What and Why Voltaic InsourcesBy Jeff Crystal
There’s been a lot of buzz about insourcing lately. We wanted to share what we do locally vs internationally and why.
We have a dozen plus manufacturing partners in China who produce a range of components for us including solar panels, fabric shells, batteries and cables. The parts for those components come from all over the world including the US (the solar panel coating) and Germany (the solar cells, mostly from Bosch). We bring those components into the US and do the final assembly and testing at our warehouse.
Why – Initial Rationale
The initial reason was that it was cheaper. The US puts a 17% tariff on all bags brought into the country. If we attached a solar panel and battery to that bag and imported the entire thing, we’d be spending a heck of a lot on duties for every bag. It was simply less expensive to assemble the bag here than the cost of assembly plus duties.
Secondary Benefit 1 – Better Inventory Management
We share components across a number of our product lines. A 2 Watt orange panel can appear in 5 different models plus is available as a standalone product. By decoupling the components from the bag, we can keep a lower amount of total inventory and have less likelihood of stocking out of a SKU. We don’t store Orange Amps, Orange Switch, Orange Converter, etc… because it is difficult to predict how many orange Amps we will sell in any given period, but we can do a pretty good job of estimating how many orange panels we will sell across all those 5 SKUs. We end up saving money because we have less cash tied up in complete systems.
Secondary Benefit 2 – More Quality Control
We have some tremendous folks assembling the bags in our warehouse. They care deeply about the product they send to our customers and understand how should look work. They perform an invaluable service in double checking all the components and the system as a whole. We work hard on our supplier relationships and think we have some great partners, but no one is going to know our products as well as we do. Since we feel the pain when we get a customer return, we’re pretty motivated to send out good quality systems.
Unexpected Benefit 1 – New Lines of Business in Components
When we started our business, we had one product, a solar backpack. At some point, when there was a gap in new product introductions, we decided to start marketing our panels as a product for DIY-ers (thanks Phillip Torrone @ adafruit for his encouragement here) and this has become a great and fun business for us. If we didn’t have the inventory of components here, we wouldn’t have started on that business.
Unexpected Benefit 2 – A physical connection to our product
I was in software long time ago and one of the things I like about Voltaic is that we make physical things that people use and are hopefully useful. After spending several days in front of a computer and phone, it is nice to be able to get into the warehouse and get my hands working building something valuable.
I think the bottom line is that we didn’t intend to “insource” for noble reasons, but it makes a lot of economic and emotional sense for us to continue doing it.