Minor setbacks, new shop space

It's been a while since we've updated.  August proved to be a very busy month - I took some unpaid paternity leave to be primary care provider for my newborn son due to Mom's business trips and between all the travelling, we've only really been home for about a week or so  since Aug 6th.  I've also been pretty sick from the grueling travel schedule, which didn't help things.

One of the biggest news that we have, is that OpenBeam had secured a commercial lease on a shop space, and we're sharing the space with them.  We had to move very quickly to make this happen, during whatever little time we had in August, to complete the move.  The reason why we jumped on this is because In the Seattle metropolitan area, warehouse space generally rents for about $0.95 per square foot, plus maintenance fees on the shared space of the property (in our case, the electricity for lighting the parking lot, for example, and various real estate taxes, the cost of hiring a gardener to mow the sidewalk grass, etc).  Unfortunately, in the Redmond / Woodinville / Kirkland area, spaces under 2000 sq ft is pretty hard to come by; and most commercial leases requires a 3 year lease.  

We were able to find a warehouse space at 1260 sq ft (20 x 61 ft bay).  Not only that, they only required a one year lease.  The space is about 10 minutes from my current job, 5 minutes from Mike Z (the Z in ZT Automations) house, and with easy access to both I5 and 405.  It was also completely empty - they just put a bathroom in for us.  We don't need fancy offices; we just need a place to store pallets of extrusions and parts for both OpenBeam and ZT Automations.

And look!  The landlord was even nice enough to put in a bathroom for us.  As an entrepreneur, I've peed into a fast food beverage cup and discretely dumped out the contents a few times in my storage locker.  I considered it part of paying the dues; but I can't exactly ask hired staff to do the same; the nearest public restroom was at a gas station that's 5 minutes drive away at our locker.  The fact that we get a real bathroom now means I can actually hire staff / contractors and give them a decent place to work!

We've been running OpenBeam and ZT Automations out of garages, storage lockers and borrowing living space from family members.  It is AMAZING how much time this sucks up - on average, we spent hours per week ferrying materials and supplies from one place to another as they are worked on.  Our dining room tables have at various times been the shipping station, the receiving station, the engineering meeting table and occasionally, a place for the family to eat.  And as we found out the hard way time and time again with the Kossel Pro project, for the lack of a single part, single envelope, or label, the entire operation can shut down.  Both OpenBeam and ZT-Automations have also grown beyond what we can shuttle to the UPS store; an average order for OpenBeam and for Amazon replenishment now requires 2 SUV loads to the UPS depot; the last printer order to our distributor left Mike's garage on a wooden pallet.  It surely will be nice to be able to pull a lift-gate truck up to our bay door and have them take a couple of pallets worth of goods off our hands - or drop off 5 metric tons of cargo!

Here's our shipping station - the shipping and counting scales are already there along with one of the two label printers.  The shelves holds various USPS Flat Rate boxes, plus all the different pouches for various courier services, Customs declaration forms, etc.  It's really exciting not to have to repack everything up and spend 15 minutes unpacking every time I need to ship a package.  

Here's our shipping station - the shipping and counting scales are already there along with one of the two label printers.  The shelves holds various USPS Flat Rate boxes, plus all the different pouches for various courier services, Customs declaration forms, etc.  It's really exciting not to have to repack everything up and spend 15 minutes unpacking every time I need to ship a package.  

Of course, with a shop, we are planning to expand some of our operations, now that we have space.  I took over Zach's room before he was born and converted it into a photo studio to bang out our documentation; we look forward to having a full time photo and video studio setup again.  On the other side of the shop, we're going to get some stainless kitchen carts from IKEA so that we can start running Kossels unattended for long term testing and filament characterization.  We only print with PLA while running at home as I didn't want to expose Zach to VOCs from the 3D Printing process, but I'd happily run Nylon, ABS and PC/ABS on these printers once we have the print stations setup (and remote monitoring in place).  We still have assembled machines to ship for our Kickstarter campaign, and having this facility will allow us to test and package these machines for shipping.  (They are BIG - a single shipping box minus the crate took over all my space in the living room and I have 10 of these machines to deal with).

Supply Chain Setbacks

Unfortunately, not everything have been smooth sailing on our supply chain side.  Without naming names, we ran into a big hot mess on our supply chain.  At Maker Faire Bay Area, I met two people that I thought would be able to help us with consolidation and packaging of our goods.  They have a mediocre website, lives in Shenzhen, and seem to be pretty well connected in the Maker Pro community.  Being cautious, I even checked their references cited on their website - one of them is someone I know and respect in the Open Source Hardware community, and the reference came back positive.

A few weeks after we wired them the money, it became apparent that there is something amiss.  Simple things, such as moving funds from one account to another, or paying vendors, appeared to be way more difficult than it should be.  We started getting back channel feedback from our vendors of payment not arriving.  One vendor even thought someone is masquerading as OpenBeam, because they couldn't answer basic technical questions that was posed by the vendor.  Upon questioning, it was discovered that the funds were wired to one of this guy's friend's account, one that he had no direct control over, and things seemed really sketchy.

Turns out, the organization was the partnership between a boyfriend and girlfriend; the relationship went sour, and the boyfriend wanted to set out on his own, but unfortunately, since the girlfriend was the one that is a native Chinese speaker and Chinese national (whose name was on the bank accounts, business registrations, etc, as it's really hard for foreigners to get set up in China, especially running a business) - boyfriend wasn't terribly successful on his new venture.  At one point, the conversation revolved around how we are going to pay our fastener manufacturer.  For better or for worse, we ended up placing a roughly US$20,000 order for fasteners for combined OpenBeam and ZT Automations -  and in local currency, this was a 6 figure sum (over CNY$120,000).  With recent banking regulation changes and anti-corruption measures in China, the bank rejected the transfer of such a large dollar amount across border (since the bank account was in Hong Kong, and the vendor was in Shenzhen).  The only idea from boyfriend was to *walk* the currency over.  I promptly shot down the idea - my Dad amusingly pointed out that the largest bill in Chinese Yuan is a CNY$100 bill and that it would take a small suitcase to transport that much cash -  while I pointed out that's a dollar amount that someone would get mugged or killed for, even a white boy in China.  Of course, we would have zero recourse if the money was to be "confiscated" by a corrupt border guard or if the guy had tripped and dropped the suitcase into Shenzhen river, etc.  We ended up getting the money wired back and paying the fastener vendor by some other equally interesting ways...

We don't believe that anyone is going to take the money and run (there would be easier ways to rip us off US$50k - and there's been progress on goods being ordered and packaged - and admittedly, 2000 stepper motors isn't as useful to someone in Shenzhen as it would be to us with an Amazon account to sell them on), but every step of the way, we have to do a LOT of hand holding and a LOT of followup and re-followup.  This had significantly cut into the available time that Mike and I have to handle other business stuff, such as answering emails, and providing support.  (Well, my travel schedule didn't help things either).  I didn't really want to air the dirty laundry or sink anyone's business, but I also feel that people require some transparency, and what's been going on had been a freaking nightmare to say the least and we need to come clean with how we've been spending our time.

There is some silver lining in this cloud.  It is beyond ridiculously painful to think that the engineering on Kossel had been done for a year - for over the past year, we've been killing ourselves trying to figure out how to source parts, get them over to the US and get the parts put into a box - and to some extend, helping people grow their business.  And, it's not like I can't speak Chinese - since the start of this project I've been brushing up on my technical Chinese, as well as practicing my Chinese input skills, to the point where I can now issue bilingual Chinese and English engineering drawings and work instructions.  As a result of this last f**kup, I've finally decided to do research on, and will most likely be spinning up my own company in Hong Kong to handle the logistics and import-export for this business.  With a Hong Kong company (and a Hong Kong business account capable of sending and receiving Chinese  Yuan) we should be able to resolve the issue of paying vendors in China relatively easily.  The other advantage is that it will drastically clean up our books in the US; we'd cut a PO to our Hong Kong company and our HK company can take care of all the various sketchy ways to get large amounts of money across the Chinese border.  (Under HK law, companies are required to have their books audited every year by a certified CPA, so as long as we pay up and get a certified CPA to keep the books and explain to them what's going on, we'd be fine).

-=- Terence