[Micah D. Cranman]

Originally Posted by VP Electricity

Ken, you can talk about broken supply chains, and I understand, but small-volume business combined with offshore manufacturing does NOT equal "just-in-time"-capability. The size of the MOQ and the delay in sea shipments and the impossibility of sales forecasting in a small market make it difficult - I think impossible.

I've been in a lot of these sales forecasting/supply chain meetings with much larger 12V companies, and I'm pretty clear that there is nobody who can forecast sales anywhere near accurately - let alone precisely - in 12V. The best they can do it look at the bigger customer's POs, which still change and which don't reflect sell-through the way you might think they should.

Right -- we're dealing with very long lead times and unpredictable sales patterns, exacerbated by the fact that there has been fallout in the 12V speaker manufacturing world. A lot of factories closed, so while total sales in 12V are way down, manufacturing capacity is even lower. This is has forced a lot of companies to use the remaining factories instead of their previous factories. And if you're doing small run manufacturing like us, you go to the end of the line behind the bigger companies.

There is, however, definitely room for improvement and we are focusing right now on two primary things to improve inventory availability:

1. Increasing available capital so we can simply buy more, have higher priority on the manufacturing totem pole, and keep more on hand. This translates as rolling nearly 100% of what the company earns back into purchasing inventory.

2. Increasing flexibility of existing inventories. Certain parts are shared across multiple cars, but are not inventoried individually, only as part of a complete speaker kit. So, if there are 5 of kit A and 5 of kit B on hand, and they both contain 5 units of part X for 10 total, if we inventoried the individual parts instead of kits we would be able to have, say, 7 of part X on hand to meet demand, freeing up that capital for other inventories. We are moving towards this type of "on-demand" model as we speak.

But I agree, if you sell all your inventory at a given price, the market is telling you that that's the right price.

Which we continue to do. But, we believe the more we resolve the other issues affecting inventory availability, the more we'll know about where the "right" price really is.

From a planning POV, there is definitely value in eliminating uncertainty and speeding inventory turns. Apparently Micah and Jason have decided that it's worth over $150 to pull some sales forward. This doesn't mean that the speaker s worth any less - remember the definition of value in economics - but it may have something to do with the time value of money.

Yep, the preorder was simply to generate additional capital for investment into a larger initial quantity, something we knew we'd need.