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Custom Made vs Mass Production

Posted on April 11, 2017 by Jerry Lee There have been 0 comments

Often times we get asked why are your in-stock goods so much cheaper from your custom made to order items? Does that mean you guys are make so much more money off of the custom orders?

 

I would like to take a moment to explain and it is actually quite the contrary, as our profit margins on the custom made orders are actually not as good as the in stock goods, and the simple reason behind this is economy of scale. What exactly is economy of scale? and how does that play into Story Leather's production process?

 

 

Economy of scale in its simplest form is the proportionate saving in costs gained by an increase in productivity level? In our custom made to order process, we do not have economy of scale, as we are literally produce one case at a time. From the time your order is placed, to when you receive your item, your order is actually handled by in excess of 15-20 people, where as with mass produced items, it would be closer to 8-10 people, so on the human resource level, we are talking an extra 7-10 people just to handle a custom order.

 

These 7-10 people are the people that processes your custom order, verifies the order with you (the customer), creates design sketches, ensuring measurement accuracy, placing orders with our production team. So imagine placing a single order for 1000 pcs, the pre-production order is done one time, where as imagine again placing an order for a single item, for 1000 customers, now we are doing our pre-production work 1000 times! When you are calling customers, verifying data, creating sketches 1000x, the cost of producing the goods dramatically increases, and needless to say the process of creating a single piece now takes longer than if you were to produce 1000 pieces of the same item.

 

Aside from the extra human resources required, the material cost of creating a single piece of leather good is also drastically higher than creating 1000 pieces of the same leather good. When we buy leather in bulk, we are able to get better deals - think buying in bulk from Costco vs buying a la carte from your local supermarket, the savings of buying in bulk is HUGE.

 

So why are we doing custom orders if it's so labor intensive and costly? It's an excellent question that many advisers and business coaches ask us, and the answer is actually quite simple - because no one else is doing it! Here at Story Leather, we feel we are offering something unique to our customers; we offer choices! Instead of everything being cookie-cutter and mass produced, we want to offer you something different, something that is uniquely different. We don't make as much money on the custom-made to order goods, but we feel good knowing that when you receive your item, you will feel special knowing how much time and energy have been spent in creating that unique piece just for you.


This post was posted in Doing the Right Thing and was tagged with handmade, in-stock, custom made, mass produced

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