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December 19, 2018 3 min read

Whenever we sell out of any model, we see a spike in messages asking when we’ll have more available. From a brand-owner’s perspective, it can be frustrating, but as problems go, not being able to keep up with demand is one of the better ones to have.

It’s common for folks to ask why we don’t just make more watches, or ask if we’re deliberately constricting supply for some reason. The explanation isn’t simple, but I’ll do my best…

Like most start-up microbrands, we started out using customers’ money to finance our production costs, through discounted pre-orders and crowd-funding projects. For the most part, it worked well for all concerned and still does for many brands.

But pre-orders and crowd-funding projects bring with them some challenges we wanted to get away from, and being able to finance our own production costs without using customers’ money has always been among our goals. I’m happy we’ve been able to get this business to that point.

But that doesn’t mean we’ve got unlimited funds to keep production going constantly. We don’t.

Because we outsource production, we can’t simply turn on the machines and make watches until we decide to stop. We have to order new production of watches with a specified count – 500 pieces, 600 pieces, etc. We can now afford to produce our watches without needing pre-orders or crowd-funding, but that doesn’t mean we’re producing a lot more than we were in the past.

Our overall volume hasn’t increased very much. Because the demand for our watches is more than we can afford to produce in a single production, we’re going to be sold out of some models for some duration of time, and at different times.

It’s fantastic that the demand for our watches is more than we can afford to produce using our own cash flow as financing. The question seems to be – how can we keep up, so we’re never sold out?

If we were making a product which cost much less and took much less time to produce, we could ramp up production much more quickly, and manage the supply versus demand much more effectively. For example, if it cost $1 and took one day to make a widget, we could increase or decrease production volume rapidly, in order to keep up with the rise and fall of demand. If we sold more today, we could increase our production volume tomorrow.

But it takes tens of thousands of dollars and 4-6 months to produce a few hundred watches. If we overestimate demand, we could end up with too much inventory, and be forced to discount it. On the other hand, if we wait to start production until we’re low on stock, or out of stock, then, of course, we’ll be sold out of something while we’re making more.

This is just a reality for small watch brands. It can’t be helped. And if we must choose between having too much inventory and being sold out, being sold out is better.

But, through observation and discussion with others in the industry, it seems like we’re doing a fair job of managing these challenges. We haven’t had to do a discounted pre-order or discount unsold inventory for well over a year, the prices of our watches on the used market seem to be holding up, and we’re seeing a decrease in the frequency and duration of times when we’re just sold out of everything.

Why don’t we take on investors, or get bank financing, so we can scale production more quickly? In my opinion, the availability of more money would likely lead to worse decision-making. Having to pay back a bank loan or report to outside investors would only add pressure and force unwanted compromise. From my chair, it looks like we’re growing at just the right pace, and avoiding over-production.

So, what can we do to manage production to better match demand? We’ve been ramping up production as quickly as our cash flow will allow. We’re increasing the size and frequency of our productions. We’re staggering the deliveries so that we’ve got something new coming in every 2-3 months, not every 4-6 months. We’re working with great retail partners, who play a vital role in this, by purchasing our inventory for sale in their own stores and helping to build market awareness for NTH. That accelerates our cash flow, which allows us to speed up our pace of production.

We’re thankful for the support of our customers, and everyone’s enthusiasm for what we do. We’re doing our best to keep up with demand and appreciate everyone’s patience as we work through these growing pains.

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