For manufacturing start-up, investment in process equipment and supporting infrastructure can be a significant drain on resources.  Decisions must be made when to invest in a process versus whether it should be outsourced.  These decisions must consider the impact on the business:

• Is the process fundamental to the product? Does it have a major impact on cost or quality?  Does it have a major impact on downstream processes?
• Does the process have significant intellectual property? Is it industrial know-how that must be kept in-house?
• Will product flow be disrupted in a way that is detrimental to supply?
• Will a large amount of Work In Process (WIP) be created by outsourcing? This ties up working capital (CASH).

Working capital is just as critical, a high technology start-up can’t follow a simple Commodity Strategy for sourcing of materials.  Imported materials require a long supply chain which ties up capital leaving it unavailable for other critical needs.  Can the supplier finance the supply chain?  Are there other logistics or 3PL options?  Would a local distributor take on the material for supply to others?  Are there other users in the market of the material that supply can be combined with?

Customer payment terms can also be a major drain on cash.  Paying close attention to the “Order to Cash” cycle is critical in not having resources constrained by the customer.  B2B trading with multi-national organisations needs a strong focus on negotiating some relief from standard terms which are usually onerous for a start-up.