The End of American Manufacturing?
We just finished our first year of business. We filed several patents, achieved UL® approval, built a supply chain and launched production. We have almost 80 committed retail accounts and growing.
It's been a dream come true.
But the dream has reached a critical fork in the path to our future and we need your help.
You see, we're a small company committed to American Manufacturing but as we've scaled up we've learned why it's so hard to manufacture in America: our suppliers want to charge more money as our quantities increase.
Three of our contracted factories sent us separate emails this week (coincidence?) asking for significant (up to 2X) price increases.
One said their other customers were bigger and they'd have to charge us more for our increasing volume to make it worth their while to keep powder coating our products. They are the only company around that can handle our increasing volume at acceptable quality.
The factory that weaves thread over our cord and the factory that assembles our products sent us similar messages, stating our increasing volume would require more attention than they want to commit.
Luckily we'll be okay for a little while. We are small and nimble and have enough inventory to keep building as is until we figure out a solution, but we're teetering on the brink and we can't help but think:
1. is their motive to take advantage of us because they want a bigger piece of our business?
2. are they really struggling to make money from the business we give them?
3. Why do factories only favor the big guys and really expensive industries anymore?
4. Isn't losing higher volume production to overseas suppliers the reason for the decline of American Manufacturing in the first place?
We don't know if they're being honest or trying to take advantage of our growth, or both. We always want to believe people are fair and honest.
If their prices go up we can't run a profitable business and we will fail.
If one day they decide to no longer service our business, we will fail.
If another bigger customer books them on a big job and we can't produce, our business will fail.
We are still too small to fund our own exclusive factory alone.
This leaves us with three choices:
A_ Quit because we can't make money and be depressed for awhile before we go get jobs somewhere and daydream about what could have been
B_ Raise at least $500,000, find a space, file for permits, buy machines and open our own factory in the United States
C_ Move manufacturing to China where our costs would be lower and we could do cool things immediately like USB integration, iPhone cables and cool sound systems and accessories
Option A is out. We're not quitting.
But we can't be at the mercy of contracted factories who can kill us by raising prices or stopping manufacturing at any time, so we have to make big decisions.
So we want your help.
We have the unique opportunity to restart the American Manufacturing revolution. Together we can figure out how to keep this business an American Made startup story and grow to become a brand that represents American Industry and Ingenuity.
Are you willing to help? Great.
We want to know: If you were us, what would you do?
These are the toughest decisions we've ever made.
Please comment below how you think we should proceed. Or send an email to firstname.lastname@example.org and tell us your thoughts.
Share this with your friends and family. We need as many people as possible to get involved so we can put our future into our own hands.
Time is critical. We have to move fast, so please take 5 minutes today and tell us what you think.
Our future depends on making the best decisions we can in the next few weeks and your support will help keep us going.
Two roads diverged in a yellow wood,
And Sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
What about a Kickstarter campaign? I notice a number of new companies are successfully raising money this way. www.kickstarter.com
I buy your products because they are awesome. They look good and will last a lifetime. Made in America is a bonus. If your suppliers can’t get their scenario straight, they are killing U.S. jobs, not you. If you need to source in China to stay viable, so be it. You can still run an American company, while developing and selling amazing products. Source in China (or Mexico, etc.) until you can raise sufficient capital to do it all locally and bring the jobs back home. Don’t shutter your business out of pride. You guys have done an amazing job to this point…. a supply squeeze should not be the end all. Best of luck…
If you are already successful why not just stay where you are? Why grow into the thing you don’t want to be? Seems like a cool business as is…
I have been in design and manufacturing business for close to 20 years and have had to deal with same problem from project to project. As you must be well aware, there are three major aspects of manufacturing – labor costs, infrastructure, and productivity. Data in the industry indicate that we are getting very close to parity for wages as US wages have stalled and Chinese labor costs have increased seven fold. Also, typically the US has better productivity per manufacturing employee. Adding those to benefits of not having to ship overseas, travel to manage the factory etc. manufacturing in US makes sense.
What I think you are seeing is the scaling. The Chinese factories can add production lines overnight. However the US manufacturers are reluctant to increase production, which includes additional investment. My take is that they are passing on the costs of increased volume back on to you. In other words, they were supporting low volumes without much of new investment costs, but now need to spend top support you.
There are still companies that are happy to support projects like yours, but you have to look. Talk to BriteHub.com, they maybe able to get you multiple connections and manufacturing options to keep you in the US.
What about powder coating yourself and sourse the weaving? Coating is easy and in expensive. Looms can be very expensive. May take a while before you could do that in house.
Is there a way to tap into some small USA, maybe garage/basement manufacturers who could produce your product and maintain your quality?
Prices normally go down as volumes go up, so something seems a bit odd if your suppliers are trying to increase prices as your volumes are growing. Have you looked at suppliers in other areas (still in the USA, but maybe another major manufacturing hub)? Made in USA feels like its part of your brand and your story……..In China, you will likely end up with high transportation costs, longer lead times, and high MOQ’s. All of these factors can tie-up a lot of cash. If costs in the USA are too high, what about Mexico? You would lose the Made in USA factor, but Mexico is kind of a good “middle-ground”. You would be able to lower labor costs, but would have more options for MOQ’s and increased transportation costs would be minimal. You would also still have quick access to factories in Mexico vs. China. A couple hours on a plane to address a production issue is certainly a lot nicer than 24 hrs of flying to China when you just need to meet for a few hours.
It sounds like some of your suppliers have it backwards. As your volume goes up, you should see your costs come down. It seems to me that they do not want to share in your success. I hope that you can find a way to make this work in the USA.
There must be other suppliers who would welcome the business. Or if the only solution is to go vertical, then I hope you are able to fund that initiative.
I would encourage you to meet with Chris King and talk about what he’s done to make his business successful as an American manufacturer. There is a way, and you can do it.
What about our hermanos in Mexico? Is there an option D to stay made in North America? or made in the Americas?
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June 26, 2015
I stumbled across your company via a share on your products on the social media site ello.co.
I read your story with keen interest because it echoes what is happening here too in Australia and I’m sure most other 1st world countries.
I often wonder about what it would take to make a truly home-grown product and brand that fellow citizens could be proud to support. And more importantly still afford, as manufacturing locally seems to equal luxuriously expensive as more and more manufacturing is moving offshore into cheaper factories in Asia and developing countries, sometimes just so businesses can simply stay open for business.
I commend you on your humility and transparency with your struggles to stay true to your purpose and to stay in business. Your openness is something that is missing for me in business and brands these days, I’m sure for good reasons that I may never understand but that doesn’t stop me from looking for it and supporting it where I can.
I hope you guys find a way, as I am sure your story will inspire others to do the same.