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Guest: Chris Mitchell of MFG.com.
Host: Kevin Mako, founder of Product Startup and the leading expert in hardware startup consulting. A hardware entrepreneur since 1999, Kevin has advised more than 1,500 founders and built and scaled MAKO Invent through its acquisition by TriMech in 2024.
Getting Better Information From Manufacturers
Chris Mitchell discusses MFG.com survey findings on proposed U.S. trade policy and what they could mean for manufacturers. He also explains the practical dos and don’ts of submitting designs for quotes, helping product teams compare suppliers on better information.
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Filip Valica: Hey, everyone. Welcome to the product startup podcast, a podcast that helps bring your product idea to life by chatting with successful inventors, product designers, and other industry professionals. This podcast is run by
Filip Valica: Mako Design + Invent and hosted by Filip Valica. Our goal here is to get to the bottom of what makes a product successful, from initial idea to putting your product on the shelf. We're taking you step by step to build a functional product and scale your product business. Now onto the show. The
Filip Valica: Product Startup, Episode 43, Chris Mitchell from MFG.com talks about soliciting quotes for manufacturers and the results of the MFG.com survey entitled How Will President Trump's Proposed Trade Policies affect U.S. manufacturing?
Filip Valica: Hi, everyone, and welcome to the Product Startup Podcast, where we talk about turning ideas into successful products step by step. I'm Filip Valica, and thanks for listening today.
Filip Valica: In the last episode, Stacy Marking talked about all natural insecticides. So make sure to check out episode 42 if you want to learn more about how she used grant-sponsored research to refine her
Filip Valica: products and how she took a DIY approach to testing, designing, making, bottling, and labeling them. We've got a lot to talk about today, so let's get started. Hi, Chris, thanks for joining me on the show today. Hey, I'm glad to be here. Thanks for having me on. Hey, so I'm really excited to have you
Filip Valica: on, and I haven't really talked about this on the show at all, but I used mfg.com probably for the first time 10 years ago, and I was working for a small business owner.
Filip Valica: here in Houston, relatively small shop, about 30 employees that manufactures hydraulically driven generators for the emergency vehicle market. And we were creating some prototypes for a new
Filip Valica: product, and the existing manufacturers that we have here in Houston just couldn't fit us in for that one piece, and it was going to be really expensive. So I went on mfg.com, created a profile,
Filip Valica: submitted my model, and got a quote back from someone here in Austin that's pretty close by. and we had the part, I would say, within a week for an insanely competitive price.
Filip Valica: I mean, it was just amazing to get a one-off 12-inch piece of aircraft-grade aluminum for relatively short amount of time and low cost.
Chris Mitchell: So I think that was a huge win for the company. Yeah, that's excellent. That's a great success story. And we see a lot of those kind of things happen every day. You know, we have people who come in and use a marketplace for projects of all sizes, you know,
Chris Mitchell: from things like that, a one-off prototype to full production runs, many, many thousands of pieces. We've even got a few projects in the pipeline right now with people asking for over a million pieces of whatever item it is. They're sourcing.
Filip Valica: So we've seen them of all sizes. I'm glad to hear you had a success in your local area. It was amazing. It basically turned me on to the whole idea of having somebody like mfg.com that can act as a broker to connect us to all these smaller shops.
Filip Valica: And really, that's what it was, is we were able to reach shops that don't, have that marketing reach and don't have the, you know, they haven't knocked on our door personally
Chris Mitchell: because we're probably too small for them. And they might be too small for us, but somehow we met in the middle. That's excellent. Yeah. I mean, that's exactly what we aim to do. There's,
Chris Mitchell: you know, a lot of the shops that we have, you know, they're not large. So they don't have a lot of a budget to, you know, hire salespeople or go out and try to, you know, run ads. I mean, a lot of times that's, you know, just something that's very, very foreign to them. They, they want to focus on
Chris Mitchell: making great parts. So it's difficult for them to do that marketing a lot of times. And then, of course, even if they'd wanted to reach you, how would they know where to find you?
Filip Valica: You know, so that's really the central benefit of mfg.com is it's a central place for people to find each other. Yeah, and we're definitely going to dive into some of that as we wrap up
Filip Valica: the show because I want to talk about the process that it takes to get an RFQ through. But I wanted to look at the survey that you conducted recently of U.S. manufacturers, and it was interesting
Filip Valica: to see people's perspectives of how President Trump's policies would affect manufacturing
Chris Mitchell: here in the U.S. So can you talk a little bit about what the overall findings were, and then we can just kind of dive into some of the results? The survey was conducted against about 45,000 members of our marketplace, so we mailed out
Chris Mitchell: a lot of surveys. Out of that, we got back 850 responses.
Chris Mitchell: They were sent to people on both sides of the marketplace, so people who are buyers in the marketplace like you were when you did your project, and then obviously the suppliers, which are the job shops.
Chris Mitchell: We got a pretty even mix of answers back from both sides, and we specifically designed the survey such that we sent a separate version to each of those groups so that we could compare the responses, because obviously they would have two very different perspectives.
Chris Mitchell: And as we expected, there were a lot of areas where they simply saw things differently. One example of that is in the idea of if there were tariffs and other trade barriers erected, what would be the result?
Chris Mitchell: Would it encourage or increase manufacturing business in the United States? Interestingly,
Chris Mitchell: the buyers in our marketplace sort of had their response. Well, if you put barriers in place on China and Mexico, we'll just find another low-cost country to purchase from, whereas the suppliers tended to think, yeah, if you do that, we're going to see a lot of business
Chris Mitchell: return to the United States. So you had a little bit of a disagreement with how they perceive things. But in other areas, they were very much in agreement. I would say an overarching area of agreement
Chris Mitchell: was in wanting to bring manufacturing jobs back to the United States. And so you saw buyers who felt like it would be fair to penalize U.S. companies who produce overseas for import
Chris Mitchell: into the United States. And we saw suppliers, obviously, agree with that. They wanted to, they wanted companies who produce American companies who produced their products in other countries to be penalized if they were producing those products and those other countries for importation
Chris Mitchell: into the United States. So there was a lot of agreement there, I would say, on the whole, we saw pretty broad support for the policies that President Trump has put forth. Now, this was
Chris Mitchell: based on a lot of his campaign promises. The survey was conducted just after, he was elected and then we worked on the report during the time when he was preparing his
Chris Mitchell: administration so when this report was released he was this was just before inauguration and as we all
Filip Valica: know there's been a lot of activity since then but the report contains a lot of you know really interesting information why did you think it was important to even conduct the survey or why did
Chris Mitchell: you do that this year think i've been a member of msg.com for like i said the last maybe 10 years and i haven't seen too many of these types of surveys in previous years, and I guess it was probably from maybe 2008 or 9 at 2013,
Chris Mitchell: we conducted on, I think, a quarterly basis, there was a survey that we did called MFG Watch,
Chris Mitchell: and that was basically designed to assess the state of the manufacturing industry as seen through the members of our marketplace. And that was a regular thing. That was sort of dropped around 2013.
Chris Mitchell: I'm not exactly sure why I was not here then. We reenacted that last year, so in 2015,
Chris Mitchell: we released our first MFG watch report, which was sort of a general survey of manufacturing.
Chris Mitchell: The Trump and manufacturing report is really sort of an interim report, but obviously the president ran on a platform made up in large part of bringing manufacturing jobs back to the United States.
Chris Mitchell: And the accepted wisdom or the received wisdom at that point was that free trade was, the best way forward for America. But obviously, when you talk about the Rust Belt areas of the country,
Chris Mitchell: what President Trump refers to as the forgotten voices in America, those areas of the country have obviously suffered great loss of jobs in the years,
Chris Mitchell: you know, in the last couple of decades since NAFTA was signed. And so we thought it would be really interesting to get the perspective of our users.
Chris Mitchell: rather than relying on what you might read and various trade publications are in the media rather than just purely rely on what President Trump said he was going to do on what the result would be or the effect would be.
Chris Mitchell: We thought it would be interesting is to find out what our members think and they're right in the, I mean, they're at ground zero of what we're talking about here. Right. And so we thought it was pretty, it would be really useful to give voice to those people's opinions.
Chris Mitchell: There's so much journalism out there that's written
Filip Valica: based, you know, op-ed pieces written by people who think they know what's going to happen, but we wanted to find out exactly what the real people who are doing this work thought. So that's why we conducted the survey. Yeah, and you guys are really uniquely positioned to be able to do this.
Filip Valica: In addition to following up with this, hopefully in the next year or two, when you see some
Chris Mitchell: of the changes in policy take effect, there's going to be some sort of an impact and you can kind of gauge what the difference has been between, you know, perception and reality. You're exactly right.
Filip Valica: That's what we intend to do is to follow up on this. in a year and maybe over the next, you know, three or four years, I mean, just see exactly how things play out.
Chris Mitchell: So going through the rest of the report, was there anything else that you thought that was a bit surprising that you didn't expect people to answer in, you know, quite this way? There was one thing. So when we created the questions, of course, we wanted to ask people's opinions.
Chris Mitchell: So opinions are one thing. You know, you can ask someone, what do you think of this or that, and I'll give you opinion and maybe it's an opinion and maybe it's, you know, a very forceful, strong opinion. but we want to go one step beyond that. And we wanted to say, okay, so we know this is what you think.
Chris Mitchell: If that's how you feel, we want to then test how committed you are to that opinion.
Chris Mitchell: So in our questions, we'll have things in the survey. We have questions that are of the nature of,
Chris Mitchell: do you think we should level tariffs against Chinese and Mexican-made products? And, you know, there'd be great many people who said yes.
Chris Mitchell: And then the next question would follow up with if those tariffs would result in increased costs for consumer goods or industrial inputs, would you still be in favor of those?
Chris Mitchell: And so the thing that we found was really interesting is that on the supply side, there's almost a feeling of, I don't care what it costs we need to punish these other countries.
Chris Mitchell: We need to put some, we need to levy tariffs against them so that we have a better competitive environment. the United States. I think it was a little bit of a, and it is an unknown of how that's going to
Chris Mitchell: balance out, you know, are there more jobs in the United States? Perhaps yes, but does that mean that then, you know, everything costs more? Maybe yes.
Chris Mitchell: And maybe, you know, people prefer to actually, they'd rather have the job and have the option to spend the money on the more, you know, expensive everyday things or not. But I think they want to have the jobs here, even if it's going to
Chris Mitchell: cost a little bit more. So that was an interesting one. And it was really
Filip Valica: strong on the supply side. The buy side was a little bit less supportive of these kinds of measures, particularly if they're going to increase the cost of inputs to their industrial
Filip Valica: process. That was an interesting one. On the buyer's side, I guess I get understanding where they're coming from. I've got a couple of products that I'm working on now myself, just under my
Filip Valica: own brand, and the difference between a U.S. manufacturer versus abroad can be 30, 40%, just on unit cost, and I'm not even talking about setup or one-time fees, and I would be happy to absorb
Filip Valica: those costs and pay those costs if then I push that on to the buyers here, you know, but on Amazon, for example,
Chris Mitchell: on a $20 unit price item, I will have a 40% swing in demand if I just drop the price two or $3. So the sensitivity to consumers on price is just huge right now for at least certain types
Chris Mitchell: of products. Absolutely. That's the $64,000 question is exactly how elastic is demand, you know, when prices and if prices increase, what actually happens to demand for products. And I think that's,
Chris Mitchell: for a lot of people, that's an unknown. It's a very difficult thing for them to extrapolate out
Filip Valica: and think how this is going to be in the future. So I think at the root right now, they're just saying, look, we want our jobs back. We want to be able to work and earn a living and then spend that money the way we see fit. So I think that's how I would interpret the answer.
Filip Valica: You know, flipping in the question around, if you had everybody on the same playing field, so to speak, and so all costs would go up at the same rate and competition was fair,
Chris Mitchell: I think consumers would have a hard time swallowing that all of a sudden now their products might be the 50% more expensive, but at least they would all be that way.
Chris Mitchell: And you wouldn't have that hole in the dam, so to speak, where there would be products getting through that are taking the lion's share of the sales. Right. Agreed. There's a few other interesting insights, too.
Chris Mitchell: we asked about NAFTA, should it be abandoned or should it be renegotiated? Very, very strong, clear support to renegotiate NAFTA.
Chris Mitchell: So there definitely seems to be an across-the-board perception that NAFTA is a bad deal.
Chris Mitchell: So when you look at the survey results, over 60% of the respondent said renegotiate NAFTA. There was about 10% who just really weren't sure.
Chris Mitchell: And, of course, there was some who wanted to keep it as is, and some who wanted to withdraw completely. But very clear support to renegotiate it.
Chris Mitchell: When it came to the Trans-Pacific Partnership, the TPP, which had not actually been enacted, as you probably know, but it was still in sort of the negotiation phase.
Chris Mitchell: There was real strong support for withdrawing, but what's interesting is, you know, people seem to have, you know, a strong feeling of, you know, to withdraw from it and that it was harmful, but a large percentage of people just weren't sure.
Chris Mitchell: So it's kind of those, something like 37, 38% of the people just really weren't sure what the impact of the TPP, the Trans-Pacific Partnership would be. So that was fascinating.
Chris Mitchell: It just kind of showed that that agreement has not, you know, been presented in a way that
Filip Valica: people really understand what was involved. It was kind of presented in a fairly general way. and I think most people just were unsure of what was going to happen, but, you know, President Trump has already killed that.
Filip Valica: So it's a little bit moot at this point, but still that was an interesting finding that there was just so much uncertainty about what it even was. I noticed that as well in the report.
Filip Valica: And I think an MFG.com is in a great position to even educate your buyers and suppliers on some of this legislation. If you're able to produce content that's not biased in any way, because as you know, we can go on media and it will be biased one way or another.
Chris Mitchell: There's always slants. Even just by choosing to run or not run a story, there's some bias there.
Chris Mitchell: It seems like there's a void in the industry for getting some of that information out to the public in a way that is easily understood using charts and graph because business owners
Filip Valica: don't have time to read pages of legislation. Well, yeah, that is the big challenge. I mean, I don't know if anybody had had time to read it. It was a little bit like the tax plan or something a few years ago when they say, well, let's pass it. And then we can go back and read it.
Filip Valica: You know, I don't know that a lot of people, I don't know that a lot of people have had the time to read that agreement. But again, so it appears to be dead at this point anyway.
Chris Mitchell: So I guess it's to some extent. It's a moot point. One thing that I noticed that was interesting when you were talking about NAFTA is that people expected the exports to decrease from the U.S. if we withdrew from NAFTA as well. Yes.
Chris Mitchell: So they're understanding that this is a 2A street and it seems like they're okay with that being a little bit more isolationist. I agree with you. That's the same interpretation that I get from it. There's all of these types of things have, obviously have costs and have consequences.
Chris Mitchell: And I think, you know, everyone realizes this is the things that are being put forth sort of are a move away from free trade, which, you know, as mentioned earlier, has been the sort of received wisdom all these years that, you know, free trade is what we need to do.
Filip Valica: We're moving. It looks like we're about to be moving in a different direction. And yet you see that people are okay with the fact that things are going to be a little bit more. expensive and there's going to be maybe a little bit less free flow of goods across
Filip Valica: borders I think that shows you the degree to which people feel frustrated and left out you know with what's with what happened in the last you know a couple of decades I don't think you measured it in this report but I've definitely noticed
Filip Valica: that one effect to people losing their jobs here is the automation that's just going through all the industries but especially manufacturing you know I used to work at places where everything was dominantly assembled by hand,
Filip Valica: and you had maybe 30 or 40 people doing that work, and now due to us using
Chris Mitchell: some subsuppliers or other people that have automation or even bringing some automation in-house, that's cut the staff drastically down to maybe only a few people that are involved
Chris Mitchell: in the process while raising output for the manufacturers. And these are all manufacturers that are based here in the U.S. So in a way, we've got more output than we had 10 years ago, and we're
Chris Mitchell: using less people to do it. Yep, that's correct. We published a piece on our Facebook recently. It was from a story that ran on, I believe, ABC about bringing manufacturing back to the United States
Chris Mitchell: and competing with these foreign countries. It was about a guy in Mississippi. He's the, I don't know, he's the economic development person in this county of Mississippi.
Chris Mitchell: And they've been quite successful with doing exactly what you said. And it seems that, you know, with robots, and automation in factories,
Chris Mitchell: it really sort of starts to level the playing field. Right now, what you've got with China or Mexico, particularly China,
Chris Mitchell: is a combination of currency manipulation that keeps Chinese made goods cheap and then a very low cost of labor.
Chris Mitchell: If, as is supported in our survey, China is labeled as a currency manipulator and some remedial measures are put into place, you could theoretically eliminate some of that different the competitive advantage of them artificially, you know,
Chris Mitchell: lowering the value of their currency.
Chris Mitchell: But when it comes to – if you remove that from the equation, and basically you have American workers who want to work for one price, and the Chinese or Mexican workers who are willing to work at a fraction of that, it's very difficult to compete. But when you bring automation
Chris Mitchell: into it, and those countries are moving to automation as well, you really get to have a lot more level playing field, and then you have transportation costs begin to be significant, you know, bringing something all the way from China versus bringing it from, you know,
Chris Mitchell: the next state in the United States. So the other trend that's revealed in that piece is that,
Filip Valica: you know, factory automation, yes, there's far fewer jobs, but the salaries are about triple. The people who are operating and maintaining and programming these robotic systems are making a great deal more than someone who worked on the shop floor in years gone by. So it seems like
Filip Valica: there's an opportunity there for people to move up the pay scale. Of course, they're going to have to go and get their skills to, yes, exactly. And there's going to be fewer jobs in the beginning, but who knows where it goes in the future?
Chris Mitchell: Honestly, I think this is just something that can't be ignored. It's not whether you choose to play the game or not. You're in the game, and you have to decide how you're going to respond to it. Do you have any experience with other markets like maybe Germany or Japan?
Chris Mitchell: Because I know from my experience, at least in Germany, they have always had this high importance on quality and automation. and I think they've kept a lot of their manufacturing in country. I'm not sure what it's done in the last five years,
Chris Mitchell: but have you seen that to still be true, or are you aware of those markets? I don't have a great deal of perspective on that. I mean, I certainly have the same awareness you have of German quality, German engineering.
Chris Mitchell: I mean, you know, some of the most respected automotive brands in the world are obviously German. They have a reputation for producing very high quality products. In our marketplace, we don't see an extremely large volume of…
Filip Valica: work being posted or won in Germany. I think Europe is a little bit of a quiet area in terms of that. I mean, with Europe, there's a lot of the trade is, like you said, it's kept in country,
Chris Mitchell: or it's within the European Union, or if people are sourcing for a lower cost production, they're usually going to Asia. They're not usually sourcing from Europe to the United States,
Chris Mitchell: for example. And conversely, our U.S. suppliers are typically are not selling manufacturing services to Europe. So I couldn't really speak authoritatively to the trends, you know, in terms of Germany.
Chris Mitchell: Have you seen any other trends either within the United States or even outside the country that you think that were interesting that might not be included in the report? Well, you know, our marketplace over the years has begun to be very focused on the United States.
Chris Mitchell: Until the election of President Trump, we were seeing an increase in interest in Chinese manufacturers joining our marketplace. It's now become a little bit questionable.
Chris Mitchell: We also had, you know, people from Mexico, companies from Mexico, who were suppliers in our marketplace. We've started to hear from them, you know, there was a company in Mexico that said we think who we're going to stop being a member.
Chris Mitchell: It's looking like it's getting ready to get, you know, difficult to do business in the United States.
Filip Valica: So we're kind of going to cut our losses now. With China, we've had a fair amount of growth and interest until the election. And now it remains to be seen. We're not sure where it's going to go from here. It's really early. You know, there's a lot things have been suggested that will happen, but nothing has actually happened yet.
Chris Mitchell: So I think that for a lot of companies, it's a little bit of a wait and see. They're ready to move forward if the way gets clear, but they're also ready to pull out if they get to be, you know, a lot of barriers to doing business here.
Chris Mitchell: Yeah, it's interesting how much the effect of legislation and regulations has on business, and that's probably the two areas that small business owners and even product designers like myself, we don't tend to spend a whole lot of time on, probably because you should
Chris Mitchell: just can't control any of that. We as a marketplace, we hear it from both sides of our customers, and we've come to some of the same conclusions in terms of how we conduct business in our marketplace that
Chris Mitchell: are reflected in this report and that, you know, probably if you ask any manufacturing in the United States, they would feel about competing against low-cost countries like China and Mexico.
Chris Mitchell: You know, we've done a lot over the last year to try to level the playing field because we know that these countries sometimes are competing unfairly. And we also know that sometimes
Chris Mitchell: buyers who come in, a lot of times they will be small companies, and they get really excited, you know, just about the idea of sourcing something internationally, being an international business
Chris Mitchell: and purchasing services from China and from Mexico. But we've learned over the years there's a lot of risk involved in that. You know, a lot of times that low price looks low until you really start getting into the difficulties of conducting business internationally.
Chris Mitchell: So we've put up guardrails, if you will, within our marketplace to help those businesses with people who are sourcing, whether they're engineers or sourcing professionals, that don't have extensive experience with sourcing internationally.
Chris Mitchell: We've put up guardrails to help them realize it's pretty risky to go to some of these foreign countries, particularly Asian countries, just because of language barriers, cultural differences,
Chris Mitchell: just the sheer distance of doing business, payment methodology. which are very challenging if you consider China.
Chris Mitchell: There's a lot that goes into it. And so for a lot of people, you know, signing up with MFG, all of a sudden they've got this immensely powerful tool to be able to source manufacturers anywhere in the world and they kind of want to use it. And we're having to say to them,
Chris Mitchell: all right, you can do it, but we want you to understand what their risks are. And we want to help them make the best decision for their business. And sometimes, you know, saving a couple of dollars on a, widget is just not worth the additional risk that comes along with it. And on the flip side,
Chris Mitchell: we've done a lot to help the suppliers. So our job shops that are, you know, our paying members in our marketplace, for a long time, they, you know,
Chris Mitchell: expressed us their concerns about competing with Chinese companies that were, you know, undercutting their prices significantly. So for them, we also put in tools to allow them to identify buyers who are sourcing to China. And we basically
Chris Mitchell: to tell them, you know, if you see this buyer sourcing to China and they frequently award to China,
Chris Mitchell: don't waste your time quoting there. And we've given them a tools to really
Filip Valica: be able to see that clearly so that they can focus on buyers who really are, these are U.S. company, U.S. job shops, I'm speaking of. So they can actually compete against other U.S. job shops for U.S.-based business. You know, that may come as a surprise that that's only been,
Filip Valica: we've only put that in place in the past year, but that's how it's actually played out.
Chris Mitchell: So we are trying to strike a fair balance where people from other countries still can come in and compete in our marketplace and win business, and they still do.
Chris Mitchell: But we're also trying to provide the transparency, if you will, both for the buyers and the suppliers in our marketplace to really understand exactly what they're up against. So as a buyer, you can create a request for quote.
Chris Mitchell: And in that request for quote, you get to pick the types of manufacturers that this goes out to or what type of product this is. and I'm talking about specifically like sheet metal or machining or that type of thing.
Chris Mitchell: What are the types of manufacturers that you predominantly work with? Well, yeah, the manufacturers that we work with primarily provide plastic metal or rubber parts. That's basically what is. And the preponderance of the business that we see here is metal.
Chris Mitchell: So it could be machining, it can be stamping, it can be cutting. But usually the material is, you know, various types of metal. You know, that's what we see all day long. You have the process exactly correct.
Chris Mitchell: Someone comes to us with a CAD drawing of their design. They create a request for quote. During that process, they can indicate what industry this is for. They can indicate obviously the material and their intended use of it.
Chris Mitchell: And what that does is that helps us match them to people who have experience in that area. So, you know, there's a lot of aerospace,
Chris Mitchell: there's a lot of automotive, there's a lot of medical products. So by selecting the industry as well as the type of process by which you'd like the product to be made and the material, we can match you to job shops that have that
Chris Mitchell: particular expertise. There's times when someone is not particular.
Chris Mitchell: You know, sometimes someone will come and develop a part and they'll say, you know, I'm not really concerned about exactly how this part is made as long as it's made according to my specifications. And in that case,
Chris Mitchell: MFG has an engineering team that vets every RFQ that comes through the marketplace. So they review every single drawing that comes through. And if the buyer requests, they will make a recommendation, their mechanical engineers,
Chris Mitchell: they will make a recommendation of what process is probably best for that product. So you don't have to have the answers to all the questions. The fundamental thing that you do have to have is the CAD drawing.
Filip Valica: And the reason that we do that is because it's, you know, as I mentioned earlier, our suppliers pay to be members of the marketplace. And we want to be sure that we give them quality opportunities to quote on.
Filip Valica: So fundamental to that is having a good clear drawing with dimensions so that they know exactly what they're quoting on. There's no guessing.
Chris Mitchell: You know, we don't take scanned, you know, drawings on a napkin or something like that. And I will say also that the service is completely free to people who are sourcing. So you can come in and use our marketplace to try to locate a manufacturer at absolutely zero cost.
Chris Mitchell: There's no catches. You know, there's no upsells, there's no commissions or anything like that. It's 100% free to use. And as people are creating an RFQ, is there something that you've noticed or that you've
Chris Mitchell: got reports of that makes it a really good, effective RFQ and then also the flip side? What have you seen that just doesn't really work that well or have manufacturers had issues with in the past? Yeah, the main thing is just that it's very clear.
Chris Mitchell: It just needs to, obviously the drawing is important. It's got to be fully dimensional, which means they need to call out all the dimensions, the tolerance is how precisely the part needs to be manufactured. That's the biggest thing.
Chris Mitchell: Beyond that, getting a response or quotes, if you will, on your RFQ, will depend a lot on, you know, things like what quantity you're ordering.
Chris Mitchell: So you mentioned a part where you did a single piece, depending on the size of the complexity and therefore the cost of that piece, you may or may not get good response. So it's not about trying to inflate the quantities.
Chris Mitchell: We want those quantities to be accurate. But the kind of response you get does vary by how big the job is. If you want a one-off thing, you may get a very small company that can make that one part.
Chris Mitchell: But if you had a lot of parts, you're going to get larger companies and probably more of them, they're going to be really competing for your business. So there's a little bit of something there for everybody.
Chris Mitchell: One thing we see frequently in terms of doesn't work really well is when people, maybe they have an idea or an invention that they've come up with and how we've all
Chris Mitchell: had our inventions and we're pretty sure that it's the greatest thing anyone's ever thought of. And a lot of times we'll see them come and they'll say, well, I have this idea that I really want to get this product made, but I don't have any money to make it.
Chris Mitchell: So I'm looking for manufacturers that want to make it and be my partner.
Filip Valica: That generally just doesn't fly because it just happens too often and it's very rare that actually turns into something. So it's best if people want to source manufacturers and really get top-notch companies that they come with a design that's very clear.
Filip Valica: They've got all their T's crossed, their eyes dotted, they know exactly what they want. And if they find the appropriate manufacturers that they're ready to do business, I mean, that's really what works out best. And these guys are, these are suppliers, they've seen it all.
Filip Valica: I mean, we have, you know, hundreds and hundreds of RFQs every month. They're pretty quick to pick up on who's really serious about doing business and who's just trying to figure out how much it might cost to make their product and then go away.
Filip Valica: Yeah, and you bring up an interesting point because one of the key design factors in any product is the manufacturing cost. And I have personal experience in working for all sorts of companies with manufacturing.
Chris Mitchell: And I can tell you the costs very wildly. I mean, even within MFG.com, I will get quotes that could be 50% off from each other, just based on individual manufacturer's capabilities and how much stock they have on
Chris Mitchell: hand and all sorts of other things. As a buyer, it's really tough to design for manufacturing without getting some input. And obviously, it helps to have that relationship with a manufacturer where you can send over a drawing and they can give you some feedback.
Chris Mitchell: but how can we best use the service on a new project that maybe it does need some iteration or you get some initial quotes back and you're thinking, gosh, this is way more expensive than I expected it to be. I need to do some rework. Sure.
Chris Mitchell: I mean, when you create the RFQ, you can simply indicate, you know, this is my drawing, as I have it now, my best effort. But I'm open to feedback and suggestions. So, yeah, designing for manufacturing ability is really important.
Chris Mitchell: And it's, I mean, obviously,
Chris Mitchell: you know, it can have a big impact on what the final product looks like. So we encourage that.
Filip Valica: We encourage that kind of communication, and we encourage our suppliers to do that really as a way of building the relationship. I mean, sometimes when people join a marketplace, they may get the idea that, you know, well, I'm just going to go in there and bid low on projects to win some.
Filip Valica: And we actually encourage them to go out a little differently to try to build a relationship and try to come to the table with, suggestions on how to improve the product to come to the table with questions to understand
Filip Valica: exactly what the buyer is trying to accomplish. Because a lot of times, you know, the shop has
Chris Mitchell: expertise that the buyer is completely unaware of. I mean, it may be a new technology, it may be a new manufacturing process. It can be all the kinds of different factors, exactly as you describe. But the key is communication, and we encourage that. We've got, of course,
Chris Mitchell: good communication tools built into the platform. I have to say that some of the smaller manufacturers in particular are really good at communicating back and forth and I made some great contacts with manufacturers in the past just by doing that back and forth and then answering
Chris Mitchell: questions and that leads into other conversations like hey by the way we can do your packaging for you or we could do some staging or we're partnered with a fulfillment warehouse and we can even ship your product somewhere and and you wouldn't really get into those types of conversations
Chris Mitchell: without just going out there and getting quotes done and engaging in your… That's right. I mean, that's exactly right. I mean, one of the nice things about this RFQ model is coming to the table as a buyer,
Chris Mitchell: coming to the table with a dimension drawing, it's showing the suppliers you're serious about your project. You know, someone has taken, someone's made the investment of time or money to actually have drawings made of the parts that you need to source.
Chris Mitchell: You know, that's a great first step that lets them realize this is a little. a legitimate, you know, potential customer in a conversation. And the matching services that I mentioned
Filip Valica: earlier based on, you know, industry and the type of process needed for the part, etc., that puts you in front of the right kind of suppliers right out at the gate. It's a totally different thing
Filip Valica: from doing a Google search or picking up an old Thomas Registered director they used to produce or any of these other places that you can go where you're basically just seeing a directory of companies,
Chris Mitchell: even, yeah, I mean, there's a bunch of them around, you know, if you go and look at a director, you've still got to call those companies individually,
Chris Mitchell: and that G. Just allows you just to put your drawings up one time, just grab the project one time, and let people from all over the world, if you choose, or just in the United States, bid on the project. So you're right away, you're talking to a reduced group of people who really are interested
Chris Mitchell: in your project and really do have the expertise to make your parts. I've definitely experienced that other side of bidding. Like you said, there's some suppliers that I have to deal with that don't produce the type of parts that MFG specializes in.
Filip Valica: So I go outside the service to quote, and it just takes way longer, even if you're sending the same message, but people have different types of questions and that maybe you didn't put
Chris Mitchell: in the original RFQ and you just spend a lot of your time responding. And that right there is a great point. It's a small little subtlety. We actually just released a feature in our communications tools. It seems silly now when you think about it, but it's basically like a reply all and an email.
Chris Mitchell: So now, if you're a buyer and you log in and you get a message from someone that asks your question, you're on, shoot, that's something that everybody's going to want to know. It's just a checkbox before you send your reply, and it goes to everyone who has quoted on your job.
Chris Mitchell: So it's a powerful way, and there's many, many, many features that we have that allow you to do a lot of work very quickly and efficiently. It's a great tool near the end of the process.
Chris Mitchell: If you, let's say you decide to award, then you contact the manufacturer, you arrange payment if you need it up front and the work commences. That's correct.
Chris Mitchell: So you will get X number of quotes on your job, depending on how exciting it appears to job shops.
Chris Mitchell: If you have a project out there, your parts are out there and you're not getting the love, you can contact your source.
Chris Mitchell: We have a team of dedicated sourcing advisors and marketplace coordinators that exist solely to help buyers be successful in sourcing on MFG. Again, no cost.
Chris Mitchell: But if you've got an RFQ out there and you're not getting the kind of response that you had hoped, you're not getting enough quotes, they can come in and boost that out to suppliers and make sure that they're aware of it and try to get more quotes.
Chris Mitchell: So then when you get your quotes, we've got tools in the application that allows you to compare them side by side, which is another benefit of using the marketplace. You know, if you take the other route, we just talked about where you go out to some directories
Chris Mitchell: and you contact a bunch of different companies, you're going to get quotes back in various different formats, and it gets to be dicey trying to actually figure out, you know, how do we compare all of these things? With MFG, you've got them all arranged in a table where you use it's apples to apples.
Chris Mitchell: So you can see, you know, this is what this guy charges, is what that guy charges. you can very clearly see itemized what each company charges. So we give you a quote comparison tool in the application. And it's easy also just to download all of your quotes to Excel.
Chris Mitchell: You can manipulate them however you need to to make your decision. Once you award the job in our system, awarding a job just essentially means picking the supplier. You don't necessarily – you're not necessarily issuing a legally binding PO at that point,
Chris Mitchell: and that's just because a lot of companies, larger companies that use our system particularly, they're not going to issue a PO through our system. they're going to end you a PO directly through their own internal systems. But you do award the job, choose the supplier within our system, and that's important because
Filip Valica: that opens the door later for you to rate that supplier and to keep the communication going about that job and to get things like production updates. So
Filip Valica: if they start making your parts, it's very easy for them to send you updates via mfg.com so you can see exactly where your job is. In terms of payment, you mentioned prepayment, I think, or maybe just said payment, but we don't have a built-in payment system there.
Filip Valica: We encourage people to use things like PayPal or a credit card or even things like escrow.com if it's a big job, which these are all just very safe ways to make payment.
Filip Valica: And then if for whatever reason the supplier doesn't live up to their end of the bargain, you've got options to get a refund. We don't encourage people to do prepayment on jobs just because we find over time it's not really the best way to go.
Filip Valica: It comes down to a case-by-k, but particularly if you're dealing with companies in other countries,
Filip Valica: we definitely discourage prepayment. Most of my experience with MFG.com is from U.S.-based suppliers. I actually haven't used any suppliers outside the U.S. through MFG.com.
Chris Mitchell: And I have to say that everyone's been really professional, and the quotes that come back are, even though there's a huge variance in between them, they're all pretty competitive. It's good to get that response back from everybody and to make those connections.
Chris Mitchell: So that's one of the key differences between U.S. manufacturing and the manufacturers abroad, where in the U.S., if something is not produced properly, you have a little bit of that leeway with a manufacturer
Chris Mitchell: where they can maybe rework some of the parts, or you'll kind of come to some mutual terms, mutual agreement, or they might be able to knock off a little bit on the price to make it work. There's just a little bit more flexibility versus abroad.
Chris Mitchell: It is what it is, and you're usually paying 30% up front. if not more.
Chris Mitchell: And at the end of the day, if the products aren't made to spec, even if it is the manufacturer's fault, you're still out that 30 percent and you might even have to eat that in order to continue doing business. That's correct. I mean, that's the risk. I mean,
Chris Mitchell: that's part of why, like I mentioned, the guardrails we have at the beginning. This is part of what we try to explain to some of these buyers. You know, some of these other countries,
Filip Valica: the culture is just different. You know, in the United States, we tend to, we tend to get give something of the benefit of the doubt to the buyer. Not necessarily so in other countries. We do
Filip Valica: have a little bit of recourse, though. Occasionally, you know, a buyer sources something in China. They get, they're not satisfied with the product. We do have a little bit of leverage. We're not judges and we don't do arbitration or anything like that. But we do have the leverage of telling
Filip Valica: a supplier, you've had a complaint from this buyer. You need to rectify this or you can be removed
Chris Mitchell: from the mfg.com marketplace it doesn't necessarily put money back into the buyer's hands but for a lot of these companies a significant portion of their business comes from their marketing via the mfg.com
Chris Mitchell: platform if you shut that off it's quite painful for them so occasionally it's not often but occasionally we have to take that route and usually when we do that we find that it gets it gets resolved pretty quickly we still aren't encouraged doing prepayment but you know occasionally if someone
Chris Mitchell: gets into a snag we can we can help that way that is the the cost of getting those low price items to begin with, I guess, you know? It's always a rent. So what happens if you don't award the quote? I know in the past sometimes there've been a couple products that just had to be reworked for manufacturing
Chris Mitchell: or the price just came back too high. I know that if you don't award an RFQ, it can count against you. But what is that relative penalty?
Chris Mitchell: At what point do you start getting into trouble where manufacturers won't give you any quotes because they think that you're just a doorknocker? Right, exactly.
Chris Mitchell: One of the features along the lines of transparency that we've introduced just in the last year is a buyer's award ratio. Every buyer account, when you log in, you will see
Chris Mitchell: your award ratio on the left-hand side of your dashboard. It's very prominent. There's no way to miss it. We understand, and I think most people will understand who are in business or
Chris Mitchell: most people are reasonable and know that not every job that you have quoted is going to get awarded. Just exactly like you said, sometimes the price just doesn't fit with the budget. Other times, maybe the project gets canceled, beyond your control.
Chris Mitchell: There's all sorts of things that can happen that would cause you not to award. But if you are a, you know,
Chris Mitchell: if you're serious about business and you're coming to our marketplace, you know, sincerely looking for a supplier, you're going to award a reasonable number of your jobs. We think anything over about 60 to 70% is very good.
Chris Mitchell: That's given you basically 30% of the time, you know, you're not awarding a job. We aren't currently penalizing you in terms of removing you from the marketplace, but we do pay very close attention to how awards work and who's doing what.
Chris Mitchell: Anyone who uses the system to try to have some shenanigans or has posted a lot of RFQs, and then ultimately didn't award any of them. Eventually, at some way, we're going to say, okay, look, it looks like our marketplace is not providing you with what it is that you're looking for.
Chris Mitchell: So we're going to ask you not to post anymore. That's very, very, very exceedingly rare. What does happen is when suppliers look at the buyer's RFQ, they can see, as I mentioned
Chris Mitchell: earlier, they can see that buyer's award ratio, but the award ratio also includes the number of RFQ's posting.
Chris Mitchell: There's a percentage, you know, maybe a 60% or a 70% award ratio, but there's also
Filip Valica: the aggregate, I mean, the actual numbers of RFQ's posted award. So if it's a brand new buyer, obviously they're not going to have, they're not going going to have any kind of award ratio, but it's going to clearly say, you know, one out of one RFQ or zero out of one RFQ is awarded. And people realize that.
Filip Valica: And there's a place for those. We've got shops that are just getting started to that are trying to build a reputation, and they need to find some jobs that are not large, that they can do well and earn a positive rating from the buyer.
Chris Mitchell: So there is a place for those kinds of jobs. But it's just about trying to strike a balance, just like what you would have in the
Filip Valica: real world and making sure that buyers are not here wasting the time. You call them door knockers, you know, that they're not wasting our support. supplier's time with jobs that they have no real intention of quoting.
Filip Valica: One thing we don't like is when, you know, companies come in and post-RFQs and get prices just to go and beat down there in common suppliers.
Chris Mitchell: That's considered a bad practice for us, and we catch on to that pretty quickly. And believe it or not, sometimes we have large companies that come in and do that. And they think because of the clout that they have, that they can do that. And we consider that sort of an abuse of our system. And so we shut them down if it gets to be extreme. Yeah, absolutely. You have to be fair.
Chris Mitchell: And my perspective on those types of negotiations, you know, I ask for pricing up front once. You need to give me your best price the first time because, you know, going back and forth, trying to have suppliers bit against each other is a race to the bottom.
Chris Mitchell: And at the end of the day, not just from the suppliers' perspective, but as a buyer, I want my suppliers to stay in business, but I also want them to take me seriously. And if they're not going to take me seriously, if I start pulling their chain. Agreed. Absolutely. 100% agree with that.
Chris Mitchell: And we all know that the cheapest option is usually. not the best. Is there something that we forgot to mention that you really want to make sure that people understand? Do you have any ideas of where people can get some rough approximation
Chris Mitchell: of manufacturing costs without actually talking to a manufacturer? I know from my experience, like using online RFQ tools that estimate manufacturing costs are not accurate at a… Correct. Yeah, there's a, you know, there are a number of companies now that have popped
Chris Mitchell: up that claim that they will give you an instantaneous quote.
Filip Valica: That works best. if you're looking for a 3D printed part and probably in a prototype or a very small quantity, simply because they can say, okay, we know the dimensions of the product that's
Chris Mitchell: going to take X amount of material. Here's your price. If you talk about machined parts or any other of the more sophisticated manufacturing processes, that gets very, very difficult. And if they're going to give you a blanket price and try to feel safe and quote in that,
Chris Mitchell: of course they're going to pad that a good deal in case they made a mistake. So there's a place for that. People who just want to, hey, I just need this prototype made quickly. I really don't care who makes it, as long as it's exactly the spec. I really don't care if I pay a little bit more.
Filip Valica: I always want the convenience of uploading it, getting a quote now and pushing the order button. There's a place for that. Our marketplace is focused on more sophisticated manufacturing and more complicated manufacturing. So if you just need those quick prototypes, you might
Filip Valica: try one of those services. Of course, we have 3D printers all day long in our marketplace as well, and they will be able to engage you in one of those manufacturing or design for manufacturerability conversations, but that's kind of how it kind of, the balance between those two.
Filip Valica: Well, Chris, thanks again for sharing all your wisdom and for sharing the results of your survey. Where can people go and get their copy of the report on manufacturing as well as sign up to get some quotes from manufacturers?
Filip Valica: Both things you can get at mfg.com. If you go to mfg.com, you can sign up for a free buyer's account. You will immediately be given access to the marketplace. It'll be assigned a sourcing advisor right when you sign up.
Filip Valica: There's a link right on your dashboard to reach them. They'll probably reach out to you. They'll call you or email you to welcome me to the marketplace and make sure that you're able to find what you need. As for the manufacturing report, you can just Google mfg.com Trump Manufacturing
Filip Valica: and you should see a link to the report. Awesome. Well, thanks again, Chris, for coming on the show. Really appreciate your time. Thank you, Philip. Yeah, it's been great. Great talk with Chris about the state of manufacturing in the U.S. and soliciting quotes from manufacturers.
Filip Valica: Here are top three takeaways. Number one, manufacturing costs are increasing. Less than a decade ago, an employer asked me to train my counterpart in Singapore to do my engineering job.
Filip Valica: IT is not the only job that has been outsource, but manufacturing costs in China have gone up almost 30% this year due to increased material costs, environmental regulations, and rising labor costs attributed to China's growing middle class.
Filip Valica: all this mean? For consumers, I think costs are bound to increase whether or not we see new tariffs. Manufacturing exports from other countries may also increase, and maybe they'll keep costs down
Filip Valica: for a bit. As a consumer, I'd like to see the return of higher quality products designed to last longer with repairs or upgrades in mind. But I also know that the stock market and many investors
Filip Valica: are used to the double-digit growth brought on by this consumer spending. As manufacturing returns to the U.S., manufacturers are likely automating as much as they can, but of course, these types of capital investments are expensive.
Filip Valica: Number two, understand the elasticity of demand for your own products. What does a 20% increase in sales price due to the demand for your products? Have you tested this?
Filip Valica: I've priced my $20 retail product at 16, all the way up to $20 to see the difference in consumer demand. The demand I saw at $20 was roughly 25% of what I saw at 16.
Filip Valica: So based on that, I was able to estimate what sales price will yield me the greatest profit per week. It's definitely worth for you to do this exercise so you're ready to take on any cost increases and decide how you will respond. Will you pass them on to the consumer?
Filip Valica: Number three, create well-defined RFQs.
Chris Mitchell: If you want the best pricing from more bidders, it's to your benefit to put some work upfront by creating drawings and specifications with proper dimensions, tolerances, and other information.
Chris Mitchell: The suppliers will take you more seriously and you'll reduce the risk up front by identifying more manufacturing issues. This is why I show the design for manufacture step before the make step in my roadmap online.
Chris Mitchell: You can see this full step-by-step product development process by going to the product startup.com and clicking on start.
Chris Mitchell: So if you'd like to get these takeaways in your inbox every week, just go to the product startup.com, scroll to the footer of any page, and sign up to the weekly wrap -up.
Filip Valica: At the end of the week, you'll get my three takeaways for each guest, along with interesting articles, free tools, inspiring innovations to help you with your own product startup.
Filip Valica: If you'd like to pitch your product on the show or just leave me feedback or questions, leave me a voicemail at 681, 321,
Filip Valica: 115. Join me next time as I speak with Elyse Daniels. She took an idea for fully customizable jackets and turned it into a million dollar business. So tune in next week to hear that episode.
Filip Valica: Thanks again for joining me today. I hope that you're taking action on your products and I'll see you next week.
Filip Valica: Thanks for tuning into this episode of the Product Startup Podcast, the show that teaches you what it really takes to bring your product to market and turn it into a big success.
Filip Valica: This podcast series is brought to you by Mako Design + Invent, the first firm in North America to provide global caliber end-to-end physical consumer product development to startups, inventors, and small product businesses. If you're looking for product development help on your invention, I don't know.
Filip Valica: over to Mako-design.com. That's m-a-k-o-design.com for a free consultation from one of Mako-Design's four design studios from coast to coast. Thanks for listening and see you next time.
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