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MANUFACTURING: A WHOLE NEW WORLD

Sure, You Can License Your Product, but What if You Want to Manufacture it Yourself and Reap More of the Rewards? Ken Tarlow Has a Few Ideas.

By Ken Tarlow

While licensing a product is a popular choice among inventors, the rewards of manufacturing it yourself can often be greater. If you choose manufacturing, I recommend that you find an O.E. M. (Original Equipment Manufacturer) who will make the product for you. This way you can concentrate on marketing and sales and not have the overhead and worry of a factory and workers.

If your product has a low labor content, you can find an injection molder who will set up an assembly line in their factory to put the product together and box it.

If your product has a medium to high labor content, you may have to consider Mexico or Asia because we have a hard time competing against people who make ten dollars a day. The disadvantage with foreign labor is the communication problem and the time delay in shipping by boat. Also, consumers feel better about products made in America.

The three main sources for locating manufacturers are:

1. Business to Business Yellow Pages--The business-to-business Yellow pages of major cities (Manhattan, Chicago, Los Angeles, etc.) are an excellent starting point. There's an index in the back for category selection. For example, If you need a special glass bottle, you can look under "bottle," "glass," or "packaging." When you speak to a vendor, you should introduce yourself, using a company name. Say "we" and indicate potential quantity or order ("We expect to produce a pilot run of 10,000 pieces).

For technical information, ask for a sales engineer or applications engineer. These people are paid to help you. They don't mind answering questions if they feel there is the chance of an order being placed.

2. General Reference Guides (Thomas Register, Electronic Engineers Master Catalog, etc.)--The Thomas Register is available in most public libraries and is a multi-volume reference guide to all sorts of mechanical parts, electromechanical parts, chemicals, materials, tools, fasteners, adhesives, etc. Reading the register is an education in itself. There are listings by both subject and company. The Electronic Engineers Master Catalog is a similar publication for electronic parts.

3. Industry Trade Publications--Trade journals are a fantastic source of information. Every industry has its own trade journal and most have an annual issue which is a directory to the industry. Those issues are a gold mine.

Finding what you need to know is like a Sherlock Holmes mystery. If one source doesn't have the answer, be sure to ask them if they know who can help you.

Once you have your product idea in presentation form, you will want to get some manufacturing estimates. At the start of product development, during the initial research step, these estimates are the "ballpark" type to see if the product can be made in a price range that allows the product to be salable to the public ($49.95 for a fly swatter just won't work!).

Further on in the process, your costs must be more and more accurate so that whether you make it yourself or sell the idea to a marketer or manufacturer, you will have a realistic idea of costs involved. There are two main types of costs:

1. Tooling--This consists of all the setup work (molds, dies, printing, I.C. chip programming, etc).

2. Unit cost--the actual cost of the parts in your product plus the labor to put it together.

Remember that the manufactured cost is usually about 20 to 25 percent of the retail price. For example, if the manufactured cost is $5, the retail price should be between $20 and $25.

It's also difficult to be in business with one product. You must quickly think about how to expand into a product line. It's always best to stay in the same product category. That way, you can capitalize on the relationships you build with distributors and retailers.

Manufacturing a product--even a simple one--is a full-time, demanding experience. But if you do it right, it can be very rewarding both financially and on a personal level.

Ken Tarlow is president of Tarlow Design, a full-service product development company that helps independent inventors design, prototype, patent and license consumer product ideas. He has developed more than 300 consumer products worth over one billion dollars in retail sales. Tarlow's office is in San Rafael, CA. He may be reached at (415) 457-6428.

The above article was excerpted from Tarlow's MIND TO MONEY, a cassette tape/workbook package that can help you develop a new product from the idea stage to the marketplace. MIND TO MONEY may be ordered from the Dream Merchant at $59.95 plus $4.95 CA sales tax and$5 shipping and handling ($69.90 total). Send orders to the Dream Merchant, 2309 Torrance Blvd., Suite 104, Torrance, CA 90501.