Have you ever heard of Manufacturing Valley of Death?
This is when a company has designed a new product, started marketing the product to consumers and retailers, then found that they have failed because of a poorly managed supply chain and New Product Introduction stage (NPI) process.
Believe it or not, every year hundreds of hardware companies drop into the Manufacturing Valley of Death.
It’s difficult to get products to market on time, with high product quality and appropriate pricing. It’s especially hard when you choose to outsource the manufacturing overseas and you don’t have enough knowledge working with overseas suppliers.
Insight Solutions team members have decades of experience working with well-known global brands such as Apple, Fitbit, Nest, Nike Fuelband along with dozens of Silicon Valley hardware startups.If you have any concerns with working with overseas suppliers, feel free to reach out and we’d be glad to help.
Here are 5 ways to reduce the likelihood of falling into Manufacturing Valley of Death for your business:
1. Find the right manufacturing and supply chain professionals
Seek out experienced manufacturing professionals in product design stage.
There are a lot of details to be planned before transforming the product design into a manufactured product. To avoid time issues and delays, it’s essential to have boots on the ground to micro-manage your suppliers.
Problems are inevitable when manufacturing a new product. These issues need to be solved in real-time with you working alongside suppliers. Running to the airport and traveling to Asia every time a problem happens in the factory will be very costly and painful for you. And you’ll end up having little time for what’s more important for your business.
2. Select the right Contract Manufacturer (CM)
You’ll spend up to 70% of costs on a Contract Manufacturer (CM). That said, engaging with a wrong CM will be a disaster and may kill your entire business.
It’s crucial to run a professional CM selection process that includes a detailed supplier assessment. Next, analyze your RFQ (request for quotation), develop proper strategies and tactics, then enter into a Manufacturing Service Agreement (MSA) that is strong and secure for your business.
3. Budget and manage cash flow extremely careful
Get an understanding of the in-depth cost breakdown and set up realistic expectation on cost targets as well as cash flow break-even points. This is helpful in reducing the risk of running out of cash in the middle of the process.
Also, Non-Recurring Engineering (NRE) cost can vary a lot under different circumstances. If you’re interested in knowing more from about it, feel free to read Kickstarter Prototype to Production: $100K is not enough.
4. Make sure you’re equipped with a pro NPI checklist and a quality plan
We’ve seen this so many times when neither the clients nor the suppliers have a professional quality plan in place before they start working together.
Remember, the devils lie in details. If these items are neglected upfront, you’ll be facing with have high risk and issues which may jeopardize the entire project schedule easily.
5. Optimize your supply chain
To survive and succeed in a very competitive industry, such as hardware, you have to act fast. Centralizing and optimizing your supply chain has become more and more critical than ever before.
For instance, part of DJI’s success lies in the centralized supply chain in Shenzhen (known as the next hardware Silicon Valley), within 1-hour of travel distance.
Ideally, a contract manufacturer helps you source sub-suppliers, develop quality plan and testing plan. Moreover, a team is offered to oversee and manage your project.
Naturally, you’d assume it as a standard practice. However, be aware, this is NOT true for most Chinese factories. Suppliers are more likely to over-promise or over-commit simply because they want you to work with them. If you rely on them only largely, the results can be very frustrating.
Do you have manufacturing and supply chain challenges? Share with us so we can see how we can better help.