What work do I need to do prior to speaking with a manufacturer?

Do your homework.  There are design firms that will cost your bill of materials etc but there is a lot of work that you should do on your own that will put you in a better negotiating position.

You should cost your bill of materials yourself.  You should know what parts are driving the cost. You should understand the lead times for your parts so you know when you need to order. In addition, you should know what parts are off the shelf prior to speaking to a manufacturer.  This is important if your parts need to change and there is a restocking fee or if you need to do a risk buy on your unique parts due to leadtime.   A restocking fee for off the shelf(meaning manufacturers can use these in other orders they have in their facility)  is considerably less. 

Understand the complexity of design then meeting with manufacturers for consultations. If you have some estimated time for assembly and the type of testing you need that is also helpful. In meeting with manufacturers you want to make sure there is not a significant investment in equipment needed. There are a lot of manufacturer leaders who have start up options and other suppliers are looking to make their mark. A program manager that can advocate for you and make things happen for you in a facility is a must.  You and your team need to click with the program manager as there will be items that you need pushed due to timelines or product demos and having a Program Manager that can advocate on your behalf is key. Next is the materials group.  The group that is sourcing your components.  Take a good look at this aspect and talk to them about sourcing strategies.  Then there is the technical and line support. Meet the people who are going to work on your product. Having some relationship with an executive is key. At some point you will need a big favor the PM can't get done. So, talk to several and narrow it to a couple to negotiate terms.  A key aspect is that you are comfortable working with the team and negotiation is a good test.

One key is do not order a lot of inventory to reduce the price. It is better to pay a bit more for a few small runs while you get your product set then get a lower price only to find out you have a lot of inventory you can't use/unload.

Even in a small company,  someone needs the direct responsibility of the relationship.  The person needs to understand how the cash flow works,  terms from the supplier (also when your customer will be paying you) and what flexibility you will have with push out/pull in.   As a company you need to agree on what drives you, cost, inventory, flexibility etc. These will drive mfg options/decisions.

Some quick lessons from Humon(Wearable-GFSA cohort 2015)

Location: when thinking about manufacturing, I previously had thought China to be the place to do this. Although there may be times when this makes sense, there seem to be a lot of resources available locally to do prototyping and small production runs. This seems like such an easier way to start the manufacturing process. 

- Testing: when thinking about a prototype, I think it helps to think about what the purpose of the prototype is, and test something specific with the prototype. For example, in our case, we could test a lot of different aspects of how a user would wear our device (e.g. size, weight, strap material) without needing to make a functional unit. I think this is important. 

- Organization: keep a running bill of materials. When doing the prototyping initially, we bought all kinds of parts from many different places to assemble our early prototypes. We weren't organized when it came to saving receipts, recording what parts we ended up using, and how many we needed. We then had to go back to look a lot of things up and actually figure out what the BOM cost was for a prototype. So, when prototyping, I'd suggest being organized and constantly recording and updating a running BOM so you always have a sense of what a unit costs. 

 

 

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