A PRODUCT IN PRODUCTION
When Manufacturing Your Product, You Have Two Options to Consider--Get a Performance Guarantee or Set Up Your Own Manufacturing Business.
By James F. Riordan
PART TWO
Delivering on your promise is one of the most important aspects of doing business. If you're planning to use an outside manufacturer, you may want to build in a performance guarantee with punitive damages in the event the manufacturer is unable to produce the goods as promised. Believe me, failing to ship a product to a buyer who has contracted for it is one of the best ways to kill a product. Many stores plan for the arrival of your product well in advance by scheduling in-store promotions, advertising space in newspapers, television ads, etc., and they all want to stand in line to strangle you if you don't deliver as promised.
I have gone so far as to pay a bonding company the "bonding fee" (approximately 10 percent of the guaranteed amount) if the manufacturer would agree to have a performance bond placed on his agreement to ship the product by a certain date. It can be money well spent if there is a chance of selling lots of product in the future. That way, if the supplier fails to ship as agreed, the bonding company pays you the full amount of the bond, and then goes after the supplier for it.
If a supplier or manufacturer is unwilling to agree to any type of performance guarantees, and you have a lot riding on the shipment date, LOOK OUT. Most store buyers build in cancellation dates on their orders and if the goods don't arrive by that date, THEY CANCEL THE ORDERS, even if the orders are presently in transit to the store. If you're unable to sell the goods quickly to another buyer, you may end up in deep "Kimchee." You will have to "eat" all the freight costs IN BOTH DIRECTIONS, sit on the goods until they're sold, AND pay the supplier whose late shipment caused you the problem in the first place.
Once a large store buyer has canceled an order because you were late, you can pretty well kiss-off selling them that product, or any other products, while you're using the same last name or company name. The buyers "blacklist" you immediately because they have to listen to their boss lecture about how much the store lost on advertising and promotion expense, how upset the store's customers were at reading an advertisement and then coming in to buy the product and it wasn't there, and how the buyer should have checked your ability to ship the product on time before ordering it.
The moral here is--You better be sure that you can produce the product IN QUANTITY AND ON TIME!
If you're planning on building a facility, or hiring a large number of workers, you can get lots of valuable information about the overall resources available to you in a given geographical area by contacting the ECONOMIC DEVELOPMENT OFFICE or association for that city or county. Usually, the city or county Chamber of Commerce can give you the phone number and address of the economic development offices in their area. Once you reach them, ask for a COMMUNITY DATA SUMMARY. This informative report lists:
* The location and its distance from major cities, the population, with race or nationality breakdowns* The labor availability, total labor force and employment statistics
* Entry level wages for selected occupations
* Property taxes and assessments
* Major manufacturing facilities located in the area
* Military installations
* The number of hotel rooms, hospitals, nursing homes, doctors, and churches
* The median household income
* The median home sale price
* The form of city government, the form of county government, and the government's primary source of revenue
* Agricultural products of the area
* Who controls the planning, zoning, code inspection, and licensing
* The source and cost of electricity
* The source, availability and cost of water and natural gas
* The source, cost, and capacity of the sewer system
* Transportation services, including air, trucking, rail, bus, and taxi
* Major highway routes
* Climate, including hottest month, coldest month, average temperature, rainfall and snowfall
* Tax rates, including corporate, personal, sales, unemployment insurance, and workman's comp
* New business tax credits and incentives
* Major attractions, including parks, golf courses, and cultural attractions
* Schools, including colleges and universities
As you can see, if you're planning on setting up a manufacturing facility anywhere, it pays you to send for this report.
The above article was taken from James F. Riordan's classic book, HOW TO EVALUATE THE POTENTIAL FOR SUCCESS OF A NEW PRODUCT OR TECHNOLOGY. Riordan's highly-acclaimed, 36-point system is a valuable tool for inventors, product evaluators or anyone interested in the invention process. Each section is followed by a comprehensive questionnaire that can be used to evaluate your product.
The highly-recommended book can be ordered through the Dream Merchant, 2309 Torrance Blvd., Suite 104, Torrance, CA 90501. The phone number is (310) 328-1925.
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