Shenzhen with benefits?

During my recent trip to Taiwan, I was struck by how similar China’s most famous electronics manufacturing hub, Shenzhen, has become to Taipei in terms of scale and costs.

stats

And yet Taipei is much more developed than Shenzhen, both in terms of its technology, infrastructure, environment and culture. Here are some statistics, anecdotal evidence and photos from Taipei that stood out from my trip.

  • Second highest GDP per capita in Asia, at $48,400. (Shenzhen’s is $24,336. For context, New York City’s is $57,329.)
  • Downtown, office-based factory setting

  • First class municipal infrastructure, mild car traffic, orderly subway

  • Natural surroundings (photos taken less than 15 miles from city center).

  • Amazing, affordable food

For someone who has spent a lot of time in Mainland China, it was hard not to see Taipei as a sort of “Shenzhen with benefits” (clean air, democracy, safe food, etc.) option for electronics sourcing. However, Shenzhen tends to attract more of my clients than Taipei.

The discrepancy in recent economic growth hints at one reason my customers’ projects still end up in Shenzhen rather than Taipei, despite the similar manufacturing costs and lack of “benefits”. My customers are working on new products, new companies or both, which represent high potential, high risk, “marginal” business to a factory. There is more appetite for marginal business in the growing market of Shenzhen than the mature market of Taipei. When I pitch a new customer and/or product development project to a factory in Taipei I mainly hear an explanation of the costs (risks) involved and what can’t be done. When I have the same conversation with a Shenzhen-based manufacturer, the emphasis of the conversation is on what can be done.

The receptiveness of Shenzhen’s factories to new electronics projects makes it much more appealing and accessible to entrepreneurs and product developers than Taipei. However, it is always worth exploring Taiwanese options when sourcing electronics because if you can find a receptive partner there are definitely benefits.

Questions, referrals, coffee?

I’d love to hear from you,

Joe

2 Weeks in the World’s Factory

[Originally sent via email newsletter August 27, 2015]
A few captioned photos from my most recent trip to Hong Kong, Shenzhen, Dongguan, Qingdao and Xiamen.
Inline image 1
The other side of Alibaba
Inline image 1
The factory farm
Inline image 8
Cupcakes!
Inline image 10
Quality Control
Inline image 9
Wood, copper and grease
Inline image 2
Not all dust and concrete
Inline image 6
“We make shoes… and pico projectors.”
Inline image 7
Guess the product that comes from this mold!
Hope everyone is enjoying their summer. As always, please reach out to me with questions, ideas and referrals.
Sincerely,
Joe

Planning Christmas in July

When do you need to place your orders for the Holidays?

[Note: Originally published June 30, 2015]

Here’s a visual representation of the steps involved in manufacturing a product in China:

Now consider the time necessary to execute these steps. Here are some rules of thumb for production planning in China.

  • 1-2 weeks for sourcing suppliers
  • 4-6 weeks for sampling and approval
  • 4-6 weeks for tooling (if your product is molded)
  • 4-6 weeks for production, QC and testing
  • 4 weeks for ocean shipment
  • 1 week for air shipment

To visualize these timelines and quickly compare options, we use a dynamic planning tool called a Gantt Chart.

For example, imagine you have a design for an awesome new handbag.

You start looking for a factory July 1st. Here’s what your production horizon looks like:

This means time is tight but you can still deliver the bags to your customers by Christmas if you place your order 9/16 and boat ship the goods from China on 11/3.

If you ship your bags by air, you could have them in your warehouse by Black Friday, but would forfeit a portion of your profits.

However, for a wholesale-driven business, Holiday products need to arrive in a US warehouse by September or October so they can be delivered to retailers in time for the November sales spike. These companies should already be placing their Holiday orders and planning for Spring 2016.

In short, if you haven’t started planning your Holiday inventory yet, the clock is ticking. All things being equal, you should focus on simpler, smaller and lighter products the tighter your deadlines become. We’ve got the tools to get your products ready for sale this Holiday season.

Shoot joe@thayer-consulting.com an email if you’re looking for last minute options. We’ll be in China July 25-Aug. 15 to accelerate our clients’ sample revisions and approvals in person.

Thank you!

Top 3 Crowdfunding Tragedies

#1 OVERFUNDING: Radiate Athletics: The Future of Sports Apparel

  • radiate
  • CEO quote: “The whole thing has been a nightmare.”
  • Summary: Unexpected success, no mass production strategy
  • Stats: asked for $30k, raised $580k = 1833% overfunded
  • The whole story
  • Moral: Prepare for the best. Make sure you’ve gotten feedback on feasibility, MOQ and price from a *factory* (not just an engineering team or prototyping lab).

#2 TECHNOLOGY: The Pocket Drone – Your personal flying robot

  • pocketdrone
  • CEO quote: “The company’s leadership … took on over $100,000 in personal debt … in order to assemble and ship all the units that were ordered.”
  • Summary: Product not engineered for mass production
  • Stats: asked for $35k, raised $929k, overfunded 2555%
  • The whole story
  • Moral: Engineer for mass production. If you ever hope to make a profit from your product, you need to design something that is relatively straightforward to mass-produce. A working prototype is not necessarily proof of this.

#3 CHINA! Kreyos: The ONLY Smartwatch With Voice & Gesture Control

  • kreyos
  • CEO quote: “[My worst decision was] falling victim to … VIEWCOOPER CORP and its CEO Pro Yang who, ultimately perpetrated an intricate conspiracy against Kreyos.”
  • Summary: Eaten alive in China
  • Stats: asked for 100k, raised $1.5m = overfunded 1402%
  • The whole story (must read for anyone who’s been to China)
  • Moral: What can go wrong, will. Murphy’s Law is the only law you can count on. Always have a backup factory and references whenever possible.

 

We put our clients in direct contact with factories in China from the outset, double check timelines and budgets and answer all your questions about how manufacturing in China works.

Learn more on our website

Email joe@thayer-consulting.com if you know someone who’d like a free coffee or phone call to learn more.

Thank you!

Joe

 

Delivering crowdfunding’s rewards

[Note: repost from earlier this year]

I just returned from my second China visit of 2015. I spent three days at the largest sourcing fair in the world, the Canton Fair

The remainder of my two-week trip was made up of visiting factories and building my China-based vetting and QC team.

This trip didn’t leave me with a notable, “How’s China?” update. Instead, what’s been striking to me over the last three months is how much of Thayer’s growth has been fueled by crowdfunding (What is crowdfunding?) projects, in particular those launched on the web-platforms Kickstarter and Indiegogo.

This is no coincidence as the following crowdfunding trends read like a description of Thayer’s ideal client.

  • New design and technology products are coming to life as a result of crowdfunding. Crowdfunding sites raised $16.2 billion in 2014, 167% more than 2013 (reference). In Q2 of 2014, design and technology products ranked in the top 5 in amount raised on crowdfunding platforms, together accounting for more than $50m of investment (reference).
  • Greater New York City is home to far more successful crowdfunding projects than any other area. 14% of worldwide crowdfunding pledges support New York City and Brooklyn campaigns.  (reference)
  • Chinese factories are producing the biggest campaigns’ products. I wasn’t able to find sources to support this theory, but my experience is that China is the #1 destination for the fulfillment of big, product-based crowdfunding projects (>1000 backers/pieces).
  • Mass production delays are the rule, rather than the exception for the most successful campaigns. According to a 2013 Wharton Business School study, 75% of crowdfunded projects were late and, more tellingly, the degree of lateness varied proportionally with the amount of funds raised.

The co-founder of a Kickstarter campaign chose to work with Thayer (instead of larger competitors) because he wanted to“take a more freelance approach to manufacturing.” My hope is that the personal, flexible approach offered by Thayer will continue to thrive together with this new movement in product design and delivery.

You can see more about how we work with crowdfunding campaigns on our website. Please message me with any relevant news and/or people who are working in the crowdfunding space. Thank you!

How’s the Chinese economy?

[note: re-post from Feb. 2015, but conclusions still relevant.]

I get asked this question a lot when I come back from China. I think the best answers are found in The Economist’s economic indicators, but I can offer some specialist insight into the manufacturing economy from my trip last month.

The biggest difference that I saw in factory operations between this year and years previous is that the Chinese New Year vacation is starting earlier. In the hey-day of Chinese manufacturing, factories would be humming late into the night in the weeks leading up to the New Year to rush out last minute orders. This year, many factories I am working with shipped their last orders two weeks before the official start of the holiday.

chinaeconomicsIn light of decreasing growth rates in China, the obvious explanation for the early holiday would be slowing orders (see above graph based on World Bank forecasts). However, based on my conversations with factory owners, traders and agents in China, volume is steady. I think that the reason for the early holiday is wrapped up in three trends:

  1. decreasing profitability
  2. increasing power of labor
  3. complacency/incumbency

One, profit margins for manufacturers in China have decreased significantly in recent years. The lower the margins, the less incentive for owners to fill marginal orders, like the ones that come before a holiday.

Two, the interests of factory laborers in China are now a force to be reckoned with. The scarcity of workers, the support of the government and the labor compliance requirements of overseas customers mean that when the workers say they can only get plane tickets home (yes, you read that right) two weeks before the holiday, the owners can do little to change their mind.

Three, there is little fear of customers taking their orders elsewhere. Domestically, all factory owners are facing the same headwinds and their interest in low-margin, last minute orders is tepid at best. Abroad, there is no competition.China is still the only game in town for accessible, economical mass production.

All this adds up to an early vacation for the workshop of the world in 2015. I figure they deserve it.

DISAGREE? QUESTIONS? REFERRALS?

My point about China’s domination of “accessible, economical mass production” is highly debatable and I’m happy to elaborate, just shoot me an email.

And, of course, please let me know if you or anyone you know could use some insight into sourcing or producing goods in China.

Made in USA vs. Made in China

Wondering whether to make some or all of your products and parts overseas?

Here’s a flowchart that I use with prospective clients.

Here are a couple articles that cut to the heart of what makes Made in USA a tough sell.

“Everyone else who makes these has packed up and left the U.S.,” he says. “And we’re getting hit over eight rivets.”http://online.wsj.com/articles/chinese-nets-and-bolts-ensnare-basketball-hoops-in-litigation-1412099954

New Balance finds a happy medium.
http://online.wsj.com/articles/new-balance-shoe-materials-arent-all-u-s-made-1412109111

Please check out our website and drop joe@thayer-consulting.com an email with any questions.

 

When is Chinese New Year and what does it mean for my business?

[NOTE: This was originally published on Linkedin January 2015. Please don’t confuse these 2015 dates with the upcoming 2016 Chinese New Year. -JB]

Chinese New Year (CNY) is February 19th, 2015 and it means a huge headache for everyone who does business there, Chinese included.

The actual break from work varies widely by industry and geography, but CNY has an outsized impact on factory production due to the concentration of migrant labor in factories. See the graphic below.

The best way to minimize the pain is to plan ahead with your Chinese partners.

  • Get a sense of the severity of their production bottleneck leading up to CNY
  • Estimate dates for when they plan to return to work and ramp up production

Then, add an extra week of contingency following the holiday to account for the inevitable post-CNY excuses for delays:

  • Workers jumping to other factories for more money
  • Workers returning late from their hometowns
  • Workers deciding the farming life wasn’t so bad after all and not returning
  • And so on…

The best advice you can get is to start planning now if you haven’t already. Understand your Chinese partners’ challenges as best you can (they are very real), frontload your orders and be prepared for things to turn out worse than you planned.

I’ll be traveling to China on January 23, so if you have any questions or could use any in-person follow-up, please check out thayer-consulting.com and don’t hesitate to contact me through LinkedIn or joe@thayer-consulting.com

If you’re ever looking for a good resource on other Chinese holiday dates and public holidays, I use this regularly.

http://www.travelchinaguide.com/essential/public-holiday.htm