At this point, you have a prototype and have completed market research. Now you face manufacturing. When manufacturing you have multiple options. The first big decision is what to make in-house and what to outsource. Each option has benefits and drawbacks.
When outsourcing, there is no capital asset cost. Others have setup factories to manufacture items like yours. They specialize in the type of work you need. This lowers the barrier to entry and eliminates the need to find skilled labor. This comes at an increased cost per item. Another cost is quality assurance. If parts are outsourced then you still require QA in your facility, to verify the parts are what you ordered. Outsourced parts can also cause unexpected delays, such as if there are problems with shipping or trade bans.
The largest factor between in-house and outsourced parts is cost. If your sales exceed a certain level then it’s more cost-effective in the long-term to build your own facility. It can take advantage of automation to reduce costs and increase reliability. Unfortunately there’s no clear cut-off point. Every part needs separate consideration and analysis.
The next big decision is manufacturing method. Every manufacturing method has restrictions. Even additive manufacturing (3D printers) have limits. This means the parts must be redesigned to fit the manufacturing method. Injection molding is the most common method of producing plastic parts. There are plenty of injection mold design guides. These even change from factory to factory, since factories have different capabilities. These capabilities affect the design. Employees in that factory also have an impact even with the same equipment, so keep this in mind. Experts can perform miracles with even simple tools. Expect an iterative process. Send out request for quotes and, if they can’t manufacture the item as specified, they will often work with you to adjust it.
Material choice is also a factor. The manufacturing method limits the types of materials you can use. For example, some polymers are made for injection molds while others can only be casted. Some metals machine better than others or can be cold formed. The decision is generally left up to price and/or user experience. It’s generally a good idea to use whatever’s cheapest, unless it impacts the customer experience. Manufacturing constantly improves so this constantly shifts and changes with new advancements.
Automation is a factor with in-house fabrication. Automation costs more to setup and often requires a continuous process of improvement.
Another often overlooked aspect of manufacturing is waste and defects. Some processes produce more waste than others. This waste requires handling and disposal, which adds to the cost. In addition, no manufacturing method is perfect. Parts are going to come off the line defective. These will also need disposal.
Many inventions include electronics. Electronics is a large field, as is the programming that usually goes into it. If you aren’t skilled in electronics then you may be surprised at some of the issues. Things like noise can be tricky for novices to deal with. If you are interested in inventing then electronics is a good field to learn. You’ll quickly learn that even integrated circuits are often badly designed and that will impact your PCB.
Electronics are usually the heart of an invention. Having them manufactured offsite means the third party has complete access to the board and components. That means they can copy it with great ease, slap a new brand name on it and sell it. This happens constantly in China. If what you invent becomes popular then copycats will spring up regardless. There are methods to make it more annoying to copy but in the end it will be copied. There is no best case, simply a measure between copy resistance and cost. Keep this in mind when you run your business.
The QA of electronics can be tricky. You can’t test one or two in a batch, which is normally done in manufacturing. Each has to be properly tested. There are methods to deal with this, such as test pads and pins. If you use third party PCB shops then ensure they include test pads and a test circuit. If you design it yourself then do the same. Place the test pads on one side of the board, such as the bottom, then design the test circuit around them. If you think ahead then your test circuit can also program any memory chips.
Programming memory chips brings up programming. Most inventions with electronics use microcontrollers and these require programs. Typically you want the smallest and fastest program possible because you can use cheaper and more energy efficient microcontrollers in your invention. Sometimes a more powerful processor is required, or something like an FPGA. If you need this level of computing then consider trade restrictions. Some high end components are under trade restrictions and that will affect international markets.
An often overlooked part of manufacturing is repair parts. Things always break down. If you have inexpensive repair parts then it makes consumers happy. As an alternative, you may want to provide STL files for 3D printers. This lets users create repair parts. It costs you nothing and makes the consumer happy. If you sell parts then you may as well sell kits too. Kits are attractive for some individuals. It’s a low cost way to increase your market.
In all of this, there are fixed costs and variable costs. This is how accountants think. Fixed costs are one time costs or facility level costs while variable costs are per unit costs. Accountants enjoy these terms but any inventor knows there’s no such thing as fixed costs. A large asset, such as a metal lathe or CNC machine, wears down over time. It has an expected lifetime and requires routine preventative maintenance and the occasional unexpected maintenance. Rather than considering this a fixed cost, calculate the wear per unit. Count for it when calculating the manufacturing costs. If a tool costs $20,000 (including maintenance) and will produce 200,000 parts then it costs $0.20 per part. Account for this in manufacturing costs. Note that an expert machinist can program the CNC machines so they have less wear.
If someone else manages the production then prepare to step in. Middle management has a habit of messing with the design to save pennies here and there. This can negatively affect the product. Brass parts suddenly become aluminum parts or electronic components are switched with cheaper ones. Some managers are good at their job and can optimize costs nicely. Other managers don’t realize that resistor they swapped has a different tolerance that could cause all sorts of support issues.
Once all parts are made and arrive they have to be assembled and tested. This also affects the design. Assembly can be expensive, so if you can change the design to make assembly easier or cheaper then you’re a step ahead. If the product can be assembled with automation then it’s even better.
Running a business will cost money. There are all sorts of fees that come in, such as licensing, sales and marketing, legal, accounting and more. Aim for a sale price of four to five times costs. This will get the business running and keep it running. If the product can’t sell for that then you need a different product. If a tool costs $40 to manufacture then sell it for $200. Different industries will have different margins so this will change. Some industries have a margin of 10% but for a new company you want a margin of at least 75%.
Expect to spend as much time on manufacturing as you did on inventing. Processes take time to work out. You’ll stumble and fail time and again before you work out the manufacturing kinks, especially for complex inventions. Packaging also takes a lot of work, especially for consumer products. Give packaging a lot of thought. Good packaging also requires manufacturing so include that in your manufacturing process.
If you’ve gone through all these steps and have verified that your product is viable then you are ready to sell the product. Or at least you are ready if you can afford everything. That’s where investment comes in.