Navigating Suppliers as a Startup

Andy Batchelor is a co-founder of Prophets and Genius, creators of inspiration-themed small batch ties and bow ties that are handmade in New York City. Support their next project on Kickstarter.

If you are reading this, chances are you have recently started your company and are entering your first foray into production. If that’s the case, congratulations! You’ve likely already learned at least one important lesson: you are a little fish in a very big pond. To successfully navigate your first production run or prototyping, it’s helpful to understand more about your new manufacturing partners and apply a few simple principles to cement a fruitful relationship.

Knowing the Numbers

Let’s begin with a simplified look at manufacturers’ cost structures and incentives. Certainly these won’t apply to all industries, but generally, I have found the following parameters to hold true:

Manufacturers carry a high ratio of fixed costs to variable costs. Fixed costs are those expenses that do not vary greatly based on volume of production. Think of a factory-sized loom for a fabric manufacturer requiring a substantial up-front investment. The purchase of the loom is not dependent upon whether the company produces one roll of fabric or 10,000 rolls of fabric in a year. Variable costs, on the other hand, are expenses that do vary with the volume of production. For our fabric manufacturer, these might include raw materials like thread and dye. Any manufacturer that operates with a high fixed cost-to-variable cost ratio—which is most—will pursue higher production volume to recoup its fixed costs. That’s why many factories offer volume discounts: it’s the nature of manufacturing.

Reaching Out to Factories

Recognizing that your small-batch requests do not align with most factories’ cost structure, here are a few tips to navigate your initial outreach to manufacturers.

1. Understand your advantages and limitations as a client

While many suppliers will initially focus on the size of your order, you still bring a number of advantages as a client. As a smaller firm with a smaller order size, you bring more flexibility to the table than your larger counterparts can offer. For example, you may be more willing to try a new production technique or to try a manufacturer’s newest line of materials. If you don’t have as strict production schedule, this is another area in which you can be more flexible. Similarly, a smaller order may require less production time than a larger order, enabling the manufacturer to slot your run in between its larger orders, limiting the factory’s downtime. During your initial conversations, be sure to emphasize any such advantageous qualities that might apply.

2. Set expectations up front

Be upfront about your expectations. Maker’s Row Academy offers several accessible (and free!) courses addressing how to work with manufacturers. And Jennifer Philbrook, co-founder of product and brand development consulting firm Stitch Method, in a recent blog post provided practical advice regarding your initial meetings with suppliers. Use these resources to be prepared to set expectations in areas like scheduling, specifications, sample reviews, and packaging.

3. Seek advice

Many manufacturers have been serving their industries for decades, and consequently have contributed to troubleshooting scenarios that you may not have considered. Welcome their advice. Most times, they’ll have valuable input, creative insights, and money- or time-saving guidance for you. Don’t be shy about asking for an opinion, or voicing your appreciation for their expertise.

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