Generally, the stereotypes for manufacturing in China are not true. Yes, there are bad factories and good factories. Those that pollute and those that do not. Those that cut corners and use poor quality source materials and those that do not. Those that make the highest quality goods and those that make poor quality goods. I submit the same is true in the USA and other countries as well.
We see everyday trash on the side of our interstates. We hear stories on the news of con artists bilking investors out of millions. Corporations who try and skirt EPA laws. The list goes on. Branding identity and the quality of our products are what matters to most. As businesses, we must do our due diligence before making any major investment decision, and manufacturing partnerships definitely qualify as an important investment decision. We must decide between pricing and quality and find a combination of both that meets our customer's demands.
Getting away from the geo-political elements that go into manufacturing in the USA vs. abroad, this article focuses instead on the presumption that a business has decided to manufacture in China. I will leave it to others to debate the pros and cons of this, but instead concentrate on how to best set up a strategy of manufacturing to a) keep product costs down, b) address scaling needs, c) increase shipping opportunities for international distribution.
Prototyping - Generally, it is expensive and time consuming to create concept pieces in China with shipping time and expense back and forth as well as limited communication due to language barriers. It is therefore advisable to use a local seamstress or one of the variety of prototyping companies (depending on the complexity of the product) to develop a handful of finished pieces from which you can with 95% or better accuracy, give your overseas sourcing agent a physical sample of what you need duplicated. I try and get away from sterotyping, but generally, China factories are very good at replication but not overly good at taking a concept to production sample. The more you can show them the better your results, pricing and speed to market will be in your overseas manufacturing efforts when starting any new product. This article presumes that you have at least 5-10 production samples in hand from these prototyping efforts.
Pre-sourcing Materials - before sourcing invest in a decent digital camera to take detail photos of your product along with any close-up images of detail work required. Also if possible, put together an RFP (request for proposal) document going through all of the specific fabrics and labor from start to finish, including packaging assembly, quality control, types of shipping cartons (wall thickness/logo printing, etc.), minimum order quantity per production (MOQ) and what port you will need it shipped (FOB). Have the factory source as many of the materials as you can for the first production, but MANDATE that they ITEMIZE each fabric / material / labor portions. If your product has special sizing requirements, be sure to include +/- tolerance that is required to accept delivery and/or expect crediting beyond. Further in the article I will show you how to further reduce your costs by separately sourcing your own materials. You will also want to source locally whatever fabrics/materials the factory will need to make a countersample.
Sourcing Factories - This article is based on my experience on the textile side of manufacturing both fabrics as well as cut/sew/assembly factories. Although it also applies to other industries, please remember the perspective this article is coming from. Please see other of my blogs about the details of sourcing. Generally, you will be best served finding a good trading company agent who will get their commissions from the final factory but will be able to help you navigate the maze of options to find your initial factory at a reasonable starting price.
I would engage at least 15 different trading companies - alibaba.com is a good source for finding these. Simply search for products similar to what you are looking to make and next to each search result - if relevant - look to confirm they are a trading company and then contact them. Of the 15, you will likely get back 10 responses that are an indication of how well they can communicate in English. This is a good weeding out method (unless you speak Chinese) as communication via e-mail is the primary way you will be working with your new partner.
Take the 10 best respondents and e-mail them your above-referenced RFP. They will all say they will need a sample to give you a specific price, but you can say back that the detailed photos and documentation should be sufficient to get an estimated price. Like with any other bidding process, you probably don't want the lowest price or the highest price, but a lot has to do with the professionalism in their reply at this point. Pick your top 5 respondents and arrange to send each of them a sample along with enough materials to make 2-3 countersamples. Generally, it is standard to have them make the countersamples for free but you will supply your shipper number (fedex, ups, dhl, etc.) and pay for shipping back and forth. It is ok to see if they will pay to ship them to you, but do not dwell on this. I would steer away from any factory requiring you to pay a sample fee, unless it is a very complex sample that requires making a mould (products with plastics, etc.) If you do have to pay a sample fee, it is customary to get them to apply the sample fee against a future order. Generally estimate about a 3 month process to get this far. Yes it is a long time, but you be surprised how long it takes to do this. I'm also anticipating that this is your first time sourcing overseas, so everything will be new to you so you will want some buffer to take that into account.
Generally, the 5 respondents with countersamples should give you a final price with the MOQ you required ahead of sending you the countersamples. If any of these are far off from the original estimate price, it is a good indicator to drop them off the list. Presuming they are all close to the estimated price, you really should only be worrying now about comparing quality of one countersample to the other along with the communication quality which is your service expectation.
This is where strategy comes in.
You will likely select one factory to make your goods. TRY AND GET THEM TO COMMIT TO A PRICE TERM GUARANTEE as a condition to proceeding. Your first production run will ideally have all materials sourced by the factory and everything shipped to the US (or whatever your destination country is). If you do not have your own import and export agents for ocean shipping, you will probably be best served having them manage the shipping for you. You can either negotiate a CIF rate (where they deliver to your destination port) or FOB and then separately pay the shipper that they use to manage your initial run.
You will want the initial order to be the smallest MOQ. If possible try to negotiate an even smaller than the MOQ test run, as you will likely get a different quality in piece #843 than you did from the countersample which was perfect. Generally payment terms are 30% start of production, and 70% upon completion. Prior to paying the 70%, you can have either a few units or a carton of units air shipped to you (at your cost to ship) so that you can test the quality. When the shipment is complete, get a consumption report from them regarding the meters per unit per fabric to make your product, along with the roll widths per fabric (as a different roll width will change the meter/fabric figure.
Once you receive your shipment, it is a good idea to break it down and spot check the units (correct assembling, sewing lines look good, labels all in the right place, etc.). If everything looks good, you start increasing your orders.
Stage 2 strategy - you will VERY QUICKLY want to get more than 1 factory online as the Chinese are known to be very crafty in pushing for higher pricing, regardless of the price guarantee. Inflation is crazy there now and with the dollar/yuan price changing by the day, pricing will always be your unknown moving forward - yet your customers will expect pricing to be consistent.
What I like to do is to immediately find a second and third factory that is competitively priced
to split my orders between them. Let each know that you have other factories that make your product as they do and so long as they all remain competitive with one another, you will split your orders between them. If pricing or quality drops significantly, you will split orders with the other two factories while you find a replacement for them. This would not be a threat but a mantra for you to actually follow. It is not unfair, but good business.
Stage 3 strategy - This step would only occur when you start working with international distributors and have order sizes large enough to warrant your efforts to further tweak out your pre-unit costs. You can save a lot of money here, but it requires much larger investment costs and overseas logistics.
You will know the itemized costs for each of your materials, so the factory should be fine with you sourcing the materials yourself to further reduce the costs. Unfortunately, all fabric and materials come with different MOQ themselves - fabrics should be 1,000 meter minimums + mould costs per color if printed fabrics. Also make sure that you are getting roll width and quality specification consistently with each quote as a shorter roll width is an easy way to quote you a lower price. You should already know the specifications from your prototyping company but you can also get them from your cut/sew factory who presumably has already sourced them for the initial order.
Go through the same sourcing techniques as you did with the cut/sew assembly for each of the materials. It usually takes about 4 weeks from start to finish once you have gotten to the point to wire them start of production funds. You ALWAYS want to spend the additional cost of having them ship you a 1 meter full roll width sample to confirm the roll width size is correct. They may look to cut corners by lowering the quality, or there are errors in the pattern printing, etc. Your best leverage is prior to paying the 70%.
You will need a place to ship them. As you will have left over fabric for any production run, you don't want to ship to your cut/sew factory more than you require to do any production run.
Option 1 - negotiate deals with each factory you source materials to keep remainders at their location to ship as needed to each factory. That way there is not left over at your cut/sew factory for them to use as leverage for future orders (not that they would hold it from you, but they would know it would cost you to get it shipped somewhere else which they can factor into a price increase later on). Also, you do not want one factory sending materials to another factory making the same product as they could conspire to set prices with each other. Better to have a more neutral 3rd party keep the remaining materials. Your consumption reports from the cut/sew factory would be used to determine exactly how much of each material should be sent to the cut/sew factory order to order. The problem with this option is that you will likely have more than one material to make the product and multiple locations with different remainders of inventory. Depending on your US general liability insurance, it is unlikely that you will be able to get this inventory insured so it is at risk. That said, you can usually get each factory to do this at no additional cost to you other than shipping (which you can have them do or have the factory do as a pick up).
Option 2 - This is a better overall option, but it comes at a price. It is also the only recommended option if you are looking to provide FOB China shipping services to international distributors. Presuming you ship bulk to international distributors, if you do this from the USA, you are paying to ship the goods twice, including the costly expense of customs entry into the US and an expensive US warehousing/fulfillment rate.
Find a warehousing and fulfillment company in China - ideally based out of Shanghai which is the least costly, fastest, and most commonly used China port to 3rd party countries. They will likely also provide shipping services that will likely be less than your factory's shipper, so get quotes for this as well as your primary destination countries where you distribute (LCL - less than container load minimum at 1 CBM - cubic meter). You will also want price per month per pallet along with pick-pack rates (will be different depending on how custom you ship international). Generally, I require my international FOB distributors to take by outer container which limits my inventory tracking and fulfillment costs. This warehouse will take possession of your raw materials, will ship those materials to each factory and will receive (warehouse and fulfill) any finished inventory to international distributors, not otherwise bound for your US home destination.
Make sure you are specific on all fees so that you can incorporate them into your international FOB pricing to distributors. Also get at least a 1 year price guarantee (ideally a 2 year) which you should be able to do.
You should find a significant price savings doing it this way than doing it from the USA which will make your goods more cost effective to distribute abroad. If you select a warehousing company that also has offices based in the USA, it may be possible to insure those goods against loss (fire, theft, etc.). Depending on your comfort zone, it may be more cost effective once this is up and running to keep most of your inventory in China and then ship them to the USA in 3-4 month inventory requirements.
For us, we keep just enough for international needs and spot orders to the US (in case we move more of one product than anticipated) with the rest going to the US. I used to place orders and shipments once per quarter, but given the price instability in both labor, commodities (cotton, etc.), and shipping (price of oil), we are now producing 10 months year worth of inventory per production run and split those between 2 factories with a 3rd and 4th factory vetted, sourced and ready to take the place of one of the main factories if I have any problems. I keep only the amount needed for international orders in China as the shipping savings going FCL (full container load) offsets my higher costs of inventory warehousing in the US and it is less expensive to insure it when it is in the US.
Stage 4 strategy - You should be doing the same thing with the warehouse solution in China that you did with all other sourcing protocols, by finding a 2nd and 3rd go-to location in the event that your warehouse starts raising prices or quality changes. That way you can immediately ship the goods from one port address to another. If you are required to ever do this, make sure you negotiate into the new deal that the new warehouse pay the costs to move the inventory to their warehouse. It is close for them and they should want your business enough to agree to this.
Stage 5 strategy - Find your own export and import agent. Start looking and get detailed quotes for both the export out of china side and the import side to your destination address. It is almost always most cost effective to have a separate export agent from the import agent and they will work together to hand the goods off once they reach port. That is why you want a detailed quote, as you will do the same thing you did with your raw materials for your shipping. Shipping is usually a large percentage of your cost of goods sold, so you should find significant savings doing this, but it does increase your logistics oversight and the number of wires required to get the goods to your destination address. You may want to look into finding a wire-friendly bank for international business - I like HSBC. They have a low cost, 0$ balance account with 5 free wires in and out a month. As with the other sourcing requirements, check your prices each time you ship and always look for new shippers. At a minimum you can use these quotes as a means to lower your current shippers fees, and at a maximum it provides you with an alternative to use in the event you have to.
Stage 6 strategy - relocate your US fulfillment to Long Beach California area. As with Shanghai, Long Beach / Los Angeles is one of the most frequented destinations in the US - especially from Shanghai. The combination is the most cost effective and fastest shipping route - usually 10 days including customs for FOB and 3 weeks including customs for LCL. Note that customs has been increasing the number of "random" container scans which gives you a surcharge + a delay of 2-3 days. I would take that into account when estimating the delivery time line just in case. But I digress. Most other destination in the US from China will still land in LA and then either train or truck (depending on the distance and location) to the final destination. This cost can be as much as double the cost of ocean shipping the goods. You can almost offset the entire warehousing and fulfillment cost from the US by simply filling doing away with the second leg of the rail/trucking cost. Also, labor in the LA area is relatively low so I have also found savings in just the warehousing fulfillment portion alone.
So that was pretty exhaustive but theraputic for me to get off my chest. Hope it can help some people out there looking to make the leap or to make their current efforts more cost effective.
Sunday, October 9, 2011
Wednesday, April 6, 2011
Social Networking Must-haves
Social network is a great way to market your site and company for free.
Here are some must-have products to help you do that (also free):
Facebook.com - start a fan page for your company and each of your products.
Twitter.com - start a page for your company and each of your products.
Hootsuite.com - allows you to view facebook and twitter sites as well as competitor sites to help narrow who is saying stuff about you or your competitors products.
Klout.com - see what your klout score is. Generally you need a score of over 100 to hit the radar of most prominent "retweeters".
Bitly.com - register for an account here and use bitly urls instead of full urls that you can generate from within your bitly account to post on Twitter. Then by typing your bitly link followed by the "+" sign, you can see how many people have clicked on your link. You can reuse the links too, plus it lokos a lot neather and saves more space for content on your tweets.
Social Twist - go to http://tellafriend.socialtwist.com to get a downloadable icon allowing your website viewers a one-stop icon where they can repost to just about every social media site available.
Here are some must-have products to help you do that (also free):
Facebook.com - start a fan page for your company and each of your products.
Twitter.com - start a page for your company and each of your products.
Hootsuite.com - allows you to view facebook and twitter sites as well as competitor sites to help narrow who is saying stuff about you or your competitors products.
Klout.com - see what your klout score is. Generally you need a score of over 100 to hit the radar of most prominent "retweeters".
Bitly.com - register for an account here and use bitly urls instead of full urls that you can generate from within your bitly account to post on Twitter. Then by typing your bitly link followed by the "+" sign, you can see how many people have clicked on your link. You can reuse the links too, plus it lokos a lot neather and saves more space for content on your tweets.
Social Twist - go to http://tellafriend.socialtwist.com to get a downloadable icon allowing your website viewers a one-stop icon where they can repost to just about every social media site available.
Wednesday, March 16, 2011
Quickbooks Tweaks for Manufacturers
When using Quickbooks Premier for a manufacturing business there are a few tweaks that need to be considered. First, this presumes you are using Quickbooks Premier - Manufacturing and Wholesale Edition.
Situation 1: You have raw materials that make up a finished product and use a 3rd party factory for inventorying the raw materials, assembling the raw materials into your product, and then packaging it for retail.
For example, let's say your product is made up of Part A, Part B and Part C + labor + Part D (retail packaging). For simplicity you need 1 unit of each to make one salable product, and your factory has a MOQ of 1000 unit minimum and each raw material factory has an MOQ of 2,000 units.
A. Step 1 - Each raw material is an inventory part. Set each one up separately. I usually put the cost to cost of goods sold and the income to sales. Be sure to include your full cost of goods sold in the cost item as it will be important for tax purposes and your accountant. You will send a PO to each factory that makes each raw material. Upon delivery, you will receive inventory with a bill and click the relevant PO. Pay the bill with a check and your inventory will now populate in the Items section. Do the same for each item, including an inventory part for whatever labor rate (I usually call it "Labor[and the product name]" so it's easy to recognize) you have per unit for the factory you will use to assemble your product. Based on the above example, you would do a PO for 2,000 units for factory A, B, C and D and then a PO for your labor factory at 1,000 units of Labor[product name]. Each bill is received and paid and now in your items list with applicable inventory units.
B. Step 2 - Building inventory. Now create an inventory ASSEMBLY item. I usually call the item the same as my product sku for simplicity. It will also help if you migrate to an intranet ordering system where the orders by sku can easily map to your inventory items in quickbooks - (see more on this from my other blogs on backend web-based wholesale intranets). Put in your actual COST (as full cost of goods sold) including all raw material costs and labor costs - this is important as it may change from shipment to shipment taking other costs into account such as ocean shipping etc. Then put in expense as cost of goods sold and I usually put Sales as income account. List each inventory part as an item for the inventory assembly to make your product. So it would include Part A, B, C, D and the Labor item with the number of respective units (or yards, or meters, etc. - whatever unit of measure you use for your parts) to make 1 unit. Based on your inventory on hand it will let you know how many units you can make of that final product. here you should have 1,000 units as you have 2,000 of everything except the labor. When you build 1,000 units, 1000 units will show in that inventory part for the assembly item and Parts A-D will now show only 1,000 units left (since you used 1,000 of the 2,000 originally purchased in the assembly.
SITUATION 2: You warehouse the same product but in different locations (internationally or otherwise). Here you would need to build an inventory assembly item for each warehouse you have product in. I generally use the same sku code with -[CITY] to distinguish between them. If you are MOVING inventory from one warehouse to the other, you would go to the Adjust Inventory Quantities section and then deduct out inventory of the one warehouses sku and add in that quantity into the other warehouse's sku.
SITUATION 3: You manufacture a slightly different version of the same product. An extreme example of this would be Factory 1 makes Product A for high end stores, but factory 2 makes the same Product A in a slightly cheaper version for value stores. Another example would be that you have Product A in 2 different types of packaging. You will need to track inventory separately for ordering and reordering purposes and your warehouse will need to separately maintain that as a different sku. To do this you would need to build a separate inventory assembly for this item. I like to do this with the same sku but with a -B or a -V2 or something like that so that they are similar but still distinguishable. This has no bearing on the software or tracking - it is just easier for you to manage manually.
SITUATION 4: Your shipping vendor is different from your packaging factory. This may or may not include sending multiple products from multiple factories to a consolidated shipping company to ship everything in one container for more efficient shipping costs. Your COGS still must contain shipping with them, so for the inventory build you need to include the pro-rated shipping COST (normally you get a quote prior to shipping and you build after receiving the inventory) for each product into the cost of the inventory assembly prior to building it.
Situation 1: You have raw materials that make up a finished product and use a 3rd party factory for inventorying the raw materials, assembling the raw materials into your product, and then packaging it for retail.
For example, let's say your product is made up of Part A, Part B and Part C + labor + Part D (retail packaging). For simplicity you need 1 unit of each to make one salable product, and your factory has a MOQ of 1000 unit minimum and each raw material factory has an MOQ of 2,000 units.
A. Step 1 - Each raw material is an inventory part. Set each one up separately. I usually put the cost to cost of goods sold and the income to sales. Be sure to include your full cost of goods sold in the cost item as it will be important for tax purposes and your accountant. You will send a PO to each factory that makes each raw material. Upon delivery, you will receive inventory with a bill and click the relevant PO. Pay the bill with a check and your inventory will now populate in the Items section. Do the same for each item, including an inventory part for whatever labor rate (I usually call it "Labor[and the product name]" so it's easy to recognize) you have per unit for the factory you will use to assemble your product. Based on the above example, you would do a PO for 2,000 units for factory A, B, C and D and then a PO for your labor factory at 1,000 units of Labor[product name]. Each bill is received and paid and now in your items list with applicable inventory units.
B. Step 2 - Building inventory. Now create an inventory ASSEMBLY item. I usually call the item the same as my product sku for simplicity. It will also help if you migrate to an intranet ordering system where the orders by sku can easily map to your inventory items in quickbooks - (see more on this from my other blogs on backend web-based wholesale intranets). Put in your actual COST (as full cost of goods sold) including all raw material costs and labor costs - this is important as it may change from shipment to shipment taking other costs into account such as ocean shipping etc. Then put in expense as cost of goods sold and I usually put Sales as income account. List each inventory part as an item for the inventory assembly to make your product. So it would include Part A, B, C, D and the Labor item with the number of respective units (or yards, or meters, etc. - whatever unit of measure you use for your parts) to make 1 unit. Based on your inventory on hand it will let you know how many units you can make of that final product. here you should have 1,000 units as you have 2,000 of everything except the labor. When you build 1,000 units, 1000 units will show in that inventory part for the assembly item and Parts A-D will now show only 1,000 units left (since you used 1,000 of the 2,000 originally purchased in the assembly.
SITUATION 2: You warehouse the same product but in different locations (internationally or otherwise). Here you would need to build an inventory assembly item for each warehouse you have product in. I generally use the same sku code with -[CITY] to distinguish between them. If you are MOVING inventory from one warehouse to the other, you would go to the Adjust Inventory Quantities section and then deduct out inventory of the one warehouses sku and add in that quantity into the other warehouse's sku.
SITUATION 3: You manufacture a slightly different version of the same product. An extreme example of this would be Factory 1 makes Product A for high end stores, but factory 2 makes the same Product A in a slightly cheaper version for value stores. Another example would be that you have Product A in 2 different types of packaging. You will need to track inventory separately for ordering and reordering purposes and your warehouse will need to separately maintain that as a different sku. To do this you would need to build a separate inventory assembly for this item. I like to do this with the same sku but with a -B or a -V2 or something like that so that they are similar but still distinguishable. This has no bearing on the software or tracking - it is just easier for you to manage manually.
SITUATION 4: Your shipping vendor is different from your packaging factory. This may or may not include sending multiple products from multiple factories to a consolidated shipping company to ship everything in one container for more efficient shipping costs. Your COGS still must contain shipping with them, so for the inventory build you need to include the pro-rated shipping COST (normally you get a quote prior to shipping and you build after receiving the inventory) for each product into the cost of the inventory assembly prior to building it.
Monday, November 29, 2010
Low Priced Corporate Videos, High Priced Look
One of the best ways to generate free marketing potential for your business is to take advantage of video on the internet.
Previous blogs discussed the necessity of high-end photography to use as a means to display your product on your website and others as well as print advertising, tradeshow displays, and for press kits, video is an ever-expanding medium that shouldn't be overlooked.
We have found it useful to have a nice 30 second, 1 minute, and 5 minute piece on each product as well as our company for different purposes from time to time, and include these on our marketing kits that are available for download on our site for press, bloggers, and retail partners who have websites of their own (or may look to do local traditional advertising). An example of what we do, can be found on our site by clicking here.
Creating a video can be daunting if you haven't done this before, and budgets aside, there are plenty of expenses you can rack up if you aren't a do-it-yourself kind of person. Presuming you are like me and want things to look high-end, but don't want to budget the multi-thousand dollars to do a custom video, a lot can be done in the form of a photo montage with a trailer clip that you shoot from a standard video camera.
We already discussed the importance of photography, so this article presumes you have that in place already sitting on one of your computer drives. I use a really great service called Animoto that is basically a Hollywood video editor in a box for dummies. With a simple interface, you upload your videos in the order you want them, and add a music file that they have pre-cleared songs on their site available (or you can upload your own - there are no copyright restrictions limiting your use on the site, but you can still get yourself in trouble if you don't have rights to use a song you upload). When you click the process button it automatically does all of this fantastic yet high-end jazz to your photo montage to perfectly meet the beat of the song and end it at the right place. They also have video options to add up to 10 seconds of video to your montage.
Although regular accounts are free, they are very limiting and for a corporate video you will want to upgrade to the professional option at $40 / month. I basically get all of my video needs together at once along with the song I want to use and then sign up for 1 month and burn them all out at once. This gives you high def downloads, no Animoto watermarks, and a link to your site at the end that will still work in youtube.
As a bonus, the month is unlimited videos so I do a few videos of each of my girls with their best friends as xmas gifts for them and a separate one to the grandparents and close friends as an e-holiday card on steroids.
The formula I like to use is text cards to intro each relevant photo, a promotional video of the product somewhere in the middle (I used our NBC Today Show clip), followed by some more photos telling the rest of the story. Here is an example of one.
I also use this for corporate training videos at bigger box retailers like Babies R Us when helping introduce our product to each of their stores. It's nice to personalize a few slides specific to them (like showing it properly displayed at one of their stores) and a personalized thank you slide. We also add a separate full size video clip from our President and Founder as a personalized touch thanking everyone in the end. You get my point though as to the possibilities for you.
If you are filming video yourself, any video camera will work, but I recommend one that shoots in high definition. The most important thing is a tripod so that you can get the right angle and that there is no shaking on the camera. Test out your shots in different rooms at different times of the day to get the best lighting.
Good luck!
I like the formula
Previous blogs discussed the necessity of high-end photography to use as a means to display your product on your website and others as well as print advertising, tradeshow displays, and for press kits, video is an ever-expanding medium that shouldn't be overlooked.
We have found it useful to have a nice 30 second, 1 minute, and 5 minute piece on each product as well as our company for different purposes from time to time, and include these on our marketing kits that are available for download on our site for press, bloggers, and retail partners who have websites of their own (or may look to do local traditional advertising). An example of what we do, can be found on our site by clicking here.
Creating a video can be daunting if you haven't done this before, and budgets aside, there are plenty of expenses you can rack up if you aren't a do-it-yourself kind of person. Presuming you are like me and want things to look high-end, but don't want to budget the multi-thousand dollars to do a custom video, a lot can be done in the form of a photo montage with a trailer clip that you shoot from a standard video camera.
We already discussed the importance of photography, so this article presumes you have that in place already sitting on one of your computer drives. I use a really great service called Animoto that is basically a Hollywood video editor in a box for dummies. With a simple interface, you upload your videos in the order you want them, and add a music file that they have pre-cleared songs on their site available (or you can upload your own - there are no copyright restrictions limiting your use on the site, but you can still get yourself in trouble if you don't have rights to use a song you upload). When you click the process button it automatically does all of this fantastic yet high-end jazz to your photo montage to perfectly meet the beat of the song and end it at the right place. They also have video options to add up to 10 seconds of video to your montage.
Although regular accounts are free, they are very limiting and for a corporate video you will want to upgrade to the professional option at $40 / month. I basically get all of my video needs together at once along with the song I want to use and then sign up for 1 month and burn them all out at once. This gives you high def downloads, no Animoto watermarks, and a link to your site at the end that will still work in youtube.
As a bonus, the month is unlimited videos so I do a few videos of each of my girls with their best friends as xmas gifts for them and a separate one to the grandparents and close friends as an e-holiday card on steroids.
The formula I like to use is text cards to intro each relevant photo, a promotional video of the product somewhere in the middle (I used our NBC Today Show clip), followed by some more photos telling the rest of the story. Here is an example of one.
I also use this for corporate training videos at bigger box retailers like Babies R Us when helping introduce our product to each of their stores. It's nice to personalize a few slides specific to them (like showing it properly displayed at one of their stores) and a personalized thank you slide. We also add a separate full size video clip from our President and Founder as a personalized touch thanking everyone in the end. You get my point though as to the possibilities for you.
If you are filming video yourself, any video camera will work, but I recommend one that shoots in high definition. The most important thing is a tripod so that you can get the right angle and that there is no shaking on the camera. Test out your shots in different rooms at different times of the day to get the best lighting.
Good luck!
I like the formula
Friday, January 29, 2010
Manufacturing in China
Manufacturing in China is always a unique undertaking. For textile products, the quality can be very high, and costs of about 1/4 of that in the US (including shipping and duty). The biggest obstacles are a) language/communication, b) sourcing quality vs. cost to the right factory, c) financial trust, d) logistics. I will talk about each below.
Generally, I like HSBC Bank as they have a low cost wiring account in the US for receiving and sending wires, have a very good presence in China, as well as throughout the world, so it is a great bank for your business to grow globally with. US support is limited, but once set up everything can easily be done online, so for me it isn't an issue at all.
You will probably need an attorney to get your corporate structure in place in China and to help you set everything up. Although I haven't used them and cannot specifically recommend them, the firm, Graham Curtin in Morristown, NJ did come to me through my HSBC banker and have been very prompt and helpful in my initial efforts of setting up my China bank account. Simply do a Google search for them to contact them.
Hoping this helps everyone better understand their options in manufacturing in China.
- Language / Communication: Everyone speaks Chinese, and the time difference is significant, so generally the best way of communicating is through e-mail. Generally, due to this, it is easiest to fully prototype EXACTLY what you are looking to be made so that it can be sent for replication. The less communication needed to allow your Chinese counterpart to understand what you want the less delay and cost for you to have a product ready for production. Time is money.
- Sourcing quality vs. cost to find the right factory: There are thousands of factories all of different qualities and costs. Finding the right one can literally be an impossible task without the help of an agent. Finding an agent is equally as difficult since there are thousands of them vying for your business. Generally working with 3rd party sources such as www.madeinchina.com or www.alibaba.com are good ways of finding agents. Usually they will be the ones that are representing the factory with certain specific types of materials (like foam or cotton or elastic). Simply contact them through these sources and ask if they are an agent or the factory as you have other materials you need to source as well. If they are willing to help you source other materials, they will be an agent, as the factories are very specific and usually only product one type of product. You will get a good idea of the quality of the agent based on the promptness of their e-mail replies, comparative quotes to what other agents you have found are giving you, and the quality of their ability to write in english. I recommend asking them for any US references that he/she has worked with in the past and contacting them. It is a great way of getting a bit more comfort in trusting this person with your mone (which I will get to shortly). Your sourcing agents will be vital in your success manufacturing in China.
- Which Factory to select: Once you have an agent you think you can trust, you need to get the names of the factories from him that he is sourcing for you. A good resource to vet these factories is www.panjiva.com which is a free way to see what the volume of product they have been shipping to the US and on behalf of what companies. A factory with small volume could be a major danger flag, as they too will need to be trusted with your money.
- How to start with any factory: Most Chinese factories will require payment in RMB, which means you will need to either set up a bank account in China (more on this later), or use your agent to wire funds in USD for him to then convert to RMB and pay the factory on your behalf. Time and costs of setting up a China bank account is large, so most will need to start by paying through your sourcing agent. This will take a leap of faith, as it will be nearly impossible for you to reclaim your money if they simply receive your wire and never contact you back again. A legitimate agent that you have researched and vetted will recognize the future business and referral potential and ultimately will result in an acceptable mid-term solution. That said, it is always advisable to start small. Have your agent negotiate the minimum down, the price down, and provide payment terms (at a minimum, 30% advance upon PO and 70% prior to ship after inspection. You should never have to pay your agent, as they get their commission from the factory, but recognize that this could be a conflict of interest, so always have multiple agents aware that they are competing for the business. Prior to production, get a countersample and have it shipped to you and the agent to compare against the product when it is ready to ship, when you should get a second countersample to check for mistakes. Sometimes you will have mistakes, and these will be material evidence in negotiating a solution. Ease into larger orders once you have confidence that your product is quality, that costs are consistent and reliable, and that your agent can be trusted as a way of reducing your risk.
- Logistics: you will need a freight forwarder that is large enough to receive goods in the nearest port to your factory and take them in the nearest port to where your company warehouses the goods. You can either pick the goods up once they clear US customs or have your freight forwarder arrange for a courier service to delivery them locally to your warehouse. Generally, when starting from scratch (i.e. you need to find an agent), and presuming you do not have a difficult product to source (i.e. it is of a standard material like cotton, and does not require special talents to cut and sew) budget a year - yes you heard me - to get to the point where you have your first test shipment of product. 3 month to find an agent, 3 months to vet the factory and receive countersamples, 1 month to negotiate, 1 month in wire delays to go from you to the agent to the factory, 2 months to manufacture, 2 months to receive goods. From there budget 6 months from one order to the next, as you will have each factory you work with re-negotiating rates, and at some point you will need to plan on having an option to leave one factory for another to keep your existing factory honest. There are a lot of holidays, and production delays are frequent (especially toward Jan/Feb during the Chinese New Year when everything stops), so 6 months is a very realistic and wise presumption to prevent having inventory problems. I generally recommend keeping 3 months of raw materials inventory stocked in China (you can usually negotiate this with the factory where you do the cutting and sewing/assembly), 3 months of finished salable inventory warehoused in China (also usually you can negotiate this with your cutting/sewing factory), and 3 months of inventory in the US. Presuming you do international distribution via distributors, you can also negotiate with your cut/sew factory to fulfill large distributor carton shipments drop shipped directly to your distributor through your finished product inventory. This way you have enough inventory available to take into account what will inevitably be the 6 months of re-negotiation haggling with your raw materials factories (which your agent will do on your behalf). Their knowing you have the time to negotiate is the best leverage you have and don't be afraid to pull your business and give it to another factory, as logistics for continued supply for your customers is an ongoing concern.
1) In order for you to open an bank account in China, you are required to establish a legal presence. This can be accomplished through the creation of (i) a representative office, (ii) a joint venture or (iii) a wholly foreign owned entity (i.e. a subsidiary). Of these options, the least expensive and least burdensome is the establishment of a representative office.
2) In order to establish a representative office, you will first need to have a lease for office space (which you could arrange through your local manufacturer if it owns the facility) and to appoint a legal representative (no employees required and the legal rep. need not be a Chinese national) before filing for clearance on your business name and registration. The approximate cost to register a representative office (including government filing fees, filing agent fees, attorney fees and preparing corporate consents and resolutions, is approximately $6,000 to $8,500, and takes approximately one month to complete from the date of the filing of your application for registration. There are some post-registration requirements which you can accomplish on your own, or through local counsel or a filing agent at an additional cost of approximately $500. You will then be able to open a bank account. In this regard banks generally require that you produce your business license, a certification from your legal representative and certain seals from the local business). The banks generally charge a fee to open the account and an annual maintenance fee.
3) A representative office will be required to file annual returns. However, you are not taxed for simply wiring money into the country.
Generally, I like HSBC Bank as they have a low cost wiring account in the US for receiving and sending wires, have a very good presence in China, as well as throughout the world, so it is a great bank for your business to grow globally with. US support is limited, but once set up everything can easily be done online, so for me it isn't an issue at all.
You will probably need an attorney to get your corporate structure in place in China and to help you set everything up. Although I haven't used them and cannot specifically recommend them, the firm, Graham Curtin in Morristown, NJ did come to me through my HSBC banker and have been very prompt and helpful in my initial efforts of setting up my China bank account. Simply do a Google search for them to contact them.
Hoping this helps everyone better understand their options in manufacturing in China.
Wednesday, September 9, 2009
Quickbooks for the Small Manufacturer
Quickbooks is a great piece of accounting software for the small manufacturer who has limited accounting knowledge. Setting up the software to work with your business is the only technical knowledge that requires a little bit of accounting and some degree of difficulty understanding how the back-end of quickbooks works. If you are not generally computer savvy, I HIGHLY recommend hiring a consultant BEFORE YOU START SELLING to manage your books and inventory so that you do not pay forward a much more expensive and time consuming problem with your accountant at the end of the first year.
This article presumes that you are a manufacturer of products, some with different styles (i.e. for us it was Plush Pads of different pattern designs. We later further complicated matters by changing our packaging such that we had 2 types of packaging options (one for mass retailers and one for boutique retailers) as well as inventory in two warehouses (one overseas and one in the US). Further, we sourced our materials that make up our product and outsourced manufacturing, so we generally over order materials to get price breaks and need to reorder from time to time when our materials run low. There are a number of materials that are needed to make up one unit of our product so tracking all of this was necessary both to understand what assets we currently had to account for their value, as well as to understand what we had on hand to know when we were running low. Quickbooks has some great features that manage all of these needs, but they are a little difficult to understand and need to be somewhat tailored in a custom way for this, as they weren't originally intended (or listed in the menu systems / help manuals) for these purposes.
Inventory Parts - Let's start off with simple inventories - each product is an item, but since our product is made of different materials, each of those are an item as well, so it's important to start off at the most basic level of material (item) that you purchase. For us it was the cotton, elastic, memory foam, etc. each being a separate item as the base level of items that make up our ultimate Plush Pad product. These base items that make up a finished product are called in quickbooks "inventory parts". So you would go into the items section and create a new item for each of them as their own separate "inventory part". You should know how much it costs (either per unit or per yard, per meter, etc. - you can even create custom "units" to describe your unit of ordering) and there is a provision here to list that. For example, our cotton material is purchased per yard, so we place the cost and list the "yard" selection as the unit of measure. We also have "labor" as a cost of our goods sold, so we "tricked" quickbooks into including this as an inventory part and listed the labor cost we pay to our cut and sew factory per unit as it's own item.
Inventory Assembly - your finished product (for us the Plush Pad) incorporates a number of different materials + the labor "inventory part" all together (be sure to include packaging, UPC labels, etc. and assembly costs as additional inventory parts that make up this inventory assembly if these are a part of your finished salable good. Basically every cost to make up what a customer ultimately buys from you.
Managing different styles and /or different warehouses - For us, we have 13 different styles of the Plush Pad - all of them made with the same materials with the exception of the cotton that comes in different patterns that make up different styles of our product available to our customers. Further we have different packaging - for us we had packaging in tubes and in boxes. Lastly, we had both located in 2 different locations (one overseas and one in the US). Ultimately, to track each separately, we had to create slightly different inventory assemblies (i.e. product item names) for each scenario. For us, we coded our sku names to provide consistency for this - for example, Plush Pads in Tubes in the US that were in the Blueberry style were given the sku: PPTUS-Blueberry-10. PP =Plush Pad, T= tube, US=USA, Blueberry=style, and 10 = when the style was first made available. A separate inventory assembly for our Poppy style would be PPTUS-Poppy-10, and the assembly would contain all of the same inventory parts except the Poppy Cotton which would replace the Blueberry cotton. Quickbooks easily allows you to create a duplicate item so that you can copy all of another inventory item to a new one without entering everything in again. It makes it much easier to create new styles, warehouses, etc. by doing this. PPTOS-Poppy-10 would be Plush Pads in Tubes in our Overseas warehouse of Poppy style.
Build assemblies - you would create purchase orders to list the materials that you were ordering and then receive inventory to then have the inventory show up when you see your inventory part items in the items screen. Once you have sufficient materials to make your finished product, go into the "build assembly" screen in quickbooks and select the assembly item - in our example, PPTUS-Poppy-10 to build the number of items ordered in your PO. You do this for every product sku that you have, and as you create new invoices you select those item numbers and each time it takes the number of units from that invoice out of your product item inventory in the items page. Quickbooks also allows you to list an alarm when your inventories drop beneath a certain number.
Moving inventory from one warehouse to another - the cool thing by doing it this way is that you can "move" inventory that may be in one location to another location by simply changing your inventory item assembly to build from another inventory assembly. Using our example, if you wanted to move 10,000 units from our overseas warehouse to our US warehouse, you would edit the PPTUS-Poppy10 item (US inventory) to be made up of the PPTOS-Poppy-10 (overseas inventory). Be SURE to look at the average cost of the items you are taking from (here the overseas inventory) and hard code the item cost in the respective window in that item before building it, as you want to make sure that this average cost (which can change from order to order) is accurate when building it into your other warehouse item. Then simply build 10,000 the PPTUS-Poppy-10 item from the PPTOS-Poppy-10 item. You will see it takes the number away from the one inventory and adds it to the other inventory, and will average cost the new cost per unit with the cost per unit of the new inventory you just moved into there.
You can customize this to suit your needs, whether it be one retail store to another, etc. It all works based on the same underlying way of maintaining items.
Good Luck!!
This article presumes that you are a manufacturer of products, some with different styles (i.e. for us it was Plush Pads of different pattern designs. We later further complicated matters by changing our packaging such that we had 2 types of packaging options (one for mass retailers and one for boutique retailers) as well as inventory in two warehouses (one overseas and one in the US). Further, we sourced our materials that make up our product and outsourced manufacturing, so we generally over order materials to get price breaks and need to reorder from time to time when our materials run low. There are a number of materials that are needed to make up one unit of our product so tracking all of this was necessary both to understand what assets we currently had to account for their value, as well as to understand what we had on hand to know when we were running low. Quickbooks has some great features that manage all of these needs, but they are a little difficult to understand and need to be somewhat tailored in a custom way for this, as they weren't originally intended (or listed in the menu systems / help manuals) for these purposes.
Inventory Parts - Let's start off with simple inventories - each product is an item, but since our product is made of different materials, each of those are an item as well, so it's important to start off at the most basic level of material (item) that you purchase. For us it was the cotton, elastic, memory foam, etc. each being a separate item as the base level of items that make up our ultimate Plush Pad product. These base items that make up a finished product are called in quickbooks "inventory parts". So you would go into the items section and create a new item for each of them as their own separate "inventory part". You should know how much it costs (either per unit or per yard, per meter, etc. - you can even create custom "units" to describe your unit of ordering) and there is a provision here to list that. For example, our cotton material is purchased per yard, so we place the cost and list the "yard" selection as the unit of measure. We also have "labor" as a cost of our goods sold, so we "tricked" quickbooks into including this as an inventory part and listed the labor cost we pay to our cut and sew factory per unit as it's own item.
Inventory Assembly - your finished product (for us the Plush Pad) incorporates a number of different materials + the labor "inventory part" all together (be sure to include packaging, UPC labels, etc. and assembly costs as additional inventory parts that make up this inventory assembly if these are a part of your finished salable good. Basically every cost to make up what a customer ultimately buys from you.
Managing different styles and /or different warehouses - For us, we have 13 different styles of the Plush Pad - all of them made with the same materials with the exception of the cotton that comes in different patterns that make up different styles of our product available to our customers. Further we have different packaging - for us we had packaging in tubes and in boxes. Lastly, we had both located in 2 different locations (one overseas and one in the US). Ultimately, to track each separately, we had to create slightly different inventory assemblies (i.e. product item names) for each scenario. For us, we coded our sku names to provide consistency for this - for example, Plush Pads in Tubes in the US that were in the Blueberry style were given the sku: PPTUS-Blueberry-10. PP =Plush Pad, T= tube, US=USA, Blueberry=style, and 10 = when the style was first made available. A separate inventory assembly for our Poppy style would be PPTUS-Poppy-10, and the assembly would contain all of the same inventory parts except the Poppy Cotton which would replace the Blueberry cotton. Quickbooks easily allows you to create a duplicate item so that you can copy all of another inventory item to a new one without entering everything in again. It makes it much easier to create new styles, warehouses, etc. by doing this. PPTOS-Poppy-10 would be Plush Pads in Tubes in our Overseas warehouse of Poppy style.
Build assemblies - you would create purchase orders to list the materials that you were ordering and then receive inventory to then have the inventory show up when you see your inventory part items in the items screen. Once you have sufficient materials to make your finished product, go into the "build assembly" screen in quickbooks and select the assembly item - in our example, PPTUS-Poppy-10 to build the number of items ordered in your PO. You do this for every product sku that you have, and as you create new invoices you select those item numbers and each time it takes the number of units from that invoice out of your product item inventory in the items page. Quickbooks also allows you to list an alarm when your inventories drop beneath a certain number.
Moving inventory from one warehouse to another - the cool thing by doing it this way is that you can "move" inventory that may be in one location to another location by simply changing your inventory item assembly to build from another inventory assembly. Using our example, if you wanted to move 10,000 units from our overseas warehouse to our US warehouse, you would edit the PPTUS-Poppy10 item (US inventory) to be made up of the PPTOS-Poppy-10 (overseas inventory). Be SURE to look at the average cost of the items you are taking from (here the overseas inventory) and hard code the item cost in the respective window in that item before building it, as you want to make sure that this average cost (which can change from order to order) is accurate when building it into your other warehouse item. Then simply build 10,000 the PPTUS-Poppy-10 item from the PPTOS-Poppy-10 item. You will see it takes the number away from the one inventory and adds it to the other inventory, and will average cost the new cost per unit with the cost per unit of the new inventory you just moved into there.
You can customize this to suit your needs, whether it be one retail store to another, etc. It all works based on the same underlying way of maintaining items.
Good Luck!!
Thursday, September 3, 2009
How to Land Large Accounts
Here are a few bullets to keep in mind when looking to go after bigger business:
1. Don't lose touch with your core competency - diversify yourself by holding on to your smaller business. You don't want to put all of your eggs into one or two large customers to have one of them fall off and jeopardize your company's continued existence. Make sure you can lose any one account and still have a plan to move to.
2. Get the top name of the company you're going after - Find out everything you can about what they do and what they need so that you can help them with what it is that you do. It's easy to then find out who their CEO or President is and contact their office. That's usually the easiest place to get an understanding of their org chart, and decision makers relevant to your business. Many times this person will walk down to the office of the highest person you might ever hope to sell to and present them with your company as an interest.
3. Know as many people in the different parts of the company as you can. Never underestimate the power of a receptionist or assistant. Not only can they help navigate the internal waters for you, but they are frequently the people who can be promoted to a role of importance, and they will never forget that you cared enough about them before their importance.
4. Try to find imperfections that you can help with - look at their website and get into depth with their sales people. The more value you can show by adding you to their business the more interested they will be to get you in.
5. Sell smart - don't just go into a generic pitch. Understand what they sell, how you can make it better for them and pitch your company's value to them in a customized way.
6. Be persistent - if you are close but they are waivering, don't give up. Persistence over time shows you have real value in the potential relationship. Perseverance is a virtue that they will respect so long as it is done with respect. But if it is a clear pass or a vehement no, then move on.
1. Don't lose touch with your core competency - diversify yourself by holding on to your smaller business. You don't want to put all of your eggs into one or two large customers to have one of them fall off and jeopardize your company's continued existence. Make sure you can lose any one account and still have a plan to move to.
2. Get the top name of the company you're going after - Find out everything you can about what they do and what they need so that you can help them with what it is that you do. It's easy to then find out who their CEO or President is and contact their office. That's usually the easiest place to get an understanding of their org chart, and decision makers relevant to your business. Many times this person will walk down to the office of the highest person you might ever hope to sell to and present them with your company as an interest.
3. Know as many people in the different parts of the company as you can. Never underestimate the power of a receptionist or assistant. Not only can they help navigate the internal waters for you, but they are frequently the people who can be promoted to a role of importance, and they will never forget that you cared enough about them before their importance.
4. Try to find imperfections that you can help with - look at their website and get into depth with their sales people. The more value you can show by adding you to their business the more interested they will be to get you in.
5. Sell smart - don't just go into a generic pitch. Understand what they sell, how you can make it better for them and pitch your company's value to them in a customized way.
6. Be persistent - if you are close but they are waivering, don't give up. Persistence over time shows you have real value in the potential relationship. Perseverance is a virtue that they will respect so long as it is done with respect. But if it is a clear pass or a vehement no, then move on.
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