Manufacturing in a Gig Economy
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    Default Manufacturing in a Gig Economy

    One thing I've thought about is manufacturing going back to a piece rate system like it was centuries ago where people produced parts at home or at a facility and employees are only paid by the piece. What if people machined parts in hackerspaces/makerspaces or built furniture pieces like on Etsy and sold online? How feasible would it be for them to compete with larger manufacturers?

    Some basic math I did was on building a table for furniture.

    I can get the lumber I need to make a small end table from yellow pine for about $5. Let's assume it takes me 20 minutes to cut all the pieces for one table, as well as use the planer to smooth/even them out. Let's also assume I spend 20 minutes gluing the top together. And then let's say it takes me another 20 minutes to do final assembly using screws for legs/supports. I've maybe used 6 or 7 bucks in materials, at most. And it's taken me an hour to build this end table. Look at what end tables sell for - lowest I see is around 60 bucks, many times 100 or more. These comparable sales on Google Shopping and Etsy I'm looking at aren't even painted. Wal-Mart had a small table like this made of fiberboard that was not assembled for 40 dollars. With the proper setup, I believe this run time could be reduced more, maybe to half an hour or even less. I'm using conservative numbers to make the point.


    So I have 1 hour of labor per table in production time + let's just say 8 bucks in materials. Now assume I'm selling 20 at a time to a retailer or distributor, and I'm selling them for 40 dollars.



    Gross Sales of 20*40 = 800

    COGS of 20*8 = 160



    Gross Profit of 800 - 160 = 640



    640 / 20 hours = 32 dollars per hour I'm getting paid to make these tables.



    Of course there's distribution/shipping - I'm not sure exactly what the convention is for retailers to get furniture, i.e. whether they pick-up or I have to handle freight. Even then, surely there's a way around this. People could make products for specific markets - like making things in a city specifically for distribution within that city and nearby areas.

    The big issue I see is that the production capacity would be small, but if you spread this out over a large number of people doing this, that would get larger.

    What I'm basically asking about is an Uber of manufacturing.

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    Are you just talking about how you would price things?
    Or are you suggesting that you would coordinate a network of other people to make the stuff for you?

    I sometimes job out parts, to people I know. But they are businesses, even if they are one man shops.
    And I file a 1099 for what I pay em.

    My big problem with Uber, (besides the fact that its a clearly flawed business model, which lost $5 BILLION last quarter alone) is that they are illegally calling people contractors when they are clearly employees. And then paying em diddly squat.
    I have had employees for a long time, and always been upfront legal about it- both for financial reasons, but moral ones as well. I think its wrong to pay somebody and not cover their unemployment, SS, Medicare, and job accident insurance.

    Anyway, I dont think you will find competent people, who have access to the tools they need, to work for the rates you want, completely off the books. I know carpenters, who own their own tools, and get $35 to $50 an hour. And thats usually 40 hours or more a week. Why would good woodworkers work that cheap, and why are you assuming that even using a makerspace is free? There is overhead, somewhere, in that 32 imaginary dollars an hour.

    Plus- somebody has to train, and then inspect, and correct errors, on those parts- are you including that cost, which generally goes to the most skilled woodworker in the bunch?
    And how are you going to sell?

    I think the basic idea of starting your own business is great, and you can contract out labor for sure- but the business end, the selling end, the managing taxes and licenses and packing and shipping and returns and billing is usually a pretty big part of the business. I usually figure direct labor at between and 20% of retail sale prices, and I think your not including a lot of potential costs.
    If you are paying somebody the equivalent of 32 bucks an hour, your wholesale price needs to be a lot higher.

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    You are not including any of the multitude of taxes that are a significant portion of the markup in products in addition to business overhead.

    At $30.00/hr., you would starve on the $62,400 after the Fed and State income tax, sales taxes, property taxes, SSI and FICA, equipment replacement-investment costs.

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    I was thinking of it more like a part-time thing for many, or something for people that don't want full-time jobs from an employer with responsibilities. Uber made a lot of people taxi drivers that never imagined doing so. Makerspaces/hackerspaces are generally cheap - I'm paying 35/month for the one I'm at now, and there's another one in Charlotte, NC for I think 40/month. There is a full-on shop with a 5-axis CNC in Atlanta that works something like this, but it's a little over a hundred a month. However, on that one, it's for-profit instead of non-profit like the vast majority of spaces. You have to reserve machine time and then those people come in and make the products they're making. It's more business-driven, and I think they do a lot of prototyping or custom work for people.

    Checking the parts would need QC people, but maybe those people could be at the spaces or the parts could be shipped to a center where people check them. The other thing I'm talking about is just selling online like on Etsy, etc.

    That overhead you're talking about is only the membership fee in a makerspace, which is near nil. If it's at home, you have power, etc., but that doesn't sound like a lot, either. I can see where in the latter it would add up a bit, but not enough to make up for the large price difference in that example vs Wal-Mart or others.

    I wasn't assuming there would really be training, but more of an onboarding process that checks they're competent. Either the parts are bought by the QC folks or they don't get anything. On the flip side, I'm also just talking about people making things themselves and selling online, which would be 100% them and no one else.

    They have something called OrderFox and MakersRow that does something like this, and then of course there's MFG.com. But those are just quoting systems for commercial players like you. I'm talking about those that are retired, those that want to earn money on the side or work part-time, etc.

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    Quote Originally Posted by Ziggy2 View Post
    You are not including any of the multitude of taxes that are a significant portion of the markup in products in addition to business overhead.

    At $30.00/hr., you would starve on the $62,400 after the Fed and State income tax, sales taxes, property taxes, SSI and FICA, equipment replacement-investment costs.
    Totally disagree. I have passive income I live off of now that's less than that. I pay taxes at the end of the year like anyone else. I just don't have it taken out of my paycheck. There are people that make less in businesses and do fine. With using a makerspace/hackerspace, you wouldn't have equipment investment costs - equipment replacement may be an issue over time if people are using the machines over and over, but there are a lot of spaces that don't seem to be charging any extra for this - they just charge a standard rate every month. I have only seen one place that is over 100/month. Most are around 50

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    There already are 'Ubers of manufacturing'. Xometry etc...

    Try working for them. LOL! In your 'makerspace' (they used to call them hobby clubs)

    I love the 'tech' industry of the last 10-15 years. Take something someone has been doing already for the past 100 years (deliver food, rent a car, drive a car, and now make some parts) and through an app on computer/phone send a notification to the most desperate that the 'gig' is available and then take some cream from the top.

    The second part of their business models is the best. Since none of them can make money just taking the cream off the top, (even by paying pitiful 'wages' to those doing the work or by avoiding the whole capex bit of buying a car or machine)they need to convince zealots to keep giving them money through endless share issuances. This they do by using the same internet to plaster hype about 'tech', 'growth', and 'the future'.

    I can't see this ending well.

    I remember when Silicon Valley used to actually make silicon and tech. Now it's changed into the business of making crappy jobs crappier.

    We live in a world of unprecedented abundance. I can look at craiglist under the free section and find something better than the crappy pine table you describe. Heaven forbid you sit around waiting for a custom job to make a theoretical 32/hr

    Since I don't do anything anymore I'm thinking about making an UberJanitor App. Anyone know of any venture capitalists willing to tide me through until we can IPO for...I'd say 10billion would be a good fair value

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    double posted....
    Last edited by rkucbel1; 08-26-2019 at 04:47 PM. Reason: double posted

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    Quote Originally Posted by nyc123 View Post
    I was thinking of it more like a part-time thing for many, or something for people that don't want full-time jobs from an employer with responsibilities. Uber made a lot of people taxi drivers that never imagined doing so. Makerspaces/hackerspaces are generally cheap - I'm paying 35/month for the one I'm at now, and there's another one in Charlotte, NC for I think 40/month. There is a full-on shop with a 5-axis CNC in Atlanta that works something like this, but it's a little over a hundred a month. However, on that one, it's for-profit instead of non-profit like the vast majority of spaces. You have to reserve machine time and then those people come in and make the products they're making. It's more business-driven, and I think they do a lot of prototyping or custom work for people.

    Checking the parts would need QC people, but maybe those people could be at the spaces or the parts could be shipped to a center where people check them. The other thing I'm talking about is just selling online like on Etsy, etc.

    That overhead you're talking about is only the membership fee in a makerspace, which is near nil. If it's at home, you have power, etc., but that doesn't sound like a lot, either. I can see where in the latter it would add up a bit, but not enough to make up for the large price difference in that example vs Wal-Mart or others.

    I wasn't assuming there would really be training, but more of an onboarding process that checks they're competent. Either the parts are bought by the QC folks or they don't get anything. On the flip side, I'm also just talking about people making things themselves and selling online, which would be 100% them and no one else.

    They have something called OrderFox and MakersRow that does something like this, and then of course there's MFG.com. But those are just quoting systems for commercial players like you. I'm talking about those that are retired, those that want to earn money on the side or work part-time, etc.
    There are a lot of IF's in this plan. A few at a time maybe, the cost of doing business is low IMHO. Auction sites and marketing venues take a bigger bite than expected along with shipping and packaging. On a very small scale you have no leverage to wield and, don't forget to include transportation for materials and processing.

    I guess that idea is OK if the market is there AND, it isn't copied at a lower price before you sell off the first batch?

    The other thing with making stuff for retail customers, they have a wide selection and varied taste. Artsy whimsical stuff sells plain jane utilitarian stuff is lost in the shuffle IMHO The Uber model works for things like transportation, it is more applicable to the 5 axis model of access rental than the producer end.

    I have a friend who was a former partner of the guy that started Tech Shop, it was a noble idea, not sure these kinds of places can exist in the long run. The capital cost, payroll and site services are not trivial and, the membership thins out over time. I can see the fractional time shop becoming more of a viable model, pay for X time on X machines and or other services.

    Steve

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    A lot of dealer mechanics work peace meal...you see the quality it brings lol.

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    Piecework is as old as the hills. In this day, seems to me, it's the equipment requirements that dictate the opportunity to put labor manufacturing labor back into individual homes and the like.

    There's a continuum of manufacturing from stuff that requires practically no capital investment to categories that require billions up front.

    For the little-or-no-capital types there are kickstarter sites for funding, places like Ebay, Etsy, and craft markets for sales. It's pretty much a solved problem. And there are already lots of people using things like 3D printers to serve a niche. I suppose you could have an AirBnB or Uber to rent out time on someone else's printer or CNC router, but the low end machines are so cheap it would rarely make sense.

    For the modest-capital-required sort of manufacturing there are the scores of small business owners on this site who saved enough to buy a first CNC machine, might have paid a neighbor on a 1099 to help out, and gradually acquired a dozen machines and a hundred customers. Except for the problems of growing from a one-man shop to a place with a dozen employers/subs that starts to be treated with all the regulatory overheads of a larger company, this is also and already eminently doable. As noted above, there are sources that claim to do sales and also sites for subcontracting -- but they generally don't add much value.

    But it's the billion-just-for-starters businesses that are responsible for most of our manufacturing output. This includes auto, engine, ag and construction equipment, aero, space, semiconductor, steel making, chemical production, most consumer electronic, etc. businesses. Here's where the big $$$ in manufacturing are and where the "Uber" model (where everyone owns their own equipment) makes less sense. There are things like silicon fabs that rent out capacity, but they don't need an intermediary to help with that.

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    When I hear ideas like this, I always think- If it was easy, everybody would be doing it.

    Who pays for bits and blades and sharpening and sandpaper and screws and stain and clearcoat and hardware and packaging and labels?
    Makerspace?
    $35 a month? Seriously? I think once much actual production for profit starts taking place, Maker Spaces are gonna want to see more money.

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    I have some actual profitable work in a makerspace... want to piss a bunch of people off really quickly... Its fine if you make a pittance, but if you have real skills and real customers and can bill real money watch out.

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    Quote Originally Posted by Ries View Post
    $35 a month? Seriously? I think once much actual production for profit starts taking place, Maker Spaces are gonna want to see more money.
    Exactly my thought. To make it work you'd have to use a lot of hours and a lot of the machines. Not going to fly.

    Damned if I'd rent out part of my shop let alone access to tools for $35/month (or any price at all) and I've a fair bit of free space now the boat is gone.

    PDW

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    Another big problem with running machine jobs as cottage industry piecework is quality control. Who's going to do the inspection? Who's going to tell Joe Drunk that he's not getting paid for the 10 crap pieces he turned in last week?

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    Quote Originally Posted by nyc123 View Post
    One thing I've thought about is manufacturing going back to a piece rate system like it was centuries ago where people produced parts at home or at a facility and employees are only paid by the piece. What if people machined parts in hackerspaces/makerspaces or built furniture pieces like on Etsy and sold online? How feasible would it be for them to compete with larger manufacturers?

    Some basic math I did was on building a table for furniture.

    I can get the lumber I need to make a small end table from yellow pine for about $5. Let's assume it takes me 20 minutes to cut all the pieces for one table, as well as use the planer to smooth/even them out. Let's also assume I spend 20 minutes gluing the top together. And then let's say it takes me another 20 minutes to do final assembly using screws for legs/supports. I've maybe used 6 or 7 bucks in materials, at most. And it's taken me an hour to build this end table. Look at what end tables sell for - lowest I see is around 60 bucks, many times 100 or more. These comparable sales on Google Shopping and Etsy I'm looking at aren't even painted. Wal-Mart had a small table like this made of fiberboard that was not assembled for 40 dollars. With the proper setup, I believe this run time could be reduced more, maybe to half an hour or even less. I'm using conservative numbers to make the point.


    So I have 1 hour of labor per table in production time + let's just say 8 bucks in materials. Now assume I'm selling 20 at a time to a retailer or distributor, and I'm selling them for 40 dollars.



    Gross Sales of 20*40 = 800

    COGS of 20*8 = 160



    Gross Profit of 800 - 160 = 640



    640 / 20 hours = 32 dollars per hour I'm getting paid to make these tables.



    Of course there's distribution/shipping - I'm not sure exactly what the convention is for retailers to get furniture, i.e. whether they pick-up or I have to handle freight. Even then, surely there's a way around this. People could make products for specific markets - like making things in a city specifically for distribution within that city and nearby areas.

    The big issue I see is that the production capacity would be small, but if you spread this out over a large number of people doing this, that would get larger.

    What I'm basically asking about is an Uber of manufacturing.
    I don't know what you have in mind for the table, but the numbers you used are low by about a factor of 6. I've built furniture and there is NO WAY I could make a table for anywhere near that amount of time.

    Tom

    edit. There were as least two threads in the last year or so about requests for contract machining. The company is a go between the end customer and the contract machinist. The responses from the shops that responded was not good. Can't remember the companies. Maybe someone here can recall the threads.

    T

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    Quote Originally Posted by TDegenhart View Post
    I don't know what you have in mind for the table, but the numbers you used are low by about a factor of 6. I've built furniture and there is NO WAY I could make a table for anywhere near that amount of time.
    Explain to me exactly what part of that is off by a factor of 6. If I'm getting these times and built tables, then I have some serious questions about how someone else who says they've done it.

    Let's assume it takes me 20 minutes to cut all the pieces for one table - how is that off? Using a chop saw to cut out four legs, the parts for the top, and some supports? That's a few pieces of wood. Hell, that may even be too much time if you're just doing this over and over again in parts, instead of start to finish building a single table.

    I'm not gonna bother breaking the rest of this down until you can explain that because what you said about a factor of 6 makes no sense at all.

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    Quote Originally Posted by plastikdreams View Post
    A lot of dealer mechanics work peace meal...you see the quality it brings lol.
    Back in my early twenties I worked at a dealer. It was hard to make time on most jobs, especially on warranty work. I finally moved over to working on the trade ins for hourly pay. I ate a lot better after making that move!

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    Quote Originally Posted by Ries View Post
    Are you just talking about how you would price things?
    Or are you suggesting that you would coordinate a network of other people to make the stuff for you?

    I sometimes job out parts, to people I know. But they are businesses, even if they are one man shops.
    And I file a 1099 for what I pay em.

    My big problem with Uber, (besides the fact that its a clearly flawed business model, which lost $5 BILLION last quarter alone) is that they are illegally calling people contractors when they are clearly employees. And then paying em diddly squat.
    I have had employees for a long time, and always been upfront legal about it- both for financial reasons, but moral ones as well. I think its wrong to pay somebody and not cover their unemployment, SS, Medicare, and job accident insurance.
    Just in response to the Uber comment. How are they employees when they can take rides or not if they don't feel like it? Do your employees get to tell you "nah, I don't feel like doing that, I'm going to take a break"... Well maybe they can say it once.

    OK to be clear I am talking about Lyft, but I think they pretty much operate the same way. I know Lyft does have a driver program that gets you a rental car, but I think most people use their own vehicles. Not to mention in my area, I figure the drivers make about $15/hour, plus tips. I know the fares I paid for a 10 minute ride, plus add in driving time between rides, I figure 3 rides an hour approximately. Not to mention premiums for airport rides....

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    To trboatworks,

    Somehow I messed up the thread trying to edit/delete a comment. Replying to your question about have I built these things - yes, I have. That's why I asked. This was the first thing I started making - tables.

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    First, let's establish the ground rules. Are your times from a fully tooled factory without indirect overhead or from a small individual shop?

    Tom

    edit Actually there is direct overhead that must be included. Someone has to draw and transport stock to the workstation, someone has to handle scrap, someone has to orient the pieces for gluing as in grain up, grain down, grain up..., someone has to dowel or biscuit the edges, someone has to clean, trim and surface the glued board, edges have to sanded or machined. Frame must be made for the legs, cut, finished, fastened to the top. Legs must be made same as the frame. Finishing, inspection, packaging.

    Then we have to throw in all the indirect costs, purchasing, management, setups, maintenance.....

    This not just a slam, bam, thank up mam.

    Tom


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