Bird Brained Strategy

I love birds – especially the way they serve them at Subway and Boston Market.  Live ones, however, are a different matter. If you stumbled onto this site through an internet search for the best cage for your bird, hit the back button and move on.  I not only know nothing about pet birds, I can’t conceive of why anyone would want to shell out serious money to become the proud owner of one.  No matter – quite a few people apparently derive some sort of enjoyment from it – enough to lay out a thousand dollars or more for cage to keep one in.  For that kind of money you can buy a freezer big enough to store a lot of birds, but to each his own, I suppose. 

What sent me down the trail of birds and their high priced homes was an article on outsourcing in Business Week.  I read the story of Carol Frank, owner and operator of Avian Adventures out of Dallas, who has churned through fourteen manufacturers in three countries trying to find one that can take care of her.  Avian Adventures peddles high priced bird cages and has been in business for ten years, but there are a couple of problems with their business model.

One big problem is that Avian Adventures’ web site proclaims in bold letters that the company is a "Manufacturer of Premium Quality Bird Products".  Her personal web site is a bit more honest, where the company is described as a designer and importer.  (It strikes me as a bit ironic when companies want the prestige that attaches to being identified as a manufacturer, while operating under the premise that manufacturing can be done as well by people who just last week were hunkered down in an Asian swamp or a South American jungle and today are making their products, as it can be by experienced, trained Americans, Japanese, Canadians or Europeans)  Regardless, the bird cage designing part has gone OK, but the importing part has been a chore. 

"Frank first tested 12 manufacturers in Mexico.  She chose the only one that delivered the quality she wanted but soon found the pace of production horrendously slow.  A deal with a Chinese manufacturer ended in disaster when the factory went belly-up. ‘We lost 50% of our sales volume in one month,’ she says.  Finally, in 2005, with the help of a manufacturing agent, Frank found a Malaysian company."

The happy ending hasn’t come from Malaysia quite yet.  "Frank says her manufacturer doesn’t understand yet that its not just a birdcage, its a piece of furniture that people want to be proud of’."  According to Business Week, however, since Avian Adventures pays 60% less in Malaysia than they would in the U.S., all of this is OK.

Carol is an accountant, by trade, as well as a motivational speaker and a bird lover.  There is no question she is smart, but it is difficult for people to know what they don’t know sometimes.  If I had bought 12 Mexican birds and a Chinese bird, and they all died, and now I owned a Malaysian bird and it was pretty sick, I would like to think that I would look up a real bird expert – like Carol, for instance – and get some sound advice.  Too bad she has not seen the wisdom in looking up a serious manufacturing person.  Probably just the accountant in her showing through – just can’t see past that 60% price differential.

If she did talk to a manufacturing person – like me, for example, or just about anyone who hits Superfactory on a regular basis – she would learn that she should have expected the Chinese outfit to go ‘belly up’.  Serious Chinese companies are not interested in low volume bird cage manufacturing for customers halfway around the planet.  The Chinese manufacturing companies do business in lot sizes, and a lot size equals a container load.  While she may not have known that $1.5 million a year in bird cages doesn’t even fill a container a month, the Chinese do.

I would also tell her that there are many good Malaysian manufacturers, but Malaysia doesn’t do low volume "furniture that people can be proud of".  Malaysia does ‘high volume cheap’, and they are very good at it.  Like most of the avid outsourcers, Carol seems to think that globalization has somehow invalidated the age-old business maxims, ‘there is no such thing as a free lunch’ and ‘you get what you pay for’.  It hasn’t.

While the pet loving community – God love ’em – makes a very big deal about the critical nature of the specifications of bird cages, in the manufacturing spectrum they dwell near the low end.  The way they carry on about powder coating and grades of stainless steel you would think that they were critical components for the space shuttle.  Carol should also be told, however, that in the spectrum of manufacturing technology, Malaysia also dwells near the bottom, as do any Mexican and Chinese manufacturers willing to take on low volume bird cage customers.  I am certain that, while holding bird cage finish tolerances would be a walk in the park for most American manufacturers, it is an ongoing adventure in Malaysia.

Just for kicks, I looked at the Avian Adventures deal for a middle of the product line, $1,000 bird cage, then looked at what a similar bird cage would cost from Animal Environments, which runs a state of the art manufacturing operation in California.  I also checked out the same deal at another serious American manufacturer, California Cages. 

Carol can get her cage to you in 2-4 weeks.  The guys in California can ship in a couple of days.  Carol will guarantee her powder coated cages for 6 months, and stainless steel for 2 years.  The California folks back their powder coated cages for 5 years, and offers a lifetime warranty on stainless.  I think, when the time comes for me to own a live bird, I’ll call one of the guys in California and get a high quality cage in a couple days.  Given that my other choice is to call Carol and get a marginal quality cage in a month for about the same price, that seems like the wiser choice, don’t you think?

So the Business Week writer cleverly says, "With production cheaper than it would be in the U.S., Frank can afford the occasional aspirin."  I disagree.  By the time the cost of low volume shipping, poor quality and long lead times (Carol – I can get a new car in 2 weeks, and you need 4 weeks for a bird cage?) are totaled up, then the cost of losing a whole lot of sales to your American manufacturing competitors is thrown in, I think Carol’s 60% savings is pretty well shot.  Besides, it is going to take something a lot stronger than an occasional aspirin to get by in the high end bird cage business using Carol’s model – I’m thinking Jack Daniels by the case, and even that might not be enough.

Her book is called, Do As I Say, Not As I Did!: Gaining Wisdom In Business Through The Mistakes Of Highly Successful People.  Carol needs to call up a serious lean, domestic contract manufacturer and fix her business plan; then put out a new edition of her book with a chapter titled,  "How I Let My CPA and MBA Delude Me Into Thinking I Didn’t Need To Know Anything At All About Manufacturing."