Supply chain · Small Parcel Shipping

Should I build my own supply chain system for my start-up's consumer product or use a service?

Frank Cohen CTO and Founder at Appvance

February 19th, 2016

I invented a new high-tech fashion jewelry product and we sold about 500 of them at $99 each over the last 4 months. We will launch a lower priced $49 product in June. It tested very well. I am anticipating sales of 500 to 2000 units per month. I built my own assembly and supply chain system using a family member and tech shop in Bellingham, Washington and we ship using US Postal Service to mostly North American customers. Seems like its time to grow up and use a professional assembly and shipping service. I bootstrapped this business with my own money. In the long term, this business will design and license product, not manufacture. Should I keep growing our inside assembly and shipping team?

Michael Dowden Director at COTNow, Biz-Guru, Human Destiny, Heliski.ski and EMvision

February 22nd, 2016

Hello Frank, 

I agree with David Coleman, it is unlikely that the timing is right to outsorce production.

The challenge you are facing is how do you take a relatively successful product at low volumes and up scale in a way that you develop both value of the business and cash flow and profit required to grow and expand.

Most small business fail not due to poor product or service or even a lack of customer but from a lack of cash flow.  The fundamental questions you should be asking at this point are the following....

1) how do I build value into my business to find my growth or attract the right investors.
2) how do I build a brand that can be leveraged and is marketable
3) how can I set up a effective distribution network that allows the business to grow at a manageable (and profitable rate) without negative cash flow challenges that come with growth.
4) what are the key milestones i need to work to and around to be on track for where I want to take the business.
5) what is my pricing model and how do I ensure that this is commercially viable once I do gear up (considering the cost increase that come with this)

I hope these questions help you to design your growth to set you up for real success.

If you would like additional assistance around these, feel free to contact me

Lane Campbell Lifelong Entrepreneur

February 20th, 2016

You answered yourself.  Why would you invest in a team if you don't want to do it long term?  Find a partner.

Anu Gardiner Global Head of Procurement at DocuSign | Business Leader

February 19th, 2016

I would advise against growing inside assembly/shipping given your ultimate goal. OK to do until proof of concept. Check out Elementum. Not sure if they have scale requirements ... Good luck 

VIKRAM V New Product Introduction Operations Program Manager

February 21st, 2016

Hi Frank, First of all, Congratulations on your start-up. To decide on whether to have your own assembly and shipping service, first you have to study capability, budget, costing and the risk. Generally speaking, If you can build or expand your own assembly and shipping facilities, then, 1) You can save some cost to the company. There by you can increase your profit or reduce the product cost which is increasing value of your product. 2) Reduce turn-around time. Since it is assembly in-house, you can avoid time consumed for material movement from one place to other. So the overall assembly turn-around time is reduced. 3) Reduce time-to-Market. You can bring your product to the market early. 4) You will have to take the risk of raw material procurement and inventory. If you out source assembly and shipping, 1) You may have to manage the supplier and the product cost will be slightly higher. 2) You will not have the risk of procuring, assembling, and maintaining the inventory of raw material and finished goods 3)You can just own the design and rest you can outsource to a contract manufacturer. Please reach me at vikramv24@gmail.com . Thank you, Vikram

David Coleman Principal at Michigan and Beck, LLC dba Brandoogle

February 22nd, 2016

Frank I was a VP of Global Supply Chain in the jewelry industry, and given the details you have offered here I would recommend continuing down the DIY path. The volumes, presuming they are spread evenly across the month, are not really that high, and the storage requirements for jewelry are not very large either. Given the low volumes, an outside service will drive up your cost structure significantly. Keep at it until volumes approach 5,000 units per month and revisit the idea of outsourcing.

Joe Emison Chief Information Officer at Xceligent

February 20th, 2016

If your long-term goal is licensing product and not manufacturing, you should start moving toward that sooner rather than later. Having focus and limiting distractions is going to be your friend.

That said, it's not clear from your description how much of your assembly and supply chain is actually your company vs. the "tech shop"? If the "tech shop" is a vendor you're contracting with, then you might just consider renegotiating your contract with them to handle more and more of the distracting/commodity services that you're having to handle right now?

Andrew Berschauer Client Partner at Cognizant

February 20th, 2016

Are your supply chain needs highly specific to your business?  If yes, consider building.  I suspect, though, the answer is 'no', so don't spend considerable effort reinventing the wheel.

Anuj Saxena CEO at Satyam Sri Services

February 20th, 2016

As you are planning to licence your product, would suggest to concentrate on your logistics, may be third party owned or in side, as would be key to customer satisfaction in long run.
 
You can test various services region wise while launching new product(as you mentioned ) and take a call on this based on results.

Edson Carillo President & CEO at Connexxion Brasil

February 21st, 2016

Franck, if you're searching for efficient and cost effective operation, I'd like to recommend you to expand your own manufacturing and logistics activities. However as many businesses these operations are not related to the core competency, so to release your capital for further investments outsource them. All the best, Edson!

Glynn Bedford 1 to 1 Amazon, Ebay Mentoring

February 21st, 2016

You should definitely focus on want you can do well. If you want an expert on internet sales contact me on skype, beddyno1.
I can give you advice guidance on everything from marketing, promoting, shipping, customer care, optimization and admin.