Going from prototype to mass production and bringing a new product to market are critical milestones in a product’s lifecycle, often fraught with pitfalls. Of course, as any hardware startup will tell you, the road behind, from building the product to securing funding, can be just as rocky as the road ahead.
Gábor Déberling, owner of contract manufacturer Synermont Ltd, has helped hardware startups from across Western Europe successfully make the leap to high-volume production. We sat down with him to discuss the most common challenges companies in this stage face.
What are your impressions of working with hardware startups that have a market-ready product?
On the whole, we meet really motivated startuppers. No wonder, really: they’ve already managed to complete the product development process, raised capital through several funding rounds and gained positive market feedback. Reaching this milestone is a huge accomplishment on its own, and only a few hardware startups get this far. Then, after our first kick-off meeting, where we explain the next steps, the euphoria usually diminishes…
Why? Is mass production so complicated?
From a helicopter view, the task looks pretty simple: you need to deliver the product in the right quantity, in the right quality, at the right time, in the right place and at the right price. But coordinating and balancing all these elements is actually a very complex and labour-intensive process. In our experience, startuppers usually lack knowledge and experience in this area.
What can they do to avoid failure so close to the finishing line?
As Austrian-American management thinker Peter F. Drucker put it, “Do what you do best and outsource the rest.” In other words, delegate your non-core business tasks and concentrate on those that create real business value. At this point, hardware startups, scaleups and early-stage enterprises need to focus on product development, sales and marketing. Fine-tuning the product and design should be done based on the market’s first response.
What do the five “rights” of manufacturing mean for a startup?
“In the right quantity” and “at the right time” bring a drastic change in a hardware startup’s life. Before, they had ample time to ensure that the production of a small number of prototypes was done properly. Once a product hits the market, volatility enters the picture. You need to scale as the market dictates and if you can’t satisfy its demands, the market will punish you.
After all, what’s a good idea worth if you can’t actually deliver the product in the right amount and at the right time to end users?
What about right quality?
As we always tell our partners, quality should be the most important factor to consider. Admittedly, growing volumes and time pressures are in conflict with quality. But that doesn’t mean it should ever be compromised. This is particularly important for hardware startups, who often sell premium products, so a drop in quality can really harm their brand.
A major best practice of ours is to use the quality and process tools that have been tried and tested in the automotive industry. This might seem like overkill at first, but it’s definitely worth the hassle in the long run.
And the right place for mass production? The first country that comes to everyone’s mind is China.
The thing is in the last 15-20 years, there was no real alternative. Even though it meant long supply and communication chains as well as a high risk of quality loss, manufacturing in China had a huge cost-cutting potential. This has changed in the past 2-3 years, mainly as a result of Covid.
On the one hand, manufacturing costs aren’t that low anymore. In some of China’s more developed regions, operating costs are only 5-10% lower than in Central and Eastern Europe. Also, surging logistics costs have become a serious consideration for businesses. A container’s shipping cost can increase four- or fivefold in just a couple of months. This uncertainty, plus the fact that a new product typically spends about 3 months at sea before arriving at its final destination, are starting to prompt even larger Western European companies to bring production closer to home. This has become known as nearshoring.
Another key factor to consider when launching a new product is the company’s reaction time in case any changes are needed. As soon as a product hits the market, customer feedback starts coming in, and you need to act on it to ensure your product remains competitive. These little tweaks, and how quickly and efficiently they are made in response to emerging consumer needs, can affect your whole brand. That’s why we always underline the importance of short time to market when talking to our hardware startup partners.
What factors should be taken into account regarding manufacturing costs?
One of the biggest winners of the nearshoring trend I’ve mentioned is the CEE region, as the distance is shorter and there’s qualified workforce available at a lower cost than in Western Europe. Another thing we always tell our partners is that besides actual operating costs, they should also consider transport cost and times, how much capital will be tied up, what administration expenses are involved and last but not least, how these factors may affect quality.
That’s why we usually add another “right” to the list: the right manufacturing partner.
Gabor Deberling, Co-founder of Synermont
In the wake of the pandemic, Western European companies have begun moving production from the Far East back to Europe. The impact of nearshoring can already be felt in Hungary, Synermont CEO Krisztián Kavas told us. The contract manufacturing company has seen quick success, with orders flooding in from around the continent, from Austria to Sweden.
"Keep your friends close and your suppliers closer" is a popular business saying that emphasizes the importance of building strong relationships with local suppliers.
