacturer, maybe distributor, maybe retailer, maybe cataloguer. If any link in the chain falters - even if it is because there is too much demand - things can spiral pretty fast. Since manufacturing can’t keep up with all of your new ideas and designs, the ideas may need to slow down in volume a bit, but the work you decide to produce (put on your business hat) will need to have more appeal, better design, better efficiency, etc. and none of those things are really bad.
Personally, I enjoy being somewhat removed from the manufacturing process as a designer - it might deter me from making certain design choices if I had to count every penny going into the manufacturing cost of a piece… a little too much reality too early in the process. And still, the design-manufacture idea is appealing in an instant-gratification kind of way. Good things come to those who work…
How do you start a design and manufacturing firm?
Answer DON’T at least not with the standard business model.
Advice from one working under this business model. Company has been in business for 15 years and has been awarded for 3 design and 9 engineering awards over that period. We have highly known clients in the areas of garden supplies, lighting, sporting goods, and high-tech electronics, as well as developed over 30 propriatary products in-house and in conjunction with category leading physicians.
Yet we have gradually seen a consistent 13%-20% decrease in sales in each of the last 4 years. Even our largest client $2 billion in sales is experiencing the squeeze from retail centers to lower costs, and simply pump out stylish designs, with little regard to quality.
To put it in the words of one of the buyers “the consumers of today want cheap, quick, and stylish products. If it breaks who cares it was cheap enough I can afford to buy a new one.” If you think about this comment for a while you see the buyers logic. They are simply worried about sales volume and inventory turn around. Having worked at this specific retail chain as support staff to a regional buyer I have a little more insight, you see the buyers are like all high level managers for this retailer. They are paid a meager salary that is supplemented through a hefty incentive program. The buyers receive a bonus for the amount of inventory turn-around (sales) that their items generate. The more sales the more income. They also receive a percentage of the contract-savings they can obtain from their suppliers.
Contract-savings: amount or percentage of savings the buyer is able to shave off the agreed to contracted price. For instance a price and quantity is agreed to and a contract drawn up. Once the retailer has the items in their warehouse the buyer calls the supplier and says, (excerpt from actual examplilary script)
“Bill we received your shipment, and everything looks great. I am really glad you were able to push your manufacturing to get it to us in that short amount of time. However we have a problem. You see our marketing and sales division has just completed their market study. Well it looks like we wont be able to sell the widget for 19.96, in fact they are suggesting we sell it for 14.96. They suggest that we return the items to you and not carry them at all since we will inevitably loose money on this product anyway. I really do not want to do that to you, So here is what I am willing to do for you. I will keep the current stock, and I will reduce the payment by say 20%. That way you wont have to worry about what to do with all this stock. See I told you I would watch out for you, and Bill I am really putting my career on the line here by even offering you this deal.”
It is really a cut thought market place, and you will need to find the niche and tailor the business model to fill it exactly. and then pray you are able to attract the clients who are receptive of innovation and quality regardless of price. No amount of price cutting can compete when design and quality are seen as merely an optional commodity .
i would add:
that buyer has more power. i’ve seen my old employers cave b/c the buyer handles a line of products. piss that person off, and it may be more than one product of yours that gets shipped back. that can instill some real fear. esp in marketing types. most measure performance on short timeframes. like 1 to 3 years before they leave for another company.
He did it. He still is.
Money, Luck, and a Damn Good and Revolutionalry Design. However it was more of a mater of physics and engineering that drove the design and final form than it was design or ID leading the way.
i studied his patents. its actually basic stuff. and something the vac industry didnt really want. lot of money in replacement filters. its the “i want the replacement blade business” (or whatever that quote is).
there are other areas out there probably. but finding one is only first hurdle. Dyson shopped his patent around. got shoved out the door. idea so simple Hoover even replicated it. he basically had to really sell himself. and not sure why Hoover lost that court battle. the principle is used in other “cleansing” processes. from power plants to medical devices. mediocre lawyers i guess. probably won on the “staging” part. that was probably unique to vacuums. the centrifugal stuff has been done and is still done now without infringement.