Made in USA vs. Outsourcing
First of all, I apologize for being so long since my last update. You see, I still have day job and instead of getting time off to run this project as I had hoped, I instead got busier. The plus side, though, is that part of my work involves mastering the way of the QuickBooks, which will be useful for this project down the line.
Second, we got on Digital Journal! http://digitaljournal.com/article/360240 . Awesomesauce!
And now for the figurative meat of the update, I would like to share with you an article I have written that describes some of my business philosophy (a sample from the blog on the company website, www.playcrafttoys.com, which I intend to continue adding to post-Kickstarter):
Made in USA vs. Outsourcing
The outsourcing of American manufacturing overseas has always bothered me. So it is a unique experience to realize that I may soon be in a position where there is something I can actually do about it. Of course, that also means I will have to come to terms with the hard economic realities of running a profitable business. I haven't yet been able to analyze real numbers for a true cost/benefit analysis, but I have had the opportunity to learn enough about the subject on a conceptual level to reflect meaningfully on my values. Here's why I plan on maintaining production in the U.S., but also reserve the right to change this policy later on if I have to:
First, the advantages of outsourcing. The main one, of course, is labor cost, as U.S. wages are many times over that of some other countries. There are also some more surprising benefits. For one, there are some options for moldmaking, especially for complex parts that need to be sold at a low cost such as Bit-Blocks, that just don't seem to exist in the U.S. For another, international manufacturers can hold a fair number of products at the factory until they are ready to ship in bulk quantities to distribution points (local warehouses), whereas it seems that the norm for U.S. manufacturers is that they cannot store products at the factory, so buyers like myself need to figure out our own warehousing, and also work with smaller quantities.
The advantages of local production are more varied. One is economical. If I am primarily selling in the U.S., then obviously I save a lot on shipping by making in the U.S. When working on a small volume, these savings may actually outweigh the difference in labor costs, but they become much smaller as volume gets larger. A second is legal. Since I am working with an invention, for which I have a U.S. patent pending, controlling and enforcing distribution locally is much easier. A third relates to marketing. Being able to put a "Made in the USA" sticker on the products one is selling definitely adds some value. On the other hand, I am not sure how far people's political beliefs actually translate to being willing to pay more for the same product because of where it was made.
The short term economics weigh in favor of local manufacturing, so it is pretty much a no-brainer that I will make the initial run to fulfill the rewards for my Kickstarter campaign in the U.S. On the other hand, the advantages of making the injection mold internationally weigh so heavily that this isn't much of a choice either. The grey area is where I will manufacture long-term. All things considered, albeit in a rather intuitive fashion, from a purely economic standpoint I will probably be marginally better off manufacturing internationally when I start to work with larger volumes. Now when I say "marginally better off", that makes it sound like a mere toss-up, but keep in mind that when competition is tough and profit margins are slim, even a few dollars in savings per sale can make the difference between a running a solid business and working for free.
There is, however, one more set of considerations I haven't addressed yet. My own personal values. Remember that the primary benefit to outsourcing is savings on labor costs. Well, the money I spend on labor isn't just going into a black hole, it is rewarding the people who work for me and make my business possible. And the fact is, I want to live in a world where it is normal for people to make a livable wage. Also, decreasing shipping by making products close to where they are sold saves more than just money, it also decreases the fuel I am responsible for burning and putting into the atmosphere. These are not values I can put on a balance sheet, but as long as I am not beholden to stockholders, I am sure as heck allowing them to factor into my decision making.
That said, while I care about my values, I am not a zealot. If it becomes clear to me that I am faced with the choice of running a profitable company that manufactures overseas vs. declaring bankruptcy or just never getting off the ground, then of course I am going with the former since a nonfunctioning entity doesn't benefit anyone. If, on the other hand, I can run a financially sound business either way and the difference is simply a bit of extra money for myself, then I plan to go against the trends, stay true to my values, and keep the jobs in the U.S. If the saying is true that everyone has their price, then I do not come cheap.
Thanks for reading! If you have any questions, comments, or suggestions about any thing regarding Bit-Blocks or this campaign, please feel free to comment, either publicly or by sending me a message to firstname.lastname@example.org.