Emphasis on creating a highly innovative product can make you successful. However, anyone in the maker community will tell you that one of the biggest challenges in scaling the business is controlling cost. If you can control cost while creating a highly innovative product, you can create a successful business. Save your cash! Efficient supply chain management can help you control cost. Seek out variable versus fixed cost options to meet the business needs while focusing on what matters most-product development, revenue generation, and funding to support growth.
Managing Inventory and Quality Concerns:
Inventory is very costly. Any company in the hardware business will tell you that inventory and people are its largest expense. Defer the ownership of that inventory until the last possible moment. This will maximize your cash-to-cash cycle time. Utilize supplier’s supply chain services to manage inventory, long lead times, create flexibility in the supply chain, and defer inventory ownership. Choose a make-to-order manufacturing strategy versus make-to-stock. This will also help you control cost. Having preorders prior to building product to avoid inventory cost is ideal.
Know how your product is made. Spend time with the manufacturing process and get a good understanding of the process, the equipment used, and time involved to manufacture. Know your defect and return rate. Acquire knowledge before scaling. It is important to take one volume step at a time.
Globalization-Why local partnerships work:
A large part of the Total Cost of Ownership or Acquisition is not related to material cost. These are the things you should consider when evaluating production outside of the United States:
- Managing the long distance relationship-How do you check on a problem that is being reported by customers?
- IP protection, reverse engineering, cloning-the contract manufacturer makes one for you and one for themselves. Someone figures out your design and then uses it and or improves on what they learned.
- Counterfeit components-reliability of product
- Illegal use of your brand name on a work alike or cloned product
- Taxes and duties
- Shipping and logistics cost
All of these items are risk factors that you have to ask yourself is the manufacturing cost saving an ample trade off for the risks associated. Having a local partnership gives you flexibility to access your product when you need it. You can make quick design changes and fix inevitable manufacturing issues. You avoid excess charges on taxes, duties, shipping, and logistics cost while being able to keep tabs on the manufacturing process.
What will be your customers’ experience?
You ultimately want to build a business, not just a product. Customer service is a key to building a business. It is a necessary cost that must be managed. This can include the process to handle a return, a defect, or address training questions. How you handle that customer’s experience can impact what that customer shares with other potential customers about your product. Customers are your best investors. Take one step at a time and keep cash flow healthy. This can be done by outsourcing your customer service needs to a supply chain provider to stay on the variable cost path.
Partner with a supply chain leader:
Controlling cost is critical to scaling and managing your business. A supply chain partner can:
- Manage all of your suppliers
- Identify component availability issues, manage lead times, and life cycle management.
- Leverage scale and scope with their suppliers to get best price, availability, and product support.
- Utilize their purchasing strategies solutions to keep inventories low, maximize return on working capital, inventory turns, and cash-to-cash cycle time.
- Logistics support and infrastructure
- Customer service support
- Service deliveries to customers
Avnet provides supply chain professionals, who are trusted advisors and solutions providers. These supply chain professionals can help with providing vetted local resources, sourcing strategies, manufacturing best practices, logistics optimization, and other critical factors necessary to scale and bring a product to market while maintaining an extremely high level of flexibility that helps avoid the peril of premature scaling. Avnet’s supply chain professionals create solutions to keep inventories under control and drive efficiencies that young companies might not consider—thus paying for themselves many times over.
Avnet provides Supply Chain End-to-End Solutions to meet your needs. If Avnet is involved in the early stages, we can help avoid obsolescence issues and identify best fit solutions for your application. Avnet supports those early stages with sampling of product and prototype support. Avnet can also help you with a solution through the production stage that ensures you can get product to market when you need it all on a just-in-time basis. This allows you to defer ownership until you are ready to turn that product into revenue. Avnet offers various services to give you assurance of supply without the concern for fluctuating lead times from manufacturers. Kitting and turnkey solutions help package the deferment of cash by managing the product at a top level assembly. It allows you to only be invoiced once the order is complete. Avnet also offers web hosting, electronic recycling, repair and refurbish, and cloud services to name a few. If you would like to learn more about Avnet’s services, contact your local Avnet representative.
Geralyn Venvertloh, CPIM, Director of Business Develoment-Avnet
Contributors: Eric Leahy and Todd Hatcher
- Category/Stage: Support
Nathan Kinkead would like to ask you about Marketing
What should I include in a product pitch with a VC?
Supply Chain Management for Makers
I have a really good idea for a product, but where do I start?
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Thanks for the question <a href='https://makersource.io/makers/natekinkead'>[Nathan Kinkead]</a> ! I would be happy to give you some marketing tips. What kind of marketing are you thinking of doing? Digital? Social Media? Advertisements? Print? There are lots of ways you could go! No matter what direction you decide to go though, the first step in marketing is understanding your consumer, who they are, where they are and what they want. After you have a firm grasp on who your customer is, you can figure out what medium, verbage and content will be most appealing to your customer. The key is to persuade them that you have what they want (hopefully, you actually do have it). Like i said before, from there you have many options on how to market your business. I hope this is helpful. I'd be happy to answer a follow up question. My specialization is in digital and social media marketing so, I am best suited for those types. Does anyone else have any tips on marketing?Nathan Kinkead would like to ask you about Marketing
That really depends on what the idea involves, you should do some research to find supporting tools, materials and services that relate to your product idea and just keep them in your bookmarks as you go through various stages of development. If this site takes off, it looks like it could become a pretty good resource for connecting with those providers. Also, getting an early design and prototype prepared is helpful for getting initial investment through sites like kickstarter.I have a really good idea for a product, but where do I start?
It’s incredibility important to start with the understanding investments are not usually made after just one meeting. Unless it’s a pitch competition, he goal of pitching a VC should be to generate interest and follow up questions. Here’s a suggested 11 slide format: - Vision and value proposition - The unique problem you are solving - The economic opportunity and targeted market - What your solution is and why it is unique or better - Your revenue model - Roadmap and what you’ve already accomplished - Your marketing and sales strategy - Who’s going to get you there - your team - Financials/Valuation - Competitive Analysis - How you are going to use the investment you are requestingWhat should I include in a product pitch with a VC?
Ok, that is good to know. So who would be the person to talk to at Avnet regarding supply chain? I'm already a customer of AVID which is an Avnet company. What other parts of the company can help me? Right now, I get the feeling with the buyout of Premier Farnell that the many arms of Avnet doesn't really know what the other arms are doing.Supply Chain Management for Makers