The Journey to Continuous Production
One of the hardest unforeseen problems of Fluora is the mechanics of its Supply Chain. We have had years of experience running an art agency, where we would get paid from our client before paying to manufacture our LED hardware. Starting a consumer business flipped this timeline on its head.
Initially, we were able to fund production via crowdfunding campaigns, but those are not sustainable for the long term. The crowdfunding websites are losing support and their core fan base is dwindling. They also take a decent cut of the sales.
To grow an eCommerce brand, you need to have product in stock, and ship it immediately after it is purchased. Even having a customer wait 3-4 weeks is unacceptable. So, we have had to re-imagine our supply chain and financial structure to support this.
From the outside in, it seems like there is 1 easy answer, just go to a bank and get a loan. In reality, it is much more difficult. Most banks don’t want to loan to startup companies that don’t have 5+ years of positive cash flows and profit. With all of our art agency’s profit going towards R&D for Fluora the last couple years, we couldn’t show the banks what they were looking for.
So, we have had to piecemeal together some alternative financing solutions. We ended up using a combination of inventory financing platforms, alternative lines of credit, private inventory financing loans, and negotiating net terms with suppliers to get ourselves enough capital to produce Fluora continuously.
The other side of this equation is optimizing our cash flow conversion cycle. The faster we can make product, and turn product into money, the more leverage we gain with the working capital we have accumulated.
We’ve identified the components that bottle neck Fluora production (mainly the stems and leaves and their internal components), and started making them even earlier in the production cycle, with the custom components inside the stems and leaves, such as the sockets and connectors Fluora and its stems plug into, being the biggest bottleneck. We’ve also broken down the assembly and testing process into more bite sized tasks, and are able to start that sooner in the production process, decreasing overall lead time.
Rather than increasing the batch size, we are opting for smaller, more frequent batches to keep the cash flow moving. We are also working with Shopify and PayPal to decrease the amount of time it takes for us to get paid after we sell, and with Facebook to get net terms on our marketing spend. All of these tiny optimizations have cut our cash flow conversion cycle down by 30%, and we hope to get down another 20-30% by the end of the year.
All this being said, more financing can always help us grow faster, especially as we start to look at leveraging the latest AI developments and tools to make the Fluora experience better, or new interactions and experiences altogether.
