Many ecommerce businesses don’t have a good understanding of how the manufacturing or development of their products works. Understanding this is crucial in order to improve products and establish effective branding. 

 

If you already have a general idea of how mass production for ecommerce works, you may want to skip ahead to our next module which reviews how businesses can improve product quality.

Guide Summary:

  • General components of products 
  • Typical production process
  • Why production for common dropshipping products is a bit different

General Components of Products

The following are the general components of most ecommerce products. However, you should keep in mind that the actual components will depend on the specific product you make:

Raw Materials (non electronic)

    • Fabrics, plastics, metals, and anything else that are  inputs that produce a product
      • Simple products (eg a t-shirt) may only have one raw material input
      • More complicated products (eg electronics) will have many
      • Can vary a lot (for example, not all plastic is the same, both in terms of cost and quality)
    • Can also be relatively straightforward to change, depending on how it is produced
      • For example, if you want to upgrade a plastic and it can use the same tool, then it might just mean having the factory source and use a different material without changing the production line
        • You should note that this is also why it can be easy to downgrade quality without being obvious (which is why quality control is important)
  • Raw Materials (electronics inputs)
    • Raw materials for electronic inputs are different from components. For example, these raw materials will include silicon, metals for wiring that go into the production of electronic components, or chipsets
    • Usually, these raw materials are made in a separate type of factory producing electronics components, chipsets etc
      • It’s rare that you have to be too concerned about raw materials management, as they are usually the inputs into components production, For example, a factory may source ready made electronics components, or with slight customizations for specific needs. In this case, you aren’t involved in the sourcing of raw materials for the electronic components at all.
      • However, lead time could still be a concern here, as factories still need to source the right components
    • Custom developing chipsets  is generally considered a massive and complex step in the value chain itself, and probably not something you want to get into
  • Electronic components
    • Includes chipsets, batteries, speakers, etc. Electronic components are usually ready-made or slightly customized
    • Typically already produced by component manufacturers, and factories adapt what is available to fit into their products
      • Ex: the same type of lithium Ion batteries can go into a wide variety of products
    • Some components are rather modular, which makes it easy to change or upgrade components. For example, it can be pretty easy to upgrade a battery as long as the housing fits
      • The flipside is that it can also be easy for factories to downgrade quality without it being obvious through quality control
  • Tooling
    • Kind of a general term – basically, all of the manufacturing components and machines to produce parts of the product for assembly
    • Examples:
      • Injection molds for creating plastic parts
      • Patterns for cutting clothing
      • Dies for stamping patterns / shapes
      • Laser machines for engraving
Tooling
    • While not “product” components directly, all of the components that make up the tooling of a product are quite literally what makes the product.
    • Tends to be the most significant fixed expense in a typical production process after the materials costs
      • Expect anywhere between $10k to $100k in tooling costs for most consumer products
      • Every single tool is an additional cost. A more complex product with many parts will be a LOT more expensive
      • Customizing an existing product tends to be cheaper, as long as you are selective in what components need changing and only investing in those tools
    • Quality here is extremely important. A shoddy or worn out tool is just not fixable without an upgrade or replacement
      • Ex: if you see plastic products where the seams don’t fit perfectly, it’s because the tools aren’t well designed, don’t have the right tolerance, or are worn out
  • Firmware
    • Basically – software for the electronics hardware components
    • Even very simple electronics have a firmware element
      • Ex: something has to tell your electronic toothbrush to start working when a button is pressed, or even what when to turn on specific lights
    • Also drives the interface to software or apps
      • Ex: Firmware is responsible for bluetooth connection for speakers or being able to control a device from your phone app
    • Typically outsourced to a “solutions” provider by the factory
      • Doesn’t mean it can’t be changed or upgraded (it usually can be), but you need to know how to manage the process
  • Software / APP
    • If the product has an app, then this piece usually is completely separate from physical production
    • Look out for Chinese produced products – existing apps are likely not “localized”
      • Even if it is in English, grammar might be awkward, and the UI might not be “western” style
    • App development can be crazy expensive to develop, and may require ongoing maintenance 
    • However, just like everything else, it IS possible to create a wholly separate app, especially if it’s built around the foundation of something that already exists
      • You can either get the factory to get the app developer partner to cooperate, or go straight to a developer and build it from scratch
  • Packaging / Manuals
    • Packaging and manuals come in all sorts of shapes and sizes depending on the product (and even the same product can have very different options)
    • Quality aside, this component is critical in driving a positive impression for your customers, so be thoughtful about what packaging and manuals you use
    • It’s Important to think about what the packaging is going to be used for – something that is optimized for retail display may NOT be a good option for international shipping
      • E.g. for international shipping you want:
        • Hard packaging, or something that holds its shape so it doesn’t require much extra protection
        • As light and compact as possible to minimize shipping costs

Typical Production Process

Remember, this is a general process. The actual production process will largely depend on your specific product, especially for the earlier stages of development. 

  • Product / industrial design
    • Every product starts with a design, usually starting with concept sketches, going into actual product design specs and documents
      • E.g. some sketches and 3D renderings from a product Dayu Yang, Ecommops CEO, developed: Codi:
    • More complicated products, especially electronics, will require an industrial design step as well
      • This ensures that the actual design is achievable in production (for example, making sure it has enough spacing in the housing to fit components)
  • Materials / Components selection
    • Next, you select the appropriate raw materials and components for your product.
    • It’s very important to do a cost-benefit analysis here of what level of quality is needed for each component – focus on investing in quality in what customers might care about the most
      • Ex: For Codi, they have some of the highest quality (i.e. more expensive) ABS plastic to make it more durable, but they don’t have the loudest speakers, because if it’s too loud it might actually be harmful for kids
  • Prototyping 
    • Critical to develop a prototype for the designs to make sure everything seems to work and to be able to get feedback from customers (if possible)
    • Note: one prototype can be a LOT more expensive than the final product at mass production, since everything has to be made at small scale
      • Ex: These first prototypes cost around $900 each:
    • They used these prototypes to user test with families to make sure that the kids actually enjoyed playing with it (fortunately, they loved it)
      • Examining prototypes will allow you to make any final tweaks before going into full production
        • Ex: Their original button layout was hard for kids to press, so they changed the positioning prior to full production
  • Firmware development
    • Firmware ideally should be developed by a “solutions” company that has intimate knowledge of the chipset being used. The code base can be very specific to the functionality of the chipset, and may require specific expertise to develop efficiently
      • Ex: Codi’s chipset is based on a foundation that is used by other smart home devices, so they went straight to a solutions company that develops firmware for other devices that utilize that chipset
    • You need to provide the solutions company with a document of specifications. How to document these specifications is out of the scope of this course, though the best way to do it is work backwards – get current specs of how the chipset works, and all of the potential functionality, and then customize based on your specific needs
  • Software development
    • Typically, you want the software / app development (if applicable) to be done concurrently with the firmware, or at least have some planned overlap
      • Remember that the firmware acts as an interface with the chipset, the software needs to account for firmware interactions
    • This can also be done by the same solutions company, though it’s also fine to have developers who specialize in app development if they have expertise that better fits your needs, as long as they can understand how the firmware can interface
      • Ex: With Codi, they utilized Western developers to make sure that our UI / UX was solid
  • Materials / components sourcing and purchase
    • After final specs and components are set, your factory should start the sourcing and purchase process 
      • Depending on the schedule, not everything needs to be purchased all at  once, and you should work with your factory to figure out what the lead times are for each component. Then, you can stagger the purchase plan based on the target schedule
        • Ex: Codi’s chipsets always take the longest to produce, while the plastics and packaging are fine waiting until full production
  • Tooling
    • The set of tools needed for production are developed, sometimes by the factories themselves, sometimes outsourced to specialty services
    • This step can be one of the most critical, as the set of tools and materials is how your product is actually manufactured
    • You want your factory to conduct test runs and create samples using the tools to make sure that they are high quality and have good tolerance levels. If not, then the factory should improve the tools or remake the tools entirely
  • First production run(s)
    • Guess what is typically the fastest stage in the process? The actual production run. Now that everything is ready to go, the process tends to move quickly.
      • This is why the typical “dropshipping” product might just takes days to produce, because all of the time consuming work of developing the product has been done already
      • Ex: 5000 Codi gets produced in about ~2 days in an assembly line like this, with different stations playing different roles to assemble the final product:
  • QC (Quality control)
    • One of the most critical steps in the process, and can be the difference maker between a great quality vs a poor quality product (even if using the same design, tooling, and materials)
    • There is ALWAYS a % of defects during any production run, but good and bad QC determines if those defects make it to your customer
      • Some factories will skimp on this step, because every defect they have to re-do is an additional cost for them. However, every defect that gets to your customers is a cost for you
    • You should make sure the factory has a good QC plan and follow it strictly
      • Ex: First run of Codi had about ~3% of the chipsets fail inspection, and those chipsets were returned and replaced during the production process
    • Note: some potential issues may not be obvious until they arrive at the customer, which is why having a first production run is so important. Issues found in the initial production run can be addressed by production improvements or additional QC steps.
  • Scaling up mass production
    • Before you scale up mass production, you want to make sure that the first batch is as issue free as possible, or make fast improvements to the tools and/or QC process
    • Scaling up from 5000 units to 50k units is no small feat, and it typically means dedicating multiple assembly lines, needing more teams of workers, and having longer lead times
      • This is why, when dropshipping products blow up, there can be longer lead times and production constraints to plan around

How Production for Ecommerce Products Is Different Than Selling Existing Products

  • Generally, production for common ecommerce products is MUCH simpler and quicker, because the most time consuming elements of the process have already been done
    • Most ecommerce products already have product development complete, tools ready, and are basically already in the mass production phase
    • Particularly for hot selling products when production runs are constantly going on, lead times can be as short as a few days.
    • Many products in this stage don’t even have much of an MOQ, because suppliers are making constant production runs
  • However, this is also why certain improvements and customizations will require MOQs and/or longer lead times (and sometimes the MOQs and lead times can be significant)
    • Depending on what the requirement is, it will require going back to a certain production step – which is why we typically suggest improvements to be done in stages and prioritized by where it matters most 
  • Keep in mind, even mass production will reach capacity limits if demand suddenly outpaces factory capacity – there is a physical limit to people and space
    • This is why when you’re scaling up hard, and especially during busy seasons like Q4, you really need your supplier to manage the factory to make sure they have the production capacity and that they prioritize that capacity for your business
      • If you can’t do this confidently, do NOT scale too hard or you WILL max out on capacity and cause significant delays

EcommOps and General Production

EcommOps can help businesses manage factories, and consult on how to develop novel prototypes for ecommerce. Contact us to learn more about how we can partner with you.