HOW TO MANUFACTURE

IN-HOUSE, OUTSOURCE, or LICENCING?

Once you have a confirmed design, and you know how it can be made, you need to look into how you will get it made! It can be very tempting here to go the 'DIY' approach, and keep all the profits for yourself, but is this the best option?


Like with any other project, such as building a house, or fixing your car, the cost and time associated will almost always be more than you initially thought! Also the volume of items you sell can impact how well you keep up with demand, or how well you can keep up with costs associated with manufacturing... You can get around this by either outsourcing or licencing, though these present their own sets of problems and headaches too! It all depends on what you are making, and how many of that item you are making.

DIY can be  aviable option!

Cost and Time

How many times have people thought to themselves 'I'll save money for myself by doing a DIY', just to do something wrong, to underestimate costs, or to have costs of items drastically increase for one reason or another. To top this off, so often the time it takes to complete a project will also blow way out of proportion, because you are not an 'expert', and so your estimates for time will never quite be right (unless you get really really lucky...). Cost and time will almost always become more than you think, when you DIY.

In this case, you may be wanting to manufacture your item on your own, which would involve plenty of capitol to purchase equipment and raw materials, and a vast amount of time to do the 'making'.

Volume of Orders

Do you know how many items you will sell? Another thing that can blow out your cost and time is the amount of orders you will anticipate... This can go wither way, in that you may only expect to sell 50 items per month, but end up selling 6000 items per month - meaning you cannot keep up with demand, and angry customers (happens with crowdfundung projects all the time...). Vice versa, you may anticipate 10000 orders per month and put up a massive amount of capitol to purchase proisions to create your items, but demand never shows up, and your 10000 orders per month plan only sells 100 orders per month... This could mean that you are not able to re-coup costs for the machinery and space you have set aside, meaning the business may drop out of the sky!

How can you avoid this sort of problem?

There are two main ways that people can manufacture a NEW object at a VARIABLE demand...

Outsourcing 
and 
Licencing

Should I Outsource?

Outsourcing? Prepare for boxes!
Outsourcing is where you are able to retain full (or majority) ownership of your design, but you do not have to manufacture the item yourself. You enter into a contract with a company for that company to make your design FOR you.

Your chosen company will then take on the responsibility of creating the items you need, including the purchasing of machinery, running the machinery, manufacturing and finishing the product, and boxing up the product. You do not need to purchase expensive machinery, and you can quite often order in variable quantities with a pre-set delivery date, so you know exactly how long it will take for the items to arrive.

Problems with outsourcing?

Outsourcing is not a complete package, you will still most likely have to handle distribution, sales, and other general management for your design, as the outsourced company is only there to MAKE your product for you.

Another problem with outsourcing is that you are relying on the outsourcing company to ensure object quality - you are not making the object, and so you cannot always guarantee the best quality products! For example, if your outsourcer is injection molding components for you, they may use bad raw material, which is brittle and crumbles after use instead of holding it's shape. You can get around this to an extent by communicating your quality requirements with the outsourcing company, and doing tests on random items to ensure quality throughout the stock.

Should I Licence?

Strike a deal with licencing...
Licencing is one of the easiest options to sell your design, while still being able to maintain some ownership. When you enter into a licencing agreement, you are effectively 'handing over the reins' of the design to another company, who will then cover the manufacture, distribution, sales, and general management of your design. You are then free to sit back and wait for returns from the licencing company, and go on to your next project. When negotiating the licencing contract, you may be able to organise for a one off payment, royalty payments, or some other arrangement.

Problems with Licencing?

Licencing is the 'lazy' option for you, as you are giving control of your design to someone else... So you will not see as much in the way of profits from items that are outsourced (per item). You will also have much less control over the quality and sales of your design, as the company you licenced your design to will typically do all of this. You will also run the risk that the licing company may stop selling your design, leaving you at square one again. Make sure that you go over the licencing agreement in thorough depth with a qualified patent attorney (or someone qualified in the field), to ensure that all bases are covered, and that you will not be exploited and taken advantage of.

Which should I choose?

The option that is best for you depends on so many different variables... It is very hard to give a definitive answer.

Typically, if you need to only make a small quantity of items, and they are easy / cheap to make...
You may want to consider DIY!

If you need to make a larger quantity of items, and/or the cost required to create the items is high (such as having to purchase specialised machinery), and/or you would need to undertake dangerous tasks to make the item, you may be better off outsourcing or licencing....

If you want to retain ownership...
You may want to consider outsourcing!

If you don't mind another company having control...
You may want to consider licencing!

Remember why you created the product in the first place, and select the option that works best to achieve your goals, and that fits within your means. Aim high and take risks, but don't let your aspirations destroy your chances of being successful!

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