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Move 4:

Logistics

John Mark Goeke

Research

Good Examples

Bad Examples

Application

Summary

Outline (click to travel)

Research

According to krowdster.com, the number one reason for why campaigns fail is that it is basically impossible to make improvements to a product/project or compensate for lack of preparation once it has launched. Truly, many campaigns with good stories and a solid prototypes, both funded and unfunded, have fallen short due to not having considered simple logistics.

 

I found some facts that act as a testament to the lack of consideration put forth by many crowdfunding hopefuls:

To quote an article written about logistics in crowdfunding by pcworld.com:

 

Most successfully funded reward campaigns run into serious hurdles in manufacturing and shipping a successful product. That’s at least partly due to the prevalence of novice entrepreneurs—people with great ideas but little or no business, supply chain, and manufacturing experience—in the crowdfunding world.....with most crowdfunded capitalists, business and manufacturing were not among Zeke Kamm’s primary skills when he set out to start his first venture. The learning curve was steep.“I read thousands of pages of business books,” says Kamm, “and I studied hundreds of successful Kickstarter campaigns to learn what worked and what didn’t.” Kamm attributes much of his projects’ success to that diligence and research.

The problem? “Manufacturing is hard,” says Kamm. He looks to bigger companies to illustrate his point: “Even Apple has shipping delays....Kamm’s point holds true for most crowdfunded entrepreneurs. If major technology manufacturers with global reach and billions in resources struggle to get products out the door on time, what chance does a first-time entrepreneur have, flying solo with a crowd-funded war chest of a few thousand bucks? ... Fortunately, says Burtch, nearly all crowdfunded ventures—more than 95 percent—do deliver promised goods to their backers eventually.

 

To consider one more piece of research, LinkedIn Pulse offered these Logistics Basics:

 

  1. Measure the length, width and height of your item.

  2. Weigh your product with packaging to get an accurate shipping cost estimate and avoid costly fees.

  3. Buy UPC Barcodes for your product. You will need them if you plan to sell on Amazon, retailers or ever expand and use a fulfillment center.

  4. Have an idea what percentage of your product is destined for US and international ( and where). Different destinations have differing customs requirements and costs. Nobody likes surprises.

I will cover these basics in my own completion of the step, as well as consider several other elements of this conceptual campaign. I first, however, would like to analyze some crowdfunding examples that are related to this project.

 

Anchor 1
Anchor 2

Good Examples

I don’t have any good examples, because a good example is just any campaign that delivered on their promises. Any of the good examples included in the past two moves are examples of strong execution on this step, with the exception of the “Coolest Cooler.”


 

+

Coolest Cooler

Zano

The Buccaneer

Bad Examples

Featured in Move 2 as an example of strong product design, it may be surprising to see this project featured on the other end of the “success spectrum.” What was this high-tech cooler’s pitfall? Unfortunately, due to lack of consideration of rewards and costs, the company now has to sell the cooler on Amazon to “keep the lights on”, even though some backers still have not received the product. The company spent $2 million as well on design and engineering, since they did not consider how best to make each element of the cooler. What started as a solid idea is now a source of anger for backers everywhere.

Another example of a project raising a significant amount of money and then falling short, Zano promised to be an intelligent and sophisticated nano drone capable of HD video and photo capture. This sounded good to the 12,075 people who backed this project for 2,335,119 euros, but they unfortunately never were able to deliver. Its release date slipped from June to July and further, and the eventually shipped devices were coupled with major technical errors. According to the criticisms linked, Zano “had a lack of self-awareness of the problems the company was making for itself.”


 

“The 3D printer that everyone can use,” Pirate3D might have to change its slogan, after failing to deliver to almost half of its backers. The product was in no means bad- it was a very functional home 3D printer- so why did it fail? According to Pirate3D, the cost for the machines exceeded what they collected for them, and they also failed to consider the logistics of shipping worldwide, having to pay $600 per printer to ship to places like South Africa. This product shows how failing to consider the little things can cause financial ruin for a successfully funded project.


 

Three crowdfunding project examples with particularly weak consideration of logistics are:

 
Anchor 3

Application

Gathering the “Logistics Basics” from my research:

 

  1. Measure the length, width and height of your item.

Completed in “Move 2”

  1. Weigh your product with packaging to get an accurate shipping cost estimate and avoid costly fees.

Completed in “Move 2” but the product has no packaging, as it is not actually being launched

  1. Buy UPC Barcodes for your product. You will need them if you plan to sell on Amazon, retailers or ever expand and use a fulfillment center.

Does not need to be done, as the product is not being launched

  1. Have an idea what percentage of your product is destined for US and international ( and where). Different destinations have differing customs requirements and costs. Nobody likes surprises.

If launching, I would focus on the U.S. first in order to avoid the shipping and customs costs associated with international sale.

Next, I need to establish a fundraising goal based on my costs and previous research:
 

Cost per belt per material (no bulk discounts):

Total per belt: $2.24

 

Cost per belt per material (bulk discounts for a production run of 1000 belts):

Total per belt: $1.48

Total for 1000 belts: $1480

 

Labor:

It took me about a half an hour to make a single belt. With better work ethic, however, or most likely outsourcing/co-packing, I could probably produce 8 belts per person per hour. Assuming a wage of $8 per hour, the cost of labor is then $8 / 8 = $1 per belt. This brings the total cost of the belt in bulk up to $2.48.

 

Shipping:

The desirable shipping material I determined after much research to be ULINE self-seal white bubble mailers (http://goo.gl/URs0WP). I would require the dimensions of 6”x10”. These packages can be purchased in cases of 250 at $45 per case. So per belt, the cost of the package is $0.18. The cost for 1000 belts will be 4 cases for a quantity of 1000 at a total of $180. My cost per belt is now up to $2.66. For the actual shipping, the cost is $1.64 for packages of 3 oz or less through eBay. This brings the cost per belt up to $4.30.

 

Errors/Misc: To make up for mistakes and other unforeseen circumstances, $1 should be added to the cost of each belt ($1000 dollars in total emergency funds).


Thus, the final cost per belt for a production run of 1000 belts is $5.30 per belt, for a total of $5300.

With a realistic, “ballpark” cost in mind, I need to now determine the fundraising goal and reward tiers, as well as choose a crowdfunding platform, as they take a share of the money raised.

 

 

Chosen crowdfunding platform: While Kickstarter takes a significant cut of the money raised (~8%), it is still worth it due to the popularity of the website, and the lack of a penalty if the campaign is not funded. As a result, I would choose to crowdfund through Kickstarter.

 

Fundraising goal: So, with a cost per belt of $5.30, I would still want to make money on the belt, so I would most likely choose to sell them starting at $10.00 and increasing in price from there. To sell off the 1000 belts, then, I would set my goal at $10,000, expecting a profit of $3,900 or more (accounting for the cut of the money raised that is taken by Kickstarter). This is a worthwhile amount of money to make from this venture. In saying “or more,” I of course mean because I can upsell the belts if they have designs printed on (a note about the custom printed belts: if I sold the belts with designs printed on them, I would most definitely require something nicer than a household printer. I would probably need to work with a flexography printer to actually print the designs onto the Tyvek according to DuPont’s website (http://goo.gl/Ee7fY8), but this is being ignored for now for the sake of simplicity. If I needed the contact information, I would be able to get this from DuPont). I also can make money from people willing to support my cause in a return for a thank you on the website that I would create. That rewards tier would be 100% revenue, since there is no cost to me to write someone’s name on my website.

 

Rewards tiers: After brainstorming, as well as looking at the rewards offered by other campaigns, I decided on the rewards tiers displayed on the product Buy Now page. They are not being repeated here for the sake of length.

 

Anchor 4

Summary

After carefully researching the logistics in this move, I feel that I have laid the groundwork for a campaign that will avoid the pitfalls of the campaigns that failed to deliver. With a simple manufacturing process that does not require outsourced parts, I hope to avoid the pitfalls of other products, and having factored shipping and slip-up costs into my cost per unit, I feel that I would be prepared if any other roadblocks presented themselves. I am confident that Kickstarter will be a great platform for acquiring publicity, and I would make well above my fundraising goal of $10,000 dollars with the unique rewards system offered. I struggled with how to structure this tier, but feel that by offering a few exciting, expensive tiers, basic tiers, early backer tiers, and combo pack tiers, I am really increasing potential revenue. By limiting cheaper design tiers to one of 6 designs, I am also decreasing my production costs, since I would not to constantly switch the printer to be compatible with the design at hand. Having made these considerations, I feel that the only other roadblock in this crowdfunding journey is the video/graphics, which were to be addressed in the next move. I was unable to reach that move quick enough, but I feel that with solid execution on that last step, I will have finished the creation of a very strong and compelling crowdfunding campaign.


 
Anchor 5

Indications of Failure from Logistics

Bad

For every successful Kickstarter campaign, two fail.

More than 75% of all Kickstarter projects in the Design category were delivered late.

Slow

Of roughly 60,000 unsuccessful projects, nearly 40,000 of them failed to reach 40 percent of their goal.

Unfundable

Breaking Down the Cost per Belt

Thread

$0.05

Stabilizer

$0.61

Tyvek

$0.26

D-Rings

$0.56

Labor

$1.00

Package

$0.18

Shipping

$1.64

Mistakes

$1.00

Adds up to $5.30 per belt

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