Real life business problem

[mossbacked]

An associate of mine just invented a unique product that we will be bringing to market soon. This is a real life situation we are struggling with, and not a fictional scenario created to start a thread, but it does segue well with topics we routinely discuss here.

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The product is unique, trademarkable and patentable. I guess you also need to know that it is a highly useful consumer product, but is a non-essential. We will have a registered trademark momentarily, but the patent application will have to wait due to financial constraints. Even if/when patented, it will be hard to protect as minor changes will allow similar knockoffs to be sold against our original groundbreaking design.

We want to produce the product locally and will be able to make a decent profit at our targeted selling price (factoring local wages into our cost formula) for "a while" until whomever steals/modifies our design produces the product overseas using lowest common denominator wages.

We estimate "a while" to be perhaps 6-9 months. With the lower overseas wage cost in place, competitors will be able to make a profit at our cost level and we will be out of business shortly thereafter. This is a viable product we estimate to have a 3-4 year growth potential, and then sustained plateaued sales for many, many years thereafter.

We already know that we can produce and import containerload quantities of the product for pennies on the dollar overseas, still sell at our originally intended price, while dramatically increasing our profits and protecting ourselves against lower cost competitors. Knock-offs will occur, but at least we will have the lowest cost production factor covered and will be able to compete on a level playing field costwise.

The conundrum is that we want to create the numerous jobs involved here instead of in Asia.

I think this is a problem many US businesses face today, and I would like to get the groups input as to how we might protect our ability to keep long term production here in the US.

[merrylander]

Patent seems the only way, even if you were to produce overseans it would be a matter of a few months while they reverse engineer your design.

[piece-itpete]

A conundrum indeed.

Two things spring to mind. 1st, are you doing apples to apples labor cost wise? We should be able to out produce developing countries' workers.

2nd, I hate to say this, but think Barney. You need to create a premium brand awareness if possible. Anyone can make a purple dinosaur, but only one has the correct spots - and most people know it.

It might be unseemingly, but I think you've got no choice but to keep an import plan as a backup. Even importing, you're keeping the sales and engineering here, as well as the profits.

Pete

[noonereal]

sadly I think you are swiming up hill

what I would do is fly over to wherever you could source it from and "sell" the product to one of the biggest potential manufacturers as a "personal investment"

This will raise private capital for you and insure you a reasonable, continual and quality controlled supply.

buying production time and struggling with quality control could make your entrepreneurial work worthless in no time

then take your profits and invest them in the local community to supply jobs

manufacturing here in the US something that is not time sensitive or high end niche will leave you with at a financial handicap that you will not overcome

depending on the complexity of production look to mexico
They can assemble (if applicable) for you, probably not manufacture

[mossbacked]

Originally Posted by merrylander

Patent seems the only way, even if you were to produce overseas it would be a matter of a few months while they reverse engineer your design.

Over the years I've trademarked several items, but patent law is a field where I have little experience. Are you thinking if we produce overseas without a patent, they will tend to produce and sell against us because we didn't protect it?

[mossbacked]

Originally Posted by piece-itpete

A conundrum indeed.

Two things spring to mind. 1st, are you doing apples to apples labor cost wise? We should be able to out produce developing countries' workers.

2nd, I hate to say this, but think Barney. You need to create a premium brand awareness if possible. Anyone can make a purple dinosaur, but only one has the correct spots - and most people know it.

It might be unseemingly, but I think you've got no choice but to keep an import plan as a backup. Even importing, you're keeping the sales and engineering here, as well as the profits.

Pete

Good points.

-- If we produced here, yes we were thinking initially of higher cost "boutique" quantities to test market, and then a full ramp up.

-- If we initially went overseas, full investment and large quantities to hit economies of scale, and especially to hit container-load shipping pricing is needed.

-- Still, when you do compare apples to apples quantities, the shipping savings stateside are more than eaten up significantly higher wage costs. Our numbers show Asian production wins, but we may be missing something.

-- In a sense I think we have the "Barney factor" to a relatively high degree, but I've been there before with new product launches where we both won big and lost big. Naturally, we always thought we had the best idea since sliced bread going in to the rollout .

[BlueStreak]

Originally Posted by noonereal

sadly I think you are swiming up hill

what I would do is fly over to wherever you could source it from and "sell" the product to one of the biggest potential manufacturers as a "personal investment"

This will raise private capital for you and insure you a reasonable, continual and quality controlled supply.

buying production time and struggling with quality control could make your entrepreneurial work worthless in no time

then take your profits and invest them in the local community to supply jobs

manufacturing here in the US something that is not time sensitive or high end niche will leave you with at a financial handicap that you will not overcome

depending on the complexity of production look to mexico
They can assemble (if applicable) for you, probably not manufacture

Great, Nooner. Encourage him to do what is killing this country, when the man is trying desperately to keep the work here. This is precisely what we're NOT supposed to be all about.

Dave

[BlueStreak]

Mossy, I don't know what to tell you, but I hope you are successful. Thank You, Sir for making efforts to employ Americans.

Dave

[mossbacked]

Originally Posted by noonereal

sadly I think you are swiming up hill

what I would do is fly over to wherever you could source it from and "sell" the product to one of the biggest potential manufacturers as a "personal investment"

This will raise private capital for you and insure you a reasonable, continual and quality controlled supply.

buying production time and struggling with quality control could make your entrepreneurial work worthless in no time

then take your profits and invest them in the local community to supply jobs

manufacturing here in the US something that is not time sensitive or high end niche will leave you with at a financial handicap that you will not overcome

depending on the complexity of production look to mexico
They can assemble (if applicable) for you, probably not manufacture

The "swimming uphill" metaphor crossed my mind and makes me wonder if "non-essential consumer goods" really can be produced here long term. At any rate, our intent is to find a way to approach the same cost per unit produced here as opposed to there (Asia/Mexico).

This is the part I haven't thought through. I can visualize what paying a next door neighbor does to the local/national economy, but I'm not sure what happens when the production dollars and return freight go to Saipan or Sonora.

[noonereal]

Originally Posted by mossbacked

The "swimming uphill" metaphor crossed my mind and makes me wonder if "non-essential consumer goods" really can be produced here long term. At any rate, our intent is to find a way to approach the same cost per unit produced here as opposed to there (Asia/Mexico).

This is the part I haven't thought through. I can visualize what paying a next door neighbor does to the local/national economy, but I'm not sure what happens when the production dollars and return freight go to Saipan or Sonora.

best of luck to you whatever direction you take!