Posts Tagged ‘Sourcing’

Prototyping New Products: What You Can Learn from an Industry Pro

By admin on May 6, 2011 | Category: Product Development | Tags: , , , , , , | Comments Off

I recently heard a talk by David Small, of Shoot the Moon products, at Hacker Dojo in Mountain View, CA. Shoot the Moon products is an uber-successful product development and invention firm in the toy industry.  Toy industry giants like Mattel, Fisher Price, and Hasbro often look outside the company to inventors and firms like Shoot the Moon, for their breakthrough products and ideas.  Shoot the Moon has had a lot of success with this–with a track record of over 100 product lines developed and licensed, creating roughly $2 Billion in retail sales. These guys are pros.

David, one of the cofounders of the firm, led the audience through several of their biggest hits, such as Laser tag, and showing videos of Elmo and Talking Teddy, two animatronic toys that were very successful in their time.  He then walked through their latest creation, to be released this June by Mattel.  Enter the doll, Fijit.

Starting concept ideation back in 2008, Small highlighted to the audience that it took their expert team 3 years before they would get their product to market. Creating a new product line that was to represent the cutting edge in toys, make kids go crazy with desire, and inspire images of hockey stick growth curves in toy industry execs, is not a feat that would be accomplished without years of hard work.

I think two of the most important takeaways that emerged from his talk were that 1) figuring out how to bring the product to life involved solving numerous, complex problems, the solving of which, led to many new problems, and 2) they used everyday materials, from whatever source they could find, to build out the prototype  It was not easy.

Let’s take #1.  In the ultra-competitive toy industry, price points are crucial, margins are thin, and therefore, cost is king.  Developing the killer new toy technology at a cost that is going to allow for affordable toy pricing, can be extremely challenging.  Anyone could have used high-end technology and disregarded assembly and part cost to build a product like Fijit.  The key was doing it at the amazing retail price point of $49.99.  This required problem-solving to create the desired capabilities as efficiently as possible.  They needed to make a doll that could pull off multiple movements in all directions, but only use a minimum of motors, battery power, and parts to do it. This took a great deal of engineering work and involved several dead-ends. When they finally developed a solution, they realized they had created a new problem: the skins (exterior of the doll) that they typically used with dolls, would not work with this setup.  The victory of the first challenge quickly created the tough work of solving the second–finding a material that would work.

The search for Fijit’s exterior skin was on.  Remember, these guys are familiar with all kinds of materials and have experts at their disposal. They looked at several materials, including plush, and needed to find a material that would house the guts of the doll safely, be flexible enough to move in a variety of directions, and soft and cuddly to the touch.  They went through a lot of options with no luck. They eventually found solution. A very soft, stretchy, rubbery plastic in…another toy.  When questions of prototype building comes up with entrepreneurs, I often encourage them to find and loot whatever off-the-shelf products they can for useful materials.  Not everything must be created from scratch and walking the aisles of stores is the fastest and cheapest way to see what’s out there that you can use.  Not only did David and his team find the plastic toy that used this material, but they bought it and spent painstaking hours taking it apart so it would be usable in their prototype.  It might sound like this is very difficult, and it may be.  But I can assure you that it is usually a faster method than describing a hypothetical material and talking to industry people and vendors to see if such a thing exists somewhere…out there…in the world.  Start with what’s in stores.  Loot existing products and materials that are easily accessible.  Get your hands dirty and be creative.

There can be a lot of dead-ends in new product development.  We spend a lot of time and resources traveling down the exploratory path of sussing out various materials and designs, only to find that they don’t work for some small reason.  It’s easy to fall into the trap of thinking that we were foolish not to see the problems early on and save ourselves the time.  Well, as David lamented, even the pros go through this very process.  They might go through certain stages faster (even though Fijit development spanned several years), but the product development process is full of uncertainty.  As I mention in this blog post, like startup businesses, the goal is to fail quickly and cheaply, and iterate to success.  Even Thomas Edison described his invention development as a process of getting through failures to hit success.

Fijit is a very impressive toy, at an even more impressive price point.  It won’t be long till we see if 6 year old girls and parents everywhere agree.  Hopefully, for Shoot the Moon, their persistence pays off handsomely.

Iphone Manufacturers Getting Heat. Should you care about the working conditions of the factories you source?

By admin on February 28, 2011 | Category: Product Sourcing and Strategy,Sustainability & Transparency | Tags: , , , , | Comments Off

I think so. Wired Magazine’s March 2011 cover/issue (available in print, not yet online) “1 Million Workers. 90 Million Iphones. 17 Suicides”, raises the question from a consumer perspective.  Article author Joel Johnson hopped on a plane and toured through the main Foxconn factory, Apple’s largest contract manufacturer, in hopes of learning and telling the world more about the kinds of places the vast majority of our electronics products come from. The article did a good job of portraying the conditions of a chinese factory, and even Johnson admits that his tour guides were not far off the mark when they described the city-state factory (1 million workers) as looking like a typical community college campus in the U.S. (Are the keg lines long?).

The working conditions of overseas manufacturers are always a hot issue and scrutiny of the way large companies like Apple treat their masses of contract manufacturer workers is a good thing. Surprisingly, the Wired article may seem like a disappointment to many hoping to find the chink in Apple’s armor, because it did a good job of exonerating Apple by showing that their business with Foxconn hasn’t led to anything outside the norm for society from a statistical standpoint. The article points out that the worker suicides at Foxconn, 17 people out of 1 million, are well below the national averages for both rural and urban China, and that the suicide rate of U.S. College students is four times the incidence of suicide at Foxconn.   Geez, it almost seems as though, if you’re kid was considering suicide, statistically–you would want to send them to work in this Chinese factory.   Either way, some people will buy the magazine because more people care these days about sustainability in general and would like to know the truth, at least, according to Wired. What may be more troubling, is many people will read the magazine cover and assume there are problems because, “why else would a magazine write about it?”  The point is, these are sensitive issues for ANY company.  So even if you’re not Apple, or HP, or Sony, but you’re a start-up, how do you approach this in your supply chain?

Sustainability and labor conditions in international supply chains is a concept that is still relatively new. For all the public and media lashings that companies like Nike and Walmart have taken over the last 20 years regarding the treatment of factory workers and environmental impacts of supply chains, we still have a long way to go in moving industries in a more sustainable and transparent direction. But it’s happening. See my posts on Walmart and IBM, for a taste of the progress.

At the start-up and growth stages, you’ve got to start early and you’ve got to approach sustainability in a way that makes sense given the challenges before you. My advice: focus on the social and environmental standards of the factories you’re sourcing. Look for the manufacturer who is already doing it right, rather than thinking you’ll change the one that isn’t.

How do you know if they’re doing it right?

There are many issues with the way large companies institute and monitor social and environmental policies with their suppliers. Typically, companies send teams of auditors to inspect factory conditions every so often.   The auditors then report either a pass for the supplier, a change in the supplier’s status to the ‘watchlist’, or elimination from the purchasing base altogether. The truth is, the monitoring system widely used in the industry is not very effective as a cause for improvement in industry conditions beyond a baseline point. Andrea Harney’s book, The China Price, does a fantastic job of laying out the problems of this system in the industry. Despite this system, there are so many factories out there that don’t even meet baseline standards.   As a start-up or small company, how do you assure the standards of the factory you’re working with?   I have 3 options for you, any of which will give you some information to make a judgment on.  Coupling a few of these tactics together will give you a more well-rounded perspective: 1) source a factory that is working with larger companies that must enforce standards, 2) go there and see the factory for yourself, 3) have an audit team go in and report on the status of the factory conditions.

Simple as that. You should start with #1, do #2 at some point anyways, and pay for #3 if you’re very serious about the issue.

Why is it unlikely that I’ll be able to push change with my manufacturer?

First, let me say that this is something that the largest of the large companies in the world are continuing to struggle with. Some companies and industries have made greater advances than others, but the fact remains that even organizations with far greater resources and budgets must work hard to make improvements. Oftentimes, industry leaders like Levi and Nike don’t have enough clout themselves to push suppliers to change their operations, and companies like these must band together with their competitors in the industry to lean on suppliers and advance their standards and operational practices. Thus, thinking you will begin to do business with a new contract manufacturer (and as a start-up, the importance of your business will likely be small compared to their larger, steady customers) and demand they adhere to guidelines they don’t already subscribe to is not realistic. For these reasons, it’s much more important to think about the factory you’re sourcing to begin with, rather than trying to change a supplier you’re already working with.

Thinking about these issues going forward, I encourage my clients who are interested in the sustainability of their products and supply chains to consider the entire lifecycle—from the materials and design of the product and packaging, to the location of the factory, the practices of the factory, and the impacts of shipping. A start-up should be strategic in their approach and go after the low hanging fruit, while making sure they are focusing on successfully growing their business. As business grows, there will be increasing opportunities and resources to continue building your business in a responsible fashion. Just like Apple, at some point, consumers and watchdogs may demand to look under the hood of your factories to see if you’re business is on the up and up.  Start early. Start smart.

Sourcing Manufacturers Through Online Supplier Directory Websites: Business as Usual

By GSS on December 15, 2009 | Category: Product Sourcing and Strategy | Tags: , , , , , | 1 Comment

There is no doubt that methods of finding suppliers are shifting.  Thomas Global Register (online), recently closed its doors and will discontinue publishing IEN, a magazine it has published since the Great Depression Era.  While the company cites the global economic downturn as the primary driving force behind this, Jason Busch, of Spendmatters, reports a different potential cause: declining revenues over the last few years.  If this is the case, and Thomas Global's value offering has not kept pace with the shifting supplier directory market, then where is the supplier directory market going?  

In another Spendmatters post, Jason, segmented the supplier directory market into 4 categories, based on the value offering and business models of the supplier directory firms that offer different approaches to the market of small and mid-size companies who tend to source manufacturers (as opposed to large companies which rely on sourcing offices and large sourcing companies abroad).  According to the Spendmatters' segmentation:

1) Group 1 features companies which have applied offline paradigms to the internet.  Examples include ThomasNet, and smaller, niche focused sites like Surplus Record.  These sites brought their supplier listings online and provided support to help their listed manufacturers and service providers improve visibility and accessibility.  

2) Group 2 includes companies like Alibaba.com and Global Sources, supplier directory providers who seek to bring the world's manufacturers to your computer screen–a more global or worldly approach.  They have a similar model to the first group, and tend to offer value in the breadth of their directory with respect to manufacturing listings by category and country.  As Jason points out, these tend to be the sites frequented by small and mid-size companies, product inventors and entrepreneurs in the early stages. 

3) Group 3 includes companies that are repositioning their supplier networks, which were geared more towards facilitating transactions, into supplier networks which will facilitate sourcing new suppliers and issuing RFQs.  These companies include Ariba and Ketera.

4) The 4th group of companies include commerce driven models, like MFG.com.  Where companies like Alibaba and Global Sources present a wider, more global listing, MFG.com seeks to supply a service focusing more on depth.  MFG.com allows industrial buyers and engineers to source potential suppliers, transfer relevant, and IP sensitive product documentation in a secure format, and proceed through the RFQ and negotiation process.  

Because of our work with new product development, start-ups, and entrepreneurs, we often get addressed with questions regarding the 2nd group segmented out by Jason, or the alibaba.com's, and Global Sources, of the internet.  I probably caution those new to working with manufacturers overseas that there is A LOT more to seeing a nice website and emailing a potential factory overseas, just as much as Dan Harris, of ChinaLawBlog, gets X phone calls a week from some poor sap who wired money to a supposed factory overseas and hasn't heard a peep from them since.  

It's also not uncommon I hear someone with reasonable business experience and intelligence regale folks with a story about some horrific China-related quality incident or fraudulence that happened to someone else, but when it really comes down to vetting who they're working with and what's going on at the factory they are depending on, no one at their organization has visited the factory in a looooonng time.  If you think this sounds absurd, see the end of Dan's post on How Not to Get (China) Internet Scammed here, and note that the same sort of cognitive dissonance, or believing that there is no way they could be involved with the same sort of low-level quality or fraudulent factory over the internet as the scam tale which they laughed about, can also be seen in 60 year-old midwesterners paying lots of money to order 22 year old, mail-order brides from Russia, only to find out that Olga isn't really coming to Illinois.   

As I've mentioned several times in other posts, companies like Panjiva are working to provide greater transparency into the suppliers you may be working with overseas and what they may be up to. Information is power and when considering the ever-important topic of risk management, it is useful to know which suppliers are getting busier and which are on their way out of business all together. This is certainly not a substitute to having eyes and ears on the ground at the factory you're working with, but with respect to ferreting out potentially bad suppliers found via the internet, a 3rd party source of information like Panjiva can be useful.  While the internet has opened up quite a bit in the way of locating and communicating with manufacturing sources over the last decade, I would wager that the number of scams is probably still on its way up.  I think there is still quite an opportunity in helping online supplier directories provide better quality information, and help in managing the sourcing process, alongside the names and contact information of manufacturers.  The question is, when you can you really start substituting good information communicated online, for paying to have experienced personnel on site at the factory?  We're not there yet, by any means.  

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