Question for Mass Production Experts

[Bow-TechAggie]

I do custom furniture work as a second job. Build one piece at time kind of deal. Anyway we got an email from a company wanting a quote for 2500 of one of our smaller ticket items. Definitely out of my area of expertise. So I sat down and calculated how much it cost me in materials only to make one unit ($7.00). This company also wanted an engraved logo in two places. We got a quote from another company at $5.00/unit to engrave. So my cost to make one unit is $12.00. We submitted a bid for $15.00/unit. Mind you I normally sell these items for $45/each.

This company responded back and politely said "thanks for your bid but we are going with someone more competitive. So we asked the contact what were the other bids and she replied $6.00 to $10.00 per unit and that included shipping to canada!!! How the heck are they making any money?

[LWD]

Could be that the quality of materials, workmanship, and engraving is much lower than yours?

I know the feeling. I'm in a totally different line of work, but what I see people working for is insane. How they make any money and why they take the work at the price they do makes no sense to me.

Reminds me of the old joke in the trucking business: we lose money on every shipment but make it up in volume! Maybe the other folks don't really understand their costs?

LWD

[Bily Lovec]

out sourced to china...

[stevieray54]

Its all about margins, did you try and find out if you could get a break on shipping,what about materials what options less quality of stock,buying in larger volume

[Uncle Saggy]

Yup, bet the guy selling at $10 is a middle man and the product is direct shipping from china

[Bow-TechAggie]

Its all about margins, did you try and find out if you could get a break on shipping,what about materials what options less quality of stock,buying in larger volume

My quote didn't even include shipping!!!! I'm sure I could have knocked my material cost down with inferior stock. And maybe these other companies have in house engraving, but I just can't fathom how they are turning a profit when they are paying for crating and shipping as well.

The contact did say that the company they are going with does NOT have as nice a product as I make, but it's within their clients budget. Basically I guess they were just hoping to get "something for nothing" as the saying goes. I'm going to look at it as they got nothing for something!

Excuse me, I got to get back to my one piece at a time.......

[westtexducks]

Lots of ways they can be getting it cheaper. Where and how much are you sourcing your wood? You buying bulk or as needed do you buy a single truckload in a year or 100 a year? I imagine they are buying so much from their supplier they get it for next to nothing. Same with the engraving you got a quote for 2500 engravings what would it have been if it were 20000? Economies of scale does wonders for how much it costs to kick out a good. Whether that is accomplished via China or here in the US who knows. And those are just to name a few ways they maybe making it cheaper.

[miket]

I dont have an answer for you but if you are selling for $45 I wouldnt even bother with the high volume/low quality market. China will beat you every time. Play to your strengths. IMHO

[Electrican]

I dont have an answer for you but if you are selling for $45 I wouldnt even bother with the high volume/low quality market. China will beat you every time. Play to your strengths. IMHO

This is my thought as well. I would rather sell one @$45EA then 2,500 @$15EA. If you can maintain that kind of margin I see no need to search for high volume orders for cheaper unit price. Much easier to manage low volume orders with higher margins IMO. Assuming the customer was honest on your competions unit price, let the competion "buy" that order.

[Daddypants]

Do you use a lot of jigs and fixtures to speed up production? For onesy, twosy stuff I rarely bother with fixturing, but if I am mass producing, it pays to do so.

[Texastaxi]

I'm assuming this is a wood product?

When I first started building pedestals, the only place I could buy oak (locally) was Lowes and Home Depot ... they're pretty high, so I had to set my prices so I could make money. A short while into it, I found a hardwoods warehouse, in Houston, that delivered to Victoria once a week. I was able to cut my material costs by 60%.

I imagine a big outfit is getting much better pricing based on volume. They problably have the machinery to cut these pieces MUCH faster than you could do it by hand, too.

Not knowing what the piece actually is, it's hard to say, but I don't think I'd turn on the lights in my shop, much less crank up a saw for $3 a piece. How much TIME would you have in each one ... just YOUR labor?