Capturing the True Cost of Manufacturing
By Jerry Taylor, Director of Product Development, RIVA Precision Manufacturing
You can feel the excitement in the air as you wake with the thoughts of your jewelry designs coming to life. You spent hours researching the market and coming up with the perfect pieces to take the market by storm. Your passion for the designs is captured in the concept and you hope it will translate well to your vendor and manufacturer. However, are you really being smart with the way it is being produced? Did you capture the real cost it takes to manufacture your dream?
Many novice designers who use multiple vendors don’t capture the true cost of manufacturing. These designers source their work to multiple small shops within the manufacturing cycle process. One shop may do their casting, others will do only setting work, while yet another will assemble, and finally another one will complete the finishing. Each shop will focus on one stage of the manufacturing life cycle and are quite affordable on the surface. However, are the invoices from your vendors the true cost of manufacturing your designs? What are the actual hidden costs if not seen in black and white? What are the Pros and Cons of this fractured manufacturing process? Is there another option for designers?
As a young apprentice in the industry, the norm was to find a jewelry shop based on price and stage of the process. It was my job to ensure that pricing was on target, in which I had to manage multiple vendors due to the fractured process. This was a full time job in itself. Solely based on price, I had to find a model maker (and now 3D printing house), casters who would cast in silver, another caster who did gold, and yet another who did platinum. The process of picking up, dropping off, tracking who had what, and gathering ETA’s was endless even at this stage of the game, not to mention that I had an assistant to help with vendor management. The juggling game continued over and over with setter shops and finishing shops.
When something went wrong in the production process, which it often does, the battle of the blame game starts. Whether the piece had porosity issues or setting issues, no vendor would take fault. Instead they blamed the “other guy” for a bad casting, poor design, or whatnot. This was the norm in dealing with these shops and of course no one wants to redo their work and lose money. However, the blame game does not help to solve your production issues and at the end day. What does your cost really look like after all your administration work?
At the end of the production cycle, you compile your invoices. You take the invoice from your 3D printing service, your caster, your setter and so forth. You add them up to find your cost. You then add a mark-up and you’re off to sell your product, but is this really the only cost to the production?
Which costs are often overlooked? The cost associated with administration work needs to be accounted for as well the time it takes away from growing your business. Using my past as example, my salary and my assistant’s salary needed to be accounted for, along with extra expenses of traveling back and forth from vendor to vendor. The cost of delays or rework (and responsibility of rework) needs to be accounted for. These costs can and often do double your invoices from your contractors.
As this fractured manufacturing process is the norm for many novice designers, take note to ensure proper costing and vendor selection. This can make or break your business. Be sure to talk with your contactors before you give them work. Ask questions on how they handle reworked items and review which other contractors they normally work with to avoid the blame game.
Now the big question: is this process the only way? The jewelry industry includes companies of several sizes, each having advantages if you know how to use them and when they add value to your business. The process mentioned above has advantages to many novice designers as often the contractors in this fashion are smaller and accept very small production size orders while larger manufacturing houses focus on larger volume production runs. The trick is to know for what and when you are able to jump from the many roofs of small manufacturing houses to the one roof of a larger production house to manufacture your product.
Many small shops are great for one stage manufacturing and for small production; however it is difficult to manage true cost. Larger manufacturers incorporate all the stages of manufacturing under one roof and capture a truer cost of production. They internally handle rework, running around from stage to stage, and require less vendor management compared to smaller shops. However, larger manufacturing usually charges a bit more than the smaller shops. This offset allows you as the designer to concentrate on designing and growing your line and business.
As a designer just starting out or even a seasoned designer, determining costs is vital to your business. Creating the right business strategy to meet you production needs is essential to your long term growth. Whether you are using multiply small shops or large shops, creating a structure that accounts for true cost of your production must be capture completely to ensure future success.