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Industry 4.0: The Benefits of Smart Manufacturing

Manufacturers are a restless bunch. We’re constantly looking for better ways to make things, ways that are faster and more efficient. Ways to make better products with less waste and fewer defects.

Enter Industry 4.0, the new wave of manufacturing. Industry 4.0 combines the digital and the physical, using huge amounts of historic and real-time data to allow better and more accurate production. Worldwide, 4.0 factories can provide full traceability of the entire manufacturing process. As you can imagine, this has the potential to minimize risk and eliminate waste. 

Industry 4.0 is evolving as fast as digital technology allows it to. Let’s look at how it came to be, how it’s used in manufacturing and what you should know about it.

History of Industry 4.0

The First Industrial Revolution, which began around 1780, harnessed water and steam power to mechanize production. About 1870, the Second Industrial Revolution introduced assembly lines and mass production, with the eventual help of electrical energy. In the early 1950s, computers ushered in the Third Industrial Revolution with digital technology. 

Often called the Fourth Industrial Revolution, Industry 4.0 was not the brainchild of an inventor or a big corporation. Instead, it began with a 2011 project of the German government to build on the computerization of the Third Industrial Revolution in order to fully digitize and optimize manufacturing. It did this with smart systems and smart machines fueled by data. 

Factories are still coming on board with Industry 4.0, gradually investing in resources and technology such as: 

  • Robotics and automation – besides the famous Amazon warehouse robot, robotics also include collaborative robots. “Cobots” are designed to work alongside their human operators, who “teach” them what to do and in what order. Cobots then optimize the steps to improve outcomes. Automation is constantly improving as well, in every sector from the auto industry and plastics, to food and consumer goods.
  • Additive manufacturing (AM) and 3D printing – depending on whose industry numbers you look at, the 3D printing market is expected to hit $35 billion by 2025, give or take a few billion.
  • The Internet of Things – the IoT is the potentially giant network of computers, machines and systems that “talk” to each other through exchange of data over the Internet. One example of the IoT at work is the smart home, with appliances, HVAC systems and security systems all connected to each other and controlled remotely from your device.  (Or your three-year-old’s voice commands.)

The Power of the Smart Factory

The power of Industry 4.0 lies in its ability to gather, process and analyze huge amounts of data. Data is how we make our decisions, how we mitigate risk. Analyzed and processed correctly, more data means more efficient factories with less waste and better production. 

We mentioned smart systems and smart machines. In manufacturing, linking these together with the help of the Internet creates an Industrial Internet of Things. This IIoT informs the production process and can actually improve it in real time. It does this as it acts on insights from data gathered at every point in the manufacturing process. 

A factory that is truly Industry 4.0, end to end, will allow continuous product development and process improvement that self-corrects and self-optimizes. This is the smart factory, a factory that can teach itself—and teach humans—how to be more productive and safer. 

The US Smart Manufacturing Leadership Coalition—a national alliance of manufacturing organizations, research universities and government labs—has made some impressive estimates on the economic benefits of smart manufacturing:

  • 25% reduction in factory safety incidents
  • 25% improvement in energy efficiency
  • 40% reduction in water use
  • 10% improvement in overall operating efficiency 
  • 10% reduced time to market

How Industry 4.0 Benefits Your Product

As noted, Industry 4.0 is all about the data and data analytics, which allow full traceability of the entire manufacturing process. In the IIoT and on the factory floor, data is collected all along the chain of production. 

For instance, in a manufacturing process, if there’s 20 steps in that process, you would have full traceability of every step. There would be a barcode placed on that component. As it’s going through the different steps in the process, sensors would allow you to actually go back and see how long it stayed in Process #12 through #15. You can see that it stopped in Process #5, and there was a potential issue in Process #7. It had to go through inspection at #7, but it still passed.

It’s extremely helpful to have that full traceability between each step, between each iteration. You can see that two years ago, a certain part was produced and it failed for surface delamination, or warping, or something else. You can start to see from the historic data that the warping was not an anomaly. Instead, it’s a problem that needs to be addressed. If it isn’t, you could be looking at 5 parts per million defect rate because of this one issue. You can see all this because of the traceability of the product, start to finish.

The Future for Industry 4.0

The future for Industry 4.0 is wide open. Besides continual optimization of factory operations and processes, you can expect to see:

  • Optimized logistics and supply chains – if something like weather is disrupting the supply chain, connected systems can step in and make adjustments 
  • Autonomous equipment – for example, self-driving cranes and trucks in addition to automated factory machinery
  • Improvements in automated assembly and additive manufacturing – technology might allow more 3D printed metal, perhaps even the ability to combine 3D printed metal and plastic

Industry 4.0 may even have the potential to “backshore” manufacturing, reversing the trend toward overseas manufacturing. The higher productivity of Industry 4.0 could encourage manufacturers to relocate operations back closer to the customer. Which could in turn save on shipping costs and help reduce the carbon footprint. 

As you look ahead and think about increasing the volume of products you’re building, you may wonder whether factories in Europe or China are the answer. Wherever you go, make sure you’re looking at contract manufacturers that are embracing Industry 4.0. This will allow you to benefit from things like an automation process that eliminates having your product touched with human hands and damaged. You might also get a more accurate sales quote and shorter turnaround times from an Industry 4.0 manufacturer. 

Industry 4.0 is the wave of the future. Since the future is already here, you should take advantage of it.

 

 

Manufacturing Mastered

Alotech provides contract manufacturing services efficiently and ethically to small business. In addition to remanufacturing, prototyping, and product development services, we make creative investments in companies. We strive for success so you can too: 919-774-1297

For Inventors, News

Manufacturing in China? Several Considerations and One Essential

Like many entrepreneurs, you may start out wanting to manufacture your product in the US. But due to cost and other factors, that may not be practical. 

China is a good option for its low production costs and manufacturing expertise. It offers several advantages: 

  • a large workforce
  • factories clustered in geographic areas that specialize in different industries
  • a good track record for manufacturing all kinds of products

If you decide to manufacture in China, there are several things you need to keep in mind—and one essential that will prevent a lot of headaches when working with factories halfway around the world.

Four Considerations for Manufacturing Overseas

Time and money, relationships and communication—these are the four things you’ll need to think about when you decide to outsource your product overseas.

Timelines. It may take 12 weeks to manufacture your product in China. Then the product spends 4 to 6 weeks on a boat and maybe 2 weeks at a port. When you finally take delivery, you’ll need to unbox your product and possibly reintegrate it with other pieces. You have to stay on top of these timelines to fulfill your orders on time.

Cost and pricing. Taking your product to a Chinese manufacturer means negotiating costs to come in at a good price point for your product and market. But after you sign the agreement is not the time to go on autopilot. As I explain below, you need to stay alert for issues along the line that affect pricing.

Relationships. When you move to a new town, you have to find a new doctor, a new dentist, a new accountant. It takes time to find people you trust and establish those relationships. This also applies to finding and working with a factory on the other side of the world to build and deliver your product. 

Communication. If you don’t clearly communicate your design and specs, the manufacturer will be forced to guess. This introduces mistakes and affects product quality. It’s not just a matter of a language barrier, either. The more complicated your product is to produce, the more accurately you have to set out your expectations—with any manufacturer.

Your Number One Essential: A Good Liaison

OK, you’ve decided to make the leap! Your number one priority now is to find the best manufacturing liaison you possibly can. 

A liaison is a third party, usually a person within a company that specializes in production management. Your liaison is responsible for quality control and consistency from order to order, serving as part project manager, part advocate, and part engineer-on-the-ground. 

Look for a liaison with the most experience in the market or sector you’re trying to manufacture in. A good liaison will:

  • Help you find the right factory for the right job. Your product may have different components made of different types of materials (glass, plastic, metal). One manufacturer usually can’t do it all, and different factories are needed for different parts. 
  • Vet unknown factories and check their business license to see if they’re actually a manufacturer, and check their references: What companies have they worked with or produced for?
  • Track your orders and hand-walk your product through the different factories you’re outsourcing to, to deliver a finished product.

Why Pay a Middleman?

A lot of times inventors and business get caught up in saving money any way they can to bring a new product to market. So they think, “Why shouldn’t I do everything myself and pocket that money? I’d be ahead of the game, right?” 

Not necessarily. 

Hiring the right liaison will mean fewer issues with quality, better oversight and more security. They will protect your designs from being misappropriated, see them through production and in the end deliver a finished product back to you.

A liaison also stays on top of current issues like changing shipping conditions and tariffs. In 2018–2019, the trade dispute between the US and China meant tariffs of 10–25% on everything from clothing to agricultural machinery. If you’re not paying attention to things like this, your profitability can go south pretty fast.

A liaison will understand the manufacturing process to the extent they can offer engineering support. You stand a better chance of getting what you order and meeting market demand with a liaison who: 

  • Can communicate your expectations on allowable tolerances and critical areas of your product. 
  • Follows up regularly. Your first run may come out fine, but every subsequent order needs to be checked. I’ve heard hundreds of times that a manufacturer didn’t even ask—they just made “tweaks” to the design. When that happens, there’s a risk of recalls and expensive do-overs.
  • Helps you continually improve your product. Most of the time, your product is going to have to change with the market and you’ll need to be evolving it. 

Engineering and Quality Control 

When Alotech serves as the manufacturing liaison for our clients we pay special attention to cost outs—the total cost of a product as designed. Many times, we find that products are overengineered. We then help clients make adjustments to bring about cost savings. This in turn helps bring down ultimate pricing for the product, yet still meet the customer’s needs and specifications.

Our most valuable lesson from our years of manufacturing in China has been in the area of quality control. Early on, we realized that it was critical to do incoming inspection on all orders—100%. So we developed our own inspection criteria to make sure parts met spec.

We found that some manufacturers weren’t inspecting parts at all. One of our clients had a 50% scrap rate. We let this particular manufacturer know about the issue and discovered they didn’t even realize they were having a problem. We ended up developing our own vision inspection system and sending it over to China. They still inspect parts with it today. 

When you’re just starting out, being able draw on the trusted relationships and experience of a liaison will give you a lot of support. But in the end, it’s all about communication. How you communicate your needs to Chinese manufacturers affects your product, the process and your ultimate experience.

 

 

Manufacturing Mastered

Alotech provides contract manufacturing services efficiently and ethically to small business. In addition to remanufacturing, prototyping, and product development services, we make creative investments in companies. We strive for success so you can too: 919-774-1297

News

3D Printing The Way To the Future

3d printing

3D printing is one of the latest and most innovative technological developments in the manufacturing industry today. It is taking the world by storm and even replacing traditional manufacturing processes in some areas. Historically, manufacturing starts with a pre-formed mold to make an object. Alternatively, it can start with a solid object whose shape is then altered through removal. For example, ancient gun barrels and bullets were by produced by pouring molten metal into a mold shaped like the barrel or bullet. Even today, many metal tools and polymer products are made via the molding process. Think about Mount Rushmore, the national monument in Keystone South Dakota. It was created by artfully chipping away at mountainside granite rock to create the likenesses of four historic American presidents.

3D print manufacturing is different. This method is already being used in a wide variety of applications, but many people have little to no knowledge of what it is or how it is being used. If you’ve seen the movie Star Wars Episode 2: Attack of the Clones, you might remember the quote by metal android C3PO: “Machines making machines… How perverse!”

How Does It Work?

In general, 3D printing begins with a virtual 3D image of a model. The image is then used to create an exact replica of the model. This is performed by printing (constructing) one thin layer at a time—from bottom to top—using the 3D image as a guide. Using this process, there is no need for either a mold or for the removal of excess material. In fact, if done perfectly, there is no need for the additional treatments such as polishing, sanding, etc., that are usually part of the traditional manufacturing process.

Now this, of course, is an oversimplification of 3D printing.

Let’s Try An example

An example might be the best way to explain the process. Let’s say you have a blue clay cup you want to produce. The first step is that you need a 3D image of the cup that can be downloaded into a computer. In practice, images would be made of the cup by deconstructing the cup into small layers, from top to bottom.

[Think of it as slicing a loaf of bread in very thin slivers. This slicing allows the computer to ultimately take a virtual 3D image of the entire loaf of bread. Instead of having an image of only the surface, you now can see all the holes and contours associated with the inside of the loaf. This is your 3D image.]

Back to the cup. Using this 3D image, each of the images (slices) are downloaded into a computer associated with a print machine. The print machine can be best described as a pen, waiting to draw the image. The main computer would then feed each cross-section image of the cup to the printer. A blue clay solution would be fed into the printer (much like the ink into a computer printer). A human operator would press the “print” button… and voila! The printer would start making a copy of the blue cup, thin layer by thin layer, based upon the 3D images.

Before long, you have an identical cup, made perfectly by a printer. Of course, the process is a little more complicated than that… In reality you would have to cool the clay after each layer so as not to end up with just a big blob. But this is what 3D printing is doing.

How Did We Get Here?

Charles Hull is credited with creating 3D printing in 1984. Although, some might credit Hideo Kodama of Nagoya Municipal Industrial Research Institute. Kodama came up with the initial idea of creating solid print modes, based upon layers using polymers, and published his work in 1981. Even still, Charles Hull is considered the grandfather and creator of modern-day 3D printing. And since 1984, 3D printing has grown into a multibillion-dollar industry.

In 2018, according to the Wohlers Report, in 2018 the 3D print industry exceeded $7.3 billion. In fact, from 2016–17 the industry saw an 80% surge in 3D printers sold… And this market is only expected to continue to grow.

One of the biggest benefits of 3D printing is the ability to quickly produce prototypes of an early design product at minimum expense. Another advantage is the ability to manufacture certain items domestically instead of relying on international companies. For example, replacement parts could be created in a local warehouse as opposed to being shipped from overseas. Another benefit is the ability to manufacture items with a minimum of materials and virtually zero waste. The 3D printer prints exactly what it is told—nothing more, nothing less.

Endless Applications

3D printing is already being used in a wide variety of industries including aerospace, airlines, automotive industries and jewelry. Sneaker companies are using the technology to produce early test prototypes. And the food industry is using it to create innovative food products and even candies in shapes that could never be achieved by hand.

A most interesting application of 3D printing is in medical applications. The FDA has already approved several types of products manufactured using 3D printing, including orthopedic implants, surgical instruments and external prosthetics. And researchers are even exploring creating organs and body parts such as eyes, ears, hearts and skin using 3D technology.

Lastly, 3D printing is used in the construction of houses and buildings. Yes, foundations of houses are being “printed” using cement. Builders believe that this may save both time and resources and reduce waste.

The future is upon us… And computers, machines and 3D printing are literally “laying the foundation” for great improvements.

For Inventors, News

Manufacturing Methods: Which Is Right for You?

manufacturing methods

manufacturing methods

Most people never really think about the machines and man hours that go into manufacturing the products that seem to magically appear at the local supermarket or big box store. But the challenge every manufacturer faces is how to reach the end goal of providing high quality consumer goods… while keeping costs at a reasonable level. Manufacturing methods are not one-size-fits-all. So how do you choose the one that is best for you?

In deciding to utilize a manufacturing method that best suits the manufacturer’s goals and price point, several calculations must be made. This includes (but is not limited to):

  • consumer demand
  • cost to the manufacturer
  • costs of raw materials
  • transportation costs
  • taxes
  • availability of resources

Manufacturers must constantly evaluate their methods in an effort to reduce costs, lead times and errors in manufacturing. And there is a wide variety of manufacturing methods that may be employed, depending on the consumer market. These are four generally accepted systems that companies employ to manufacture products:

  1. One-off production refers to making a single specialty item. This is the most expensive, because it usually refers to making something custom made according to the customer’s desires (e.g., a custom-built house, or a mall kiosk customized t-shirt featuring a photo of your family or pet).
  2. Batch production refers to making a specific number of identical products. Specialty drink or food products are usually run in batches.
  3. Mass production is generally focused on large quantities of products, using machines and repetition. Car companies generally employ this technique, perhaps running a facility for three days straight and then taking two days off for maintenance.
  4. Continuous production refers to a 24-hour (nonstop) manufacturing process. Did you know that giant potato chip companies often fail to meet consumer demand, despite running their facilities indefinitely? Come on guys… More chips, please!  

Each of the above general processes have unique costs and benefits for the manufacturer. And companies are constantly pushing the envelope to develop more streamlined manufacturing methods to increase quality, reduce costs and reduce industrial waste—while leaving less of a carbon footprint. But historically, there are several matters all manufacturers must deal with:

  • When to order supplies
  • When to make repairs or maintenance
  • When to transition to a new production line
  • How long inventory should remain on the shelves
  • How fast a consumer can receive a product
  • The order and layout of their facilities
  • Safety of their workforce

Choosing the most efficient manufacturing method for your business can mean the difference between success and failure… Headaches and peace… Profitability and bankruptcy. But manufacturers have developed some additional techniques to help streamline the overall process.

Kanben Scheduling System

Kanben was developed by Taiichi Ohno, an engineer at Toyota, to help streamline a just-in-time (JIT) manufacturing process. Basically, it includes some sort of alert system (human or computer) which orders new supplies when the company is running low. Nowadays, many manufacturers (and businesses alike) use a Kanben system for ordering supplies.

Just-In-Time Manufacturing

JIT is exactly what it sounds like: purchasing enough supplies to manufacture the right amount of goods before having to order additional supplies. Kanban and JIT basically go hand-in-hand. In theory, Kanben and JIT will allow manufacturers to reduce inventory, which should reduce a variety of costs.

Just-In-Sequence Manufacturing

Just-in-sequence is an extreme case of JIT, where supplies arrive at the factory the exact moment they are needed. However, using this method is risky because of the potential for downtime should the materials arrive late.

Quick Response Manufacturing

This involves a sole focus on getting products to the customer as soon as possible. However, speed comes at a cost due to the potential of mistakes and errors. Think of the classic scene from I Love Lucy, when Lucy and Ethel are unable to keep up with the conveyor belt while wrapping chocolate candies (so they stuff them in their clothes, hats… and mouths.) Mistakes will be made, but for all manufacturers speed vs. quality is a never-ending balancing act.

Cellular Manufacturing

The design and layout of a manufacturing facility is another area which, if done properly, can save both time and money. Cellular manufacturing describes a process where machines work in ordered sequence from start to finish. The automobile industry probably does this the best. After all, Henry Ford reduced the manufacturing time of automobiles from 12 hours to less than three by reorganizing how the workers and machines worked together.

Maintenance, Repairs and Changeover

Another struggle manufacturers face is knowing when to conduct maintenance and repairs. The experts suggest TPM, or total productive maintenance. This means, at the end of the day, all the manufacturing equipment is cleaned and serviced at one time rather than doing it haphazardly—or waiting until something breaks down.  

Single minute exchange of die refers to how fast a manufacturer can change over to manufacture a different product. Ideally, this is under 10 minutes, or a “single-digit” amount of time. The downtime from the changeover costs resources and revenue. Think about changing a tire… Now think about a pit crew changing a tire.

There are endless ways to manufacture products, and manufacturers should think both critically and strategically about what process works best for them.

(I must note that some of the newest manufacturing techniques employ 3D printing, which I will address in another post.)

 

For Inventors, News

5 Tips for Selling to a Buyer

When you’re breaking into big box stores, you’re worried about getting your foot into the door and getting a meeting with a buyer. But what happens once you’ve written your proposal, generated some press about your product, caught the attention of a buyer and set up a meeting? What are the next steps?

New vendors are a major risk for buyers, so you’ll be fighting an inherent (though, not intentional) bias. A buyer’s career banks on how profitable their vendors make the store; so, they naturally worry about whether or not you can deliver the goods and deliver them on time. Sometimes, it’s easier for a buyer to keep buying from a vendor they have bought from the past. If they do choose your product, it’s because they believe that your product will sell better than what they’re already purchasing.

To convince a buyer that your product is the better option, there’s five things you should consider.

Don’t Forget They See A Lot of Products

In order to see everything they need to see in a day, the buyer may come off as brusque or like they’re rushing you. That’s fine, just remember they’re seeing a lot of products from a lot of people in one day. Continue your pitch as confidently as possible, don’t let it rattle you.

Some buyers may give you a time limit to present, so make sure you practice for a time limit. Organize your thoughts and prioritize your points. The most important points should come first, in case you go over your time limit. Focus on what makes your product unique, what you’ve learned in your market research and the reasons why the retailer should go with your product.

Offer More Than One Product (if Possible)

When a buyer takes on a new vendor, they have quite a bit of work to do. They have to fill out a whole bunch of paperwork and, some retailers, have very strict rules about dealing with single-product vendors. Even if you have a great product that the buyer thinks would sell, they may be less likely to say yes just because you’re only able to provide them with one option. Suppliers who can offer a whole line of great products are more likely to hear “yes”.

Prove Your Ship Time

While it can be a while before you get your first purchase order, retailers want you to be able to provide a fast turnaround time. It may take them a year to submit their first purchase order, but they’ll expect you to finish and ship their order in a matter of days or weeks.

Prove you have a history of shipping on time with a tight turnaround to really get the buyer to listen.

Show How Your Product Fits in the Current Line

Most retailers have a niche that they fill and want to purchase products that will also fill that niche. In your pitch, prove how your product fits within their line. This is a great time to use your market research.

Find the Right Price

Retailers want to make, on average between a 40 to 65 percent profit margin while still keeping the price at something that will keep their customer base happy. If possible, find what profit margin your prospective retailer aims for and make sure you can supply your product at the price they need to be profitable while being profitable yourself.

Big-box stores might not be right for you, so consider other outlets to sell your product.

At Alotech, we partner with you to find creative ways to help you navigate the manufacturing world. Because we work with inventors with a range of products and needs, we have the resources and knowledge to help you be successful. Contact us today by calling 919-842-3599, or visit our contact page and fill out the form.

News

Navigating the Manufacturing of Your New Product

Industry Today - Navigating the manufacturing of your new product, by Tommy Kirk

Navigating the Manufacturing of Your New Product was originally published on Industry Today’s website.

When you have a cutting-edge invention, you need to understand market research, prototyping and building a business case when considering manufacturing your product. Many inventors fail to remain objective. And, they don’t ask for help through the process. To take your bias out the of the equation, Tommy Kirk, COO of Alotech, Inc. and COO of CTI Systems, advises inventors to seek a third-party firm to conduct relevant market research. He also advises inventors to seek out experts in the market all along the path to manufacturing. Read more as Tommy shares his insights inventors can learn from when manufacturing new products and learn more about what Tommy considers key to bringing your invention to life and navigating the manufacturing process.

Excerpt from Tommy’s Industry Today article:

An early mistake made by many inventors is failing to remain objective. This is because we can’t help being biased—armed with a patent or patent application, it’s easy to believe “my idea is the best one.” But the hard fact, according to Richard Maulsby, director of the Office of Public Affairs for the U.S. Patent & Trademark Office, is there are around 1.5 million patents in effect and in force in this country. Of those, maybe about 3,000 are commercially viable.

That’s a <1% chance that your patent will bring commercial success.

READ MORE

For Inventors, News

Deciding to License, Manufacture or Both

You’ve come up with an idea that’s great, will solve a problem for a lot of people and– you believe– will make you rich. Now, it’s time to bring that idea to life; but, how do you do it? You’ve got a few options to consider. First, you can start your own company, manufacture yourself and sell the product. Your other option is to find a business that already has the ability to manufacture and distribute and license your idea to them. Your final option is to do both.

Why You Should Manufacture

The financial reward that comes with manufacturing is much greater than when you license. You can certainly stand to make more by manufacturing the product yourself, rather than licensing the idea to someone else. You’ll also have greater control over the product, how it’s produced, where it’s produced, packaging details and more.

Why You Shouldn’t Manufacture

Starting your own business can sound great– you don’t have to take orders from anyone but yourself, you’re in charge of what goes on and you can make the final decision. While it sounds fun, starting your own business can be difficult, time-consuming and take a very large investment that you might not be prepared to make yet. Most start-ups, especially those headed by someone new to owning a company, statistically will fail; the chances for success are incredibly low.

Why You Should License

For many people, licensing is a very attractive prospect that offers the best balance of characteristics. People who license can see a desirable ROI, or return on investment, in more ways than just monetary– you can see it in time and other resources, as well.

Getting into a retail store, the ultimate dream for many inventors and entrepreneurs, can be a difficult feat to accomplish. Larger retailers, like Walmart or Target, don’t often buy from individuals. Walmart’s supplier checklist is three pages long with no guarantee for acceptance. Target has a similar process in their own portal. For some, they spend so much time on the application process just to be denied.

Even if you are accepted, managing the logistics and technicalities of selling in one of these big box stores isn’t for the faint of heart. It can be difficult to meet the corporations demand. However, if you license with a company already selling in a retail store, it might be easier for your product to make it in front of the mass consumer.

Why You Shouldn’t License

While licensing may seem attractive, it’s important to consider the downsides as well. Some may not be able to license their product; there can be a lot of luck involved in a product getting the green light to license. Some perseverance is necessary to find the right licensing partner.

For those who like to be in control, licensing a product means you lose most, sometimes all, of the control of your invention. Your licensing partner is in charge, and if you don’t agree with their decisions, they don’t have to take your opinion into account. You don’t get to decide where your product is produced, how it’s packaged, where it’s distributed, the pricing, or the marketing.

Other concerns when licensing is your partner becoming your competitor. Sometimes, a licensee may start producing a similar product for a new market and end up being an unexpected competitor.

While licensing can save time and money, the deal can be complicated. To navigate licensing deals, you should invest in a good licensing attorney who knows the industry to make sure you don’t fall into any traps before you start contacting licensing partners.

When to Consider Doing Both

Some inventors will both manufacture and license their product, by switching strategies at appropriate points. You can manufacture a limited run of your product, generate some sales and prove the marketability of your product before approaching someone to license it. This is known as developing market traction and it’s a great strategy to have when negotiating the value with a potential licensing partner.

Weighing the Factors

Ultimately, your decision to license, manufacture or both depends on a few factors:

  • Your ability to tolerate risk- licensing is less risky than manufacturing, though the reward is not as high. How much of your personal funds are you willing to risk in your invention?
  • Your ability to generate capital from outside investors- chances are, the money you’re investing won’t be enough to completely fund your product. It will take outside investors, as well.
  • Your ability to set up a company- setting up a company is difficult and it takes a lot of commitment to be successful. Sometimes, even the most committed of entrepreneurs still fail.
  • Your personal goals- for some, licensing is right because they want their product out in the world but aren’t necessarily willing to start their own business. For others, working for themselves has been a lifelong goal they can now achieve.

To determine the best option for you, it’s best to take into account who you are, what your skills are and what you’re looking to get out of your product.

At Alotech, we partner with you to find creative ways to help you navigate the manufacturing world. Because we work with inventors with a range of products and needs, we have the resources and knowledge to help you be successful. Contact us today by calling 919-842-3599, or visit our contact page and fill out the form.

For Inventors, News

ODM Manufacturing: Do You Know What it Is?

An ODM, or original design manufacturer, is a company that designs and manufactures a product that is eventually re-branded and sold by a different company. This model is frequently used in international trade. A local ODM will produce goods for a foreign company; this choice is usually made in response to some kind of advantage, such as low labor-inputs, transport links or proximity to target markets. ODMs are especially useful when local ownership laws could possibly prohibit direct ownership of assets by the foreign entity, allowing a local firm to produce for a brand company.

ODMs make it possible for a company to get a product to completion without having to design the hardware from scratch and invest in a production facility. The ODM supplies the manufacturing capabilities for their branded partner.

ODM falls under the outsourcing category and have grown in size in recent years. Many ODMs are now sufficient in size to handle production for multiple clients, providing a large portion of the overall production for their clients.

The defining factor of an ODM is that they own and/or designs in-house the products bought by the buying partner, in contrast to a contract manufacturer, like Alotech.

Benefits of Working with an ODM

The biggest benefit of going with an ODM is that you don’t have to spend any time designing the product. For an inventor, this isn’t an appealing benefit. Part of the fun is tinkering and designing, changing specifications as you learn more from your target market or figure out what works and doesn’t.

But not having to design the product leaves you a lot more time to spend on core operations and bank on the skills of a skilled manufacturing company.

There may also be the benefit of a lower price compared to designing and refining yourself and producing the product. Since you don’t have to spend time and resources designing your product, that money can be fed into the branding and marketing of the product.

Disadvantages of Working with an ODM

While there are some great benefits to working with an ODM, there are sine disadvantages. You will not be receiving a unique product like if you had invented and designed it yourself. This means you will be selling a product with competing products that meet the exact same specifications. You will have to differentiate your product from your competitors through your branding, which means any money you may have saved by working with an ODM could be used in the marketing to make sure your product is a success.

It can also only be truly effective for certain types of products. Unique goods that work on a specialized system can’t be made at an ODM in a cost effective manner.

Industries that Rely on ODM Manufacturing

Many different industries rely on the skills of an ODM manufacturer, especially the food industry. Most supermarkets will have their own range of basic items, like Walmart’s Great Value brand, that may share the same supplier as another supermarket’s brand. While they may have different suppliers, chances are incredibly likely they’re simply re-branding the product in their own name.

Other general industries include:

  • Electronics
  • Clothing
  • Medications

You may not always benefit from working with an ODM, there may be other options that make sense for you and your invention.

At Alotech, we partner with you to find creative ways to help you navigate the manufacturing world. Because we work with inventors with a range of products and needs, we have the resources and knowledge to help you be successful. Contact us today by calling 919-842-3599, or visit our contact page and fill out the form.

For Inventors, News

Understanding the Web of OEM Relationships

In a traditional sense, the original equipment manufacturer, or OEM, is a broad term used to describe the web of relationships that go into manufacturing. It’s a company whose goods are used as components in the products of another company, which then sells the finished item to users. The company purchasing from the OEM is called the value-added reseller (VAR) because they augment their product with the goods from the OEM to add value to the original item. Both the VAR and OEM have to work closely together.

The most common example everyone is familiar with is cars. In the automotive industry, the OEM is the original producer of a vehicle’s components. When a part breaks or fails, for example the radiator or the alternator, the owner has two options: OEM or aftermarket. An OEM part will be identical to the original part and made by the vehicle’s VAR’s preferred OEM. As original suppliers, many OEM’s have their products sold by branded car dealerships and available through the automaker directly. OEM products will be endorsed and recommended by the auto VAR with one downside being that they are often significantly more expensive than aftermarket parts made by non-endorsed manufacturers.

In simpler terms, parts such as the exhaust systems or brakes are made by a variety of manufacturers (the OEM), sold to the automaker (the VAR), then assembled into a car (the product). In this definition, OEM refers to the company that sells a component to a VAR.

With the rise of computer and software product, OEM has a new meaning.  In this case, OEM refers to the company that buys products before incorporating or rebranding them into a new product under their own name. For example, Dell receives their Windows software from Microsoft, integrates that software into its computers, then sells a complete, working computer to the public. Following the traditional definition, Windows is the OEM and Dell is the VAR. However, user guides are more than likely going to reference customers to Dell as the OEM.

For the computer industry, the relationship is slightly different. In this definition, the VAR acquires a product from the OEM.

Over time, as companies like Dell, Hewlett Packard and IBM, started to accept branded parts from outside their own organizations, the relationship between an OEM and a VAR needed to shift. So, OEM came to refer to companies that rebrand or openly use other manufacturers products for resale. Most of this had to do with who was responsible for issuing warranties, customer support and other services consumers may need.

This change also reflected a shift in the manufacturing dynamics. For example, Lenovo uses AMD chips and Intel for their computer processors in all their computers. Since both AMD and Intel are brand names (rather than no-name chips), this adds value to Lenovo’s computers. Lenovo advertises that they use Intel and AMD in their marketing materials, which suggest both processors manufacturers and Lenovo are equal partners in the design as opposed to Lenovo telling Intel and AMD what to do.

All of this makes Lenovo the OEM in the minds of the suppliers and the public’s mind– which makes sense, the hardware and software package is viewed as a “Lenovo computer”.

No matter how the definition shifts, one thing remains the same: OEMs and VARs work closely together. OEMs will make the sub-assembly parts, sell them to the VAR, and then the VAR is responsible for building the finished product. Although some OEMs do complete things for their VARs, they usually won’t have a direct role in determining the finished product. Typically, no one integrated part from an OEM is recognized as playing an overly significant part in the finished product, it all goes under the VARs name.

OEMs will usually focus on business-to-business (B2B) sales, while VARs market more to the public or other end users. But, now, an large number of OEMs are selling their parts and services directly to the public, making them a VAR. This is especially common in the tech industry where people who are building their own computers can but graphics cards directly from Nvidia, processors from Intel or other retailers who stock those parts. People who work on their own cars now have access to the manufacturer who makes the OEM parts rather than going through the automaker.

The relationship between OEMs and VARs can be confusing– especially when it’s broken down by industry.

At Alotech, we partner with you to find creative ways to help you navigate the manufacturing world. Because we work with inventors with a range of products and needs, we have the resources and knowledge to help you be successful. Contact us today by calling 919-842-3599, or visit our contact page and fill out the form.

News

Tommy Kirk, COO of Alotech, Inc. has been chosen to speak at mfgCON 2016

COO of Alotech, Inc., Gold sponsor and exhibitor at the second annual mfgCON conference, will speak on “Funding Growth with Inventory and Contract Manufacturing.”

GREENSBORO, N.C. – Tommy Kirk, COO of Alotech, Inc. has been chosen to speak at this year’s mfgCON conference on October 18, 2016 at 1:15 p.m. The topic will be “Funding Growth with Inventory and Contract Manufacturing.” As successful organizations grow product sales, inevitably they come to a point where additional capital is needed to sustain their growth rate. Traditionally, that means giving up equity in the business or personally guaranteeing sizable loans. Kirk will explain how companies are now leveraging their existing inventory with contract manufacturing to sustain their growth curve without giving up equity in the company or tying up personal finances.

Beginning his career as a machinist, Kirk learned early on how to solve problems and cultivate his trade quickly. Soon he set a personal goal to own his own business. Soon after, he met his mentor and eventual business partner, Bill Murphy. Bill hired him as a General Manager of Alotech, Inc. and taught him the ins and outs of business ownership. Adopting Bill’s business philosophies to develop people not just products, Tommy and Bill have grown the company from 5 full time people generating $500k in sales to 50 employees with over $8.5m in sales.

The second annual mfgCON conference for manufacturing innovation kicks off in Greensboro, NC on October 18-19, 2016 at the Four Seasons. Provided by the North Carolina Manufacturing Extension Partnership (NCMEP), mfgCON provides a valuable forum to share practical advice and tips with world –class companies, and small emerging companies who exhibit and meet for two days of presentations and breakout sessions. The mfgCON second annual conference offers an opportunity for manufacturing professionals to weigh in on technology, sustainability, workforce development, market building, innovation and continuous improvement in the industry to capture immediate results.

Alotech, Inc. is a Gold sponsor of mfgCON and will be exhibiting at the event. For more information about Alotech, Inc. call 919-774-1297 or visit www.alotechinc.com.

About Alotech, Inc.

Alotech, Inc. is a contract manufacturer located in Goldston, NC specializing in engineering and design, fabricating and machining. An ISO Compliant company, Alotech, Inc. delivers globally serving US inventors, entrepreneurs and product marketers. Alotech, Inc. specializes in taking a product to market from business model development, prototyping, design and engineering to product development, manufacturing, fulfillment and logistics. Alotech, Inc. offers creative investments for inventory and product development to help customers achieve efficient independence and rapid scalability. They partner closely with clients to understand their products, challenges and goals to then propose more efficient ideas and engineering design. For more information about Alotech, Inc, call 919-774-1297 or visit www.alotechinc.com.