Parser wrote:
Hesh, your labor estimates are pretty darn high. 3 FTE's producing 65 per year comes out to 97 hrs per guitar. Are you including overhead functions such as sales, accounting, etc. in this number as well? Even then it is high. No factory will survive if it takes them 97 hrs per guitar. The shops that I have knowledge of take about 40 hrs per guitar for a quality build....
Hey Trev!
Yeah we all know too that there are likely just as many ways to run a business and view one's staff as there ways to build a guitar too.
I suspect that my labor estimates are high as well and that's my personal goal - to treat people who I care for and value as well as I can...
Here's a very related example of where this can lead. Costco in the US values their employees greatly and as such pays far above the minimum wage even for starting employees. Some folks who have been there a few years make over $21 per hour and the benefits are outstanding too.
WalM*rt.... on the other hand goes through people like feces through a goose.... They are paid very poorly resulting in many Walmart employees having to be on food stamps and at times other forms of public assistance as well. Walm*rt pushes much of the costs of their business as a result of the poor treatment and pay of their employees back on the public, their customers... What results is the public has to subsidize Walm*rt employees and even then I would not wish the life of a Walm*rt employee on anyone.
At the end of the day, beginning too Costco stores are twice as profitable per square foot of sales space as a Walm*rt....
Which model would you want to be?

And yes I am a Costco member and it's great including their new car buying plan which just saved me over $1,200 on my new car just because I belong to Costco... But I digress.
Social contracts aside much also depends on what kind of manufacturer we wish to be when we grow up too. More specifically are we with our 200 units annually produced in our North American facility keen to produce very few models that are all basically the same with little or no customization?
Or are we keen to be Huss and Dalton or Collings who manage to produce far more than 200 units annually but also offer a huge amount of customization available too? Doing more than the cookie cutter single offerings requires a different level of skill set for at least some of your employees. Folks may actually have to fit a bridge pin.... or cut a stinking nut slot at least somewhat close to optimal. And for this there is no way around skilled labor. You can grow your own skilled labor but I suspect that if you invest in folks to this degree you may also have a vested interest in keeping them doing great things for you and not your competitor. Nothing stops them from defecting after being trained on your dime. Nothing that is unless they are happy and well cared for by you/us.
You may think that my numbers are high and they very well may be but I also think that my numbers represent a business model that is "sustainable" in the sense that the investments that one makes, including in any businesses most valuable asset - it's people are more likely to have benefits realized because folks are treated very well.
I left out other costs too in my post modeling a prospective Lutherie biz manufacturing 200 units annually.
Insurance and not health insurance but business liability insurance. Our business pays around 2% of our annual revenues on first class insurance through Heritage. Not only are we insuring people's property that we have a bailment for (stuff in our custody) but we are also insured for accidents that we may cause including knocking a guitar off a bench accidentally, etc. Our insurance also covers $2,000,000.00 toward our building, work loss, relocation, lost income in the event of a fire, etc, theft, and even shipping. I see no reason why a manufacturer would pay less than we do and in fact see a far greater possibility of more liability for the insurance company for a manufacturer that may be milling their own lumber, etc.
A word about how cost analysis is done. There is a term "fully loaded" employee which does not refer to the guy who works for you and loves single malt scotch even at work.... Fully loaded refers to an "expected" level of productivity that the organization employing the person can hope to glean from the employee's efforts. Fully loaded is the sum of the salary, benefits (time off, etc), health insurance, all other associated costs such as workman's comp, unemployment insurance AND..... here's the kicker - fully loaded also refers to that expected productivity which in North America is a factor of 5 times the salary. A person making $40K has a fully loaded cost of $200,000.00 because this is the expected level of productivity and all other associated costs for that person.
If you take my $40K per employee and test it against the concept of "fully loaded" the employee would only take home $8K annually. And who would wish this on anyone. Hell it's not even legal to pay this little for a FTE....
Ken has some good numbers from Martin. I don't doubt that Martin can do this because of economies of scale, prior investment for generations that is now realized and "paid for" (things they own that prior generations bit the bullet for), excellent embracing of technology while never losing site that customers expect a person to be making a Martin not some stinking machine, and a reputation second to none as the standard bearer of the industry. Both the D-18 and D-28 are what all others are judged against.
I'll save it for another post but Martin does a lot of things right by the way IMO including environmental stewardship but more on this later.
With Martin's 500 folks 20 hours per unit is entirely possible but that number likely does not include the support services, sales, marketing, accounting, procurement, slipping and deceiving, etc. But when you are Martin with the distribution channels that they have developed and grown you have to operate as an industry leader because you are very much one.
So sure you and I and several others can lease a building, bring in some CNC, hire some folks and excrete some number of units annually. But most importantly since this would be a new business what differentiates our offerings from anyone else's? What is our value proposition and what makes it winning in the market place.
Why do we see so very many builders essentially fail? How many people have come and gone from this very forum and how many of these people had big plans that they even voiced here on the OLF? I wanted to build full time but the numbers told me that I would be working for virtually nothing.... Sure I might be happy as a clam until I became homeless....
We've fancied building and have the market for it too based on folks who love our work already. But the numbers just don't work and instead we are WAY better off doing what we are doing. I can think of lots of aspects of Lutherie that one can make a living with and do fine. But when I do the numbers and throw them on the wall of business costs, regulation, market concerns, competition, the economy, one's own personal requirements such as say health insurance, etc. - nothing sticks....
Every day I see guitars that were manufactured by some big names and every day I also see guitars that the maker is long gone....
China - how could we possibly discuss Lutherie and manufacturing without mentioning China. You know don't you that if the Chinese ever learn to use serviceable glues and do a proper bolt-on or dovetail joint that we can all kiss our own prospects good bye... Even Japan which is a democracy and very much a modern, advanced nation greatly benefitting from our wrong minded belief that Demming was a whack-job also produced very high quality guitars. Again the neck joint and glue choices held them back
But at the end of the day Japan and China can easily change neck joints and glue choices but can we say that we will work for .50 cents an hour or have a nationalistic obsession with quality that prevents even the line workers from ever knowingly letting defects pass?
I'm not throwing in the towel by any means but I am attempting to make it clear that anyone who fancies starting a Lutherie business of any size better know in advance that their costs are highly likely to far exceed their initial expectations, the market is full of stories of people who tried and failed, the economy is fickle as all get-out, and based on recent surveys perhaps, just perhaps the hay days of guitar making are passing us by now.
This is why the good folks who make a run at it and succeed have all of my admiration - this is NOT easy..... And I am sure that those who are in the trade, are part of a profitable manufacturing concern, etc. will read this and say that whack-job Hesh guy is right about this - the Lutherie biz is NOT easy by any means.
