| Congratulations, your embroidery business is picking
up steam. You have
identified target niche markets ,
developed a professional image and learned when to
outsource to a professional digitizer. You have just received the
professionally digitized logo with 10 color changes and it looks great;
however, the thought of stitching it on 100 polo shirts makes you break
out in a cold sweat. How long will it take to stitch these out one at a
time on a single needle home machine? Even with a six needle machine,
threads will have to be changed halfway through each design and back
again when it is complete. This is another situation where outsourcing
can be the savvy business strategy. In Part 2 of this series, we
examine when outsourcing to a commercial embroiderer is the best
resource.
Commercial Embroidery Business
Before you find yourself in this scenario, do
your homework; research commercial embroidery businesses in your area.
Think of yourself as a broker. The customer is yours and you are
responsible for customer satisfaction. The customer doesn't needs to
know you outsourced their job. You must be sure the company you hire
will be an accurate reflection of your business standards. It is easy
to find local businesses through the internet and steer clear of any who
have poor ratings. This company may be an extension of your business
and if they do a poor job, you have done a poor job. Set up a meeting
with the owner/manager onsite. It is important to view the facility to
make sure it is clean and odor free (particularly smoking and strong
food smells).
Information you will need to gather:
-
What are the pricing parameters
including variables such as stitch count, color changes and
quantities? If they prefer to quote on a per job basis, make up a
couple of examples so you have a basis for analysis.
-
What is the usual turn-around time
and is it guaranteed?
-
Is there a charge for providing your
own garments/items (blanks) to be embroidered?
-
What are their payment terms? You
may not get any at first, but it never hurts to ask.
-
Is finishing and packaging included
in the pricing? This is a good area for negotiation. You may be
able to save some money by getting the goods straight from the
machine packaging them yourself.
-
As a broker, what discount will you
receive?
Before you finish the interview, ask what their
minimum order is? Many commercial embroiderers do not want to deal with
small orders. This is YOUR OPPORTUNITY! Turn them into a customer or,
at least a source of referrals. You would be more than happy to do
those annoying small orders for them. If they decline those orders
completely, offer to take them as referrals and maybe even pay a
percentage. Leave a stack of business cards.
Before you know if outsourcing to a commercial
embroiderer is a wise business decision, you must understand your costs
and limitations.
Machine Time
The first thing to analyze in making a
decision to outsource is the time it takes to stitch the design.
Estimate the total amount of time required to just stitch 100 shirts if
you could load them onto the machine one after another. (This estimate
does not include prep time, hooping, adjustment, finishing and packaging
time.) To get a more realistic estimate, calculate the number of
stitches per minute at 80%. This adjustment allows for color changes,
trims and those times when the machine is not running at maximum speed.
|
Function |
Qty |
Value |
Calculation |
|
Maximum machine speed |
800 |
stitches per minute |
|
|
Real time speed adjustment |
640 |
stitches per minute (spm) |
80% of max speed |
|
Stitches in the design |
12000 |
|
|
|
Time to stitch design |
19 |
minutes per design |
Real time spm/# of stitches |
|
Color changes |
10 |
|
|
|
Time to change threads |
3.3 |
minutes per design |
20 seconds/color |
|
Order quantity |
100 |
polo shirts |
|
|
Total stitching time |
37 |
hours |
hours |
In this scenario, the machine time needed to stitch
the shirts is 37 hours.
Labor Expense
One of the benefits of the embroidery business
is the ability to multi-task. While the machine is stitching, the
operator is able to complete other tasks nearby such as hooping the next
item, trimming the finished embroidery, packaging, etc. The more
intervention required by the machine operation (such as thread changes),
the less time the operator has to complete additional tasks. In this
example, if the machine is a single needle machine, the labor expense
just to run the machine should also be calculated close to 37 hours. If
you are an owner/operator, is this the best use of your time? Would you
profit more from developing new business and stitching other orders than
babysitting your machine?
Where is the Profit?
One of the most lucrative aspects of the
embroidery business is the profit margin on purchased blanks (i.e.
t-shirts, bags, aprons, sweats...). If you are
purchasing wholesale (and you should be!), typical markup is 100%,
or a profit margin of 50%, on all blanks. For example, a polo shirt
purchased for $14 should be sold for $28 PLUS the price of the
embroidery. The embroidery portion of the order should be calculated at
the retail rate the commercial embroiderer would charge and not the
discounted, “broker” rate you receive.
Therefore, the tangible profit from outsourcing
embroidery lies in the markup from the product and the discount you
receive from the embroiderer. The less tangible profit; however, lies
in customer retention through the service you provide, labor and
material savings and, perhaps most importantly, your increased
productivity.
"Sew" long for now!
Tamara
 |
