PRS Guitar Business Operation System/Process

[fair.child]

Hello Folks,

This is my first post and I'm currently a grad student at UC San Diego, studying Business Operations. I'm currently doing research in regards quality, capacity, and inventory that relates in Business Operation System. I decided to do further research with PRS because I do know Paul stands for it's quality. However, I do encounter some roadblocks for my research. I couldn't find more information how PRS produces the guitar from the start. Due to COVID and living in the West Coast, I'm really concerned to travel at this moment and on the top of that I can't go sign up for factory tour. I wish I can do the factory tour because I do want to understand how PRS is different than any big guitar companies like Fender, Gibson and so on, as well with stay competitive within the market (Suhr, James Tyler, and so on).

If someone here can chime in with their experiences for factory tour, that would be an awesome start. I'd like to gather some insights with others player as well and understand better how PRS deliver the best result/guitar in guitar manufacturing industry. I know there is a video of walkthrough of the factory tour, also how PRS makes their guitars. However, what I'm looking is to what degree the PRS operation aligned with its mission?

PRS Mission statement: Guitar building is an ongoing process of discovery. We are devoted to the guitar's rich heritage while committed to new technologies that will enrich our products with uncompromised tone, playability and beauty. Our success depends on our ability to listen, implement positive change and continually refine our craft. Believing this, we strive to build the best guitars and guitar products possible and to serve our employees, customers, suppliers and community with distinction.

 

[goat-n-gitter]

 

[HANGAR18]

Hello Folks,

This is my first post and I'm currently a grad student at UC San Diego, studying Business Operations. I'm currently doing research in regards quality, capacity, and inventory that relates in Business Operation System. I decided to do further research with PRS because I do know Paul stands for it's quality. However, I do encounter some roadblocks for my research. I couldn't find more information how PRS produces the guitar from the start. Due to COVID and living in the West Coast, I'm really concerned to travel at this moment and on the top of that I can't go sign up for factory tour. I wish I can do the factory tour because I do want to understand how PRS is different than any big guitar companies like Fender, Gibson and so on, as well with stay competitive within the market (Suhr, James Tyler, and so on).

If someone here can chime in with their experiences for factory tour, that would be an awesome start. I'd like to gather some insights with others player as well and understand better how PRS deliver the best result/guitar in guitar manufacturing industry. I know there is a video of walkthrough of the factory tour, also how PRS makes their guitars. However, what I'm looking is to what degree the PRS operation aligned with its mission?

PRS Mission statement: Guitar building is an ongoing process of discovery. We are devoted to the guitar's rich heritage while committed to new technologies that will enrich our products with uncompromised tone, playability and beauty. Our success depends on our ability to listen, implement positive change and continually refine our craft. Believing this, we strive to build the best guitars and guitar products possible and to serve our employees, customers, suppliers and community with distinction.

One HUGE difference is how PRS sources their wood and then treats the wood with heat to get the moisture content down to an astonishingly low level.
Then there is the way they make necks s-l-o-w-l-y to compensate for any natural warping/flexing which may occur in the wood to virtually eliminate warping in the future.
AAAAAAAnd then there is the way they use highly resonant materials at ever level of the guitar, especially anything that touches the strings so that vibration is free to travel through the entire instrument unobstructed.
After all this, THEN comes the whole bit about making the guitar LOOK REALLY GOOD!

 

[aphantomvaper]

One HUGE difference is how PRS sources their wood and then treats the wood with heat to get the moisture content down to an astonishingly low level.
Then there is the way they make necks s-l-o-w-l-y to compensate for any natural warping/flexing which may occur in the wood to virtually eliminate warping in the future.
AAAAAAAnd then there is the way they use highly resonant materials at ever level of the guitar, especially anything that touches the strings so that vibration is free to travel through the entire instrument unobstructed.
After all this, THEN comes the whole bit about making the guitar LOOK REALLY GOOD!

Also something about how the heat crystallizes the sap in the wood for more stability. This is super important IMHO.

 

[11top]

Also something about how the heat crystallizes the sap in the wood for more stability. This is super important IMHO.

 

[HANGAR18]

Also something about how the heat crystallizes the sap in the wood for more stability. This is super important IMHO.

treats the wood with heat to get the moisture content down AND crystallize the sap in the wood so that it will allow vibration to pass through the wood without absorbing energy...

Better?

 

[Nice F Holes]

There are a lot of videos on YouTube to supplement whatever you learn here. I've enjoyed watching many of them.

 

[fair.child]

There are a lot of videos on YouTube to supplement whatever you learn here. I've enjoyed watching many of them.

Well I know Paul did some classes but I honestly am looking forward how PRS runs the business as a corporation. Within realm of Porter's Five Forces, I can tell that PRS margin of profit is still considered mid-high. I know for sure that PRS bargaining powers came from Suppliers and Buyers. I also identified that there is a threat of new entrants like Suhr. They might come as industry rivalry/incumbent player in next innovation of guitar manufacturing.

What I care the most is how PRS stands over the quality over budget/schedule/inventory and so on. How does PRS stay competitive among the saturated guitar manufacturing market? Is it because Carlos Santana/John Mayer and other artists? Or simply because the quality of the product itself is outstanding and aligned with its mission statement?

In terms of operation, do the operate in predicting future capacity/forecast in guitar player market? Or they are more aiming building inventory over private stock? There are level of business operation here that I'd like to understand how PRS can win the next guitar market within next 10-20 years.

I don't think these questions can be simply found/researched over YouTube. It has some theory of constraints in operation and that's what I'm looking for the insights.

 

[fair.child]

Also something about how the heat crystallizes the sap in the wood for more stability. This is super important IMHO.

Thank you for pointing this out. It looks like the PRS quality stands over careful wood stability. I believe this is how you see the value in quality over PRS guitar.

 

[fair.child]

I have carefully taken notes for this one as well with Surabaya production. However, this is more known process in guitar manufacturing. I think PRS is well-engineering instrument. I have seen every time Paul touches the wood he always tests the resonance of it. I think he learned a lot from experiences and the past from repairs and defined a circumstances that the core wood needs to sing. He also says "Everything relates to everything" something like that. By knowing that, I see that Paul really strives for quality. This makes me wonder, how does the company sustain the business over high-quality instrument, compared the cost of manufacturing, labor, and schedule of delivery. I also read that Annapolis gives PRS business loan to keep the cash flow and company going.

 

[CandidPicker]

Well, to be honest, I don't know, and what you seek to learn about may be proprietary information held by PRS itself.

I had a similar experience like yours once when I asked a well-stablished environmental remediation firm's hiring officer if I could view some of his files of how my potential job position's work examples were to be handed in as investigational reports. The hiring officer politely replied, "Sorry, that's proprietary information."

While I had questions about the firm, because I was not an employee nor a consultant to the firm, they were protective of their business's personal interests.

You may find that since few if any forum members are actually employees of or consultants to PRS, it may prove difficult to discover anything that isn't already posted on the internet as public information.

Yet, best wishes regards your search. You seem like a good person who genuinely has valid questions about PRS. Yet, again, what you seek to find may be proprietary information.

 

[Stephen J.]

I recommend you change your target to a closer entity that you can connect with directly. Asking a bunch of fans of a brand about a company's business practices makes for less than accurate results. Make it easy on yourself. Taylor and Kiesel are right down the road from you.

 

[fair.child]

I recommend you change your target to a closer entity that you can connect with directly. Asking a bunch of fans of a brand about a company's business practices makes for less than accurate results. Make it easy on yourself. Taylor and Kiesel are right down the road from you.

I did a research with Kiesel and it seems they have different operation process. Their process is pretty much lean process/agile in this case and they are winning the market of djent/shred. In this case, differentiation.

Jeff also mentioned their biggest competition in the market could me market segment in that music genre (in this case I was assuming Ernie Ball). Also, comparing with PRS, I think (not against Kiesel fans) I like the way of Paul process of thought. He thinks like an engineer and understand the guitar player better (I look back from his TED talk about his process selecting guitar parts).

I also start to read the book and see how Paul gets connected with Carlos Santana. I try to imagine in his perspective how he actually makes an impact in guitar making process. I see Paul as the Steve Jobs of guitar making. Others seem to follow. I might be overstate it but again, as an engineer, I can see value and quality over PRS product.

Regarding confidential information/secret sauce. The only thing I can do now is just ask. Whether customers itself have more Knowledge or experiences with PRS. I think that’s all. If it’s really confidential, I do really apologize if I’m asking the question and I can completely understand. I just wish I can explore more (I haven’t tried Taylor though it’s a good idea) and just need to start over the research in guitar manufacturing with my Professor.

 

[CandidPicker]

...Regarding confidential information/secret sauce. The only thing I can do now is just ask. Whether customers itself have more Knowledge or experiences with PRS. I think that’s all. If it’s really confidential, I do really apologize if I’m asking the question and I can completely understand. I just wish I can explore more (I haven’t tried Taylor though it’s a good idea) and just need to start over the research in guitar manufacturing with my Professor.

Agreed, there's nothing wrong with asking questions, but most of what you've already asked seems far and above what most all of us already know. There may be several folks on this forum who are holding their tongues just now because they don't wish to be the ones who reveal company secrets. Much like the business itself, they have a loyalty to PRS that if spoken, might compromise that proprietary information without the consent of the PRS entity itself.

However, I could just be blowing smoke up your keister altogether, since I said "I don't know" initially. I'd prefer to think what I've already said is a viable scenario based on personal experience with corporate entities (that part is true). Yet if you must, I'd go to the horse's mouth, not the other end, to hear the facts. (Yes, you may borrow that line.) Your professor will be better equipped to provide you with the correct guidance than any of us ever could.

Another truth is that what I'm saying are possible scenarios, not probable ones. Like you, I studied in college and liked to postulate scenarios which, if played out in real life, only affirmed my thought process as being "wise." Of course, many times these scenarios never occurred, but since the odds were that one or more of the scenarios could occur, it helped reassure me that what I was doing was a manner of looking forward, based on probability and current events.

 

[fair.child]

After some research and discussion with fellow operation grads. I think I can come up with this hypothesis: (this hypothesis gives me some preliminary thought about PRS's operation, it might not reflect with the current situation due to Pandemic)

Mission statement: Guitar building is an ongoing process of discovery. We are devoted to the guitar's rich heritage while committed to new technologies that will enrich our products with uncompromised tone, playability and beauty. Our success depends on our ability to listen, implement positive change and continually refine our craft. Believing this, we strive to build the best guitars and guitar products possible and to serve our employees, customers, suppliers and community with distinction.

PRS's operating system is highly focused on delivering a quality product. Based on the mission statement, PRS aligned the company operating strategy by focusing on timing capacity. By assessing the timing capacity attributes below, we can see that PRS operates at lag strategy in capacity/demand due to the unique process of selecting beautiful wood, engineering the electronics, and listening over the guitar players' need (features, tone, and playability). PRS drives the new product initiative and innovation by giving liberty to its employees. This also aligns with the mission statement that PRS also cares about their employee creativity to bring the new products to life.

PRS Attributes (Lead vs Lag Time Capacity Strategy)

1. Low Switching Guitars Cost for Customer:
PRS is to leads due to distribution with sellers (Guitar Center, Sam Ash, etc.) and brand competition. Guitar Players do not see that it is expensive to switch other brands to satisfy their needs. Therefore, PRS builds capacity to retain market competitiveness.

2. Great Brand, Quality Features, well-engineered, and Patented mechanical design
PRS is to Lag. PRS can afford production cost to ramp-up the market power due to their artist relation, does have viscosity over the high-end guitar players market and quality products.

3. Saturated-market and incumbents hi-end guitar makers
PRS is to lead due to market competition. PRS needs to deliver the highest quality products that align with its mission statement. To win the market, PRS is to lead with new product initiatives and diversification.

4. Aftermarket options
PRS is to lag due to ownership of the final products. There are only a few aftermarket products that can go with PRS, such as pickups and strings. In this case, PRS guitars are well designed and engineered. It is better suited with the original pickups configuration/per specs.

5. Price Based Strategy
PRS competes in two different markets, high-end with private stock and mid-class for beginner players. I think the end goal still is manufacturing at quality and cost. The PRS is aiming to use full production capacity to win the lag demand.

6. Cost of Material Underage
PRS is to lead by having private wood selection. Capacity sells based on wood rarity and policies.
Four classifications of wood:

Regular/10-Top/Artist/Private Stock.

Private Stock is of the highest quality. PRS focuses on the level of figuring. PRS also only selects one classification of wood, curly maple. PRS can lead strategy as Private Stock and Artists should take time to select.

7.Outsourcing Production
PRS outsources mid-price guitar-production to a different country (Indonesia/China/Korea). This can be challenging and hard to come by in terms of policies, inventory strategy, and meeting production demand. PRS needs to lead due to guitar manufacturers outside of the US could have different operation material purchasing.

As a side note: The company also grows revenue for $15.60M in 2020 (May statement).
https://www.dnb.com/business-direct...d835430ccd0fd0d6f26f41026d7.html#company-info

I don't know about Suhr (competitor) revenue in 2020. I just know that they are with Avalanche in 2015. This might be good for PRS because Paul still stands with his mission.

Sources of research below:
ttps://sheshreds.com/prs-women-leadership/
https://guitar.com/features/interviews/paul-reed-smith-future-of-guitar/
https://www.prsguitars.com/index.ph..._x_acto_knife_master_and_serial_number_writer
https://www.prsguitars.com/index.php/blog/post/from_the_archives_the_scrapbooks_vol_1
https://www.prsguitars.com/index.ph..._the_mccarty_594_instruments_to_the_s2_lineup
https://www.prsguitars.com/index.php/blog/post/prs_usa_factory_tour_stevensville_maryland
https://www.prsguitars.com/index.ph...uthall_customer_and_technical_support_manager
https://www.prsguitars.com/index.ph...odel_crossroads_pre_factory_santana_i_limited
https://www.prsguitars.com/index.php/blog/post/se_factory_tour_surabaya_indonesia
https://www.prsguitars.com/index.php/blog/post/behind_the_scenes_the_mccarty_594_models
https://www.prsguitars.com/index.php/blog/post/behind_the_scenes_the_private_stock_wood_vault
https://www.prsguitars.com/index.php/blog/post/paul_reed_smith_tells_the_carlos_santana_story
https://www.prsguitars.com/index.php/blog/post/prs_employee_spotlight_jeff_taylor_amps
https://www.prsguitars.com/index.php/blog/post/prs_featured_on_voice_of_america
https://www.prsguitars.com/index.php/blog/post/the_story_of_the_prs_bird_inlays
https://www.prsguitars.com/index.php/blog/post/meet_the_builders_private_stock_acoustics

Good reference to understand Paul's process of thought: ( I read the entire book and took some notes that I'm interested to align with PRS mission)
https://www.amazon.com/PRS-Electric...p-1480386278/dp/1480386278/ref=dp_ob_title_bk

 

[fair.child]

Also, there is an interesting story, back in 2012, this is from Forbes (https://www.forbes.com/sites/karste...s-chasing-perfection-profits/?sh=34d0b92f3a7e)

But with 2012 revenues of $43.5 million, it's difficult to be heard over bigger rivals Fender Musical Instruments ($350 million) and Gibson Guitar Corp. ($325 million). Smith must try to squeeze out profits wherever he can. So in January he paid an undisclosed sum to acquire his U.K. distributor, with the idea of selling direct to retailers in Europe by year-end.

I think annual revenue target should be around $40'ish million. Acquire UK distributor/direct selling to retailers might cause PRS to lead the market in Europe, which it was a good strategy. Fast forward to now, 2020, due to COVID, I bet the operation strategy has been changed.

 

[Black Plaid]

I think what PRS does is ensure they implement continuous integration of core competencies across functional units to synergize coupling between brand value and operational expertise with market leading reputation sourcing via international distribution channels.

Pretty basic stuff, really.

 

[fair.child]

I think what PRS does is ensure they implement continuous integration of core competencies across functional units to synergize coupling between brand value and operational expertise with market leading reputation sourcing via international distribution channels.

Pretty basic stuff, really.

is it vertically integrated? Looks like in 2012 Paul did because of distributor acquisition. Not for 3rd party licensing strategy in this case. I might see that Surabaya/Mojokerto production handled by 3rd party. This is similar operation with Ibanez/Solar/Chapman through Cort Indonesia.

I agree with continuous integration but I’m sorry that I disagree with it’s pretty basic stuff statement. If it’s basic then Suhr/James Tyler/Anderson also can do what PRS do. I think one of the discussion I had with my colleague that PRS stays in business because of Private Stock. We are guessing it based on company highest value added to the guitar player (this assumption without looking at balance sheet and GAAP since it’s still private).

Another guess, PRS revenue streams also can come from operation efficiency. I think that’s also the part makes PRS excel at certain cases. Also, PRS is good at keeping their current artists and market them on YouTube. I think that’s another dimension of how they cut the cost by market the product highly segmented to certain type of players/endorsee.

Production wise, I mean PRS makes a deal with licensing the design with Cort. I know for sure Cort is huge in Indonesia and they got some contracts to build guitars per vendor specs. That is how Cort stays in business. However, I don’t know the full closure how Cort impacts operation with PRS.

All I can assume if the company is for profit making high-end quality and innovative product, there might be a higher degree of challenge in keeping capacity/demand and inventory.

 

[aphantomvaper]

After some research and discussion with fellow operation grads. I think I can come up with this hypothesis: (this hypothesis gives me some preliminary thought about PRS's operation, it might not reflect with the current situation due to Pandemic)

Mission statement: Guitar building is an ongoing process of discovery. We are devoted to the guitar's rich heritage while committed to new technologies that will enrich our products with uncompromised tone, playability and beauty. Our success depends on our ability to listen, implement positive change and continually refine our craft. Believing this, we strive to build the best guitars and guitar products possible and to serve our employees, customers, suppliers and community with distinction.

PRS's operating system is highly focused on delivering a quality product. Based on the mission statement, PRS aligned the company operating strategy by focusing on timing capacity. By assessing the timing capacity attributes below, we can see that PRS operates at lag strategy in capacity/demand due to the unique process of selecting beautiful wood, engineering the electronics, and listening over the guitar players' need (features, tone, and playability). PRS drives the new product initiative and innovation by giving liberty to its employees. This also aligns with the mission statement that PRS also cares about their employee creativity to bring the new products to life.

PRS Attributes (Lead vs Lag Time Capacity Strategy)

1. Low Switching Guitars Cost for Customer:
PRS is to leads due to distribution with sellers (Guitar Center, Sam Ash, etc.) and brand competition. Guitar Players do not see that it is expensive to switch other brands to satisfy their needs. Therefore, PRS builds capacity to retain market competitiveness.

2. Great Brand, Quality Features, well-engineered, and Patented mechanical design
PRS is to Lag. PRS can afford production cost to ramp-up the market power due to their artist relation, does have viscosity over the high-end guitar players market and quality products.

3. Saturated-market and incumbents hi-end guitar makers
PRS is to lead due to market competition. PRS needs to deliver the highest quality products that align with its mission statement. To win the market, PRS is to lead with new product initiatives and diversification.

4. Aftermarket options
PRS is to lag due to ownership of the final products. There are only a few aftermarket products that can go with PRS, such as pickups and strings. In this case, PRS guitars are well designed and engineered. It is better suited with the original pickups configuration/per specs.

5. Price Based Strategy
PRS competes in two different markets, high-end with private stock and mid-class for beginner players. I think the end goal still is manufacturing at quality and cost. The PRS is aiming to use full production capacity to win the lag demand.

6. Cost of Material Underage
PRS is to lead by having private wood selection. Capacity sells based on wood rarity and policies.
Four classifications of wood:

Regular/10-Top/Artist/Private Stock.

Private Stock is of the highest quality. PRS focuses on the level of figuring. PRS also only selects one classification of wood, curly maple. PRS can lead strategy as Private Stock and Artists should take time to select.

7.Outsourcing Production
PRS outsources mid-price guitar-production to a different country (Indonesia/China/Korea). This can be challenging and hard to come by in terms of policies, inventory strategy, and meeting production demand. PRS needs to lead due to guitar manufacturers outside of the US could have different operation material purchasing.

As a side note: The company also grows revenue for $15.60M in 2020 (May statement).
https://www.dnb.com/business-direct...d835430ccd0fd0d6f26f41026d7.html#company-info

I don't know about Suhr (competitor) revenue in 2020. I just know that they are with Avalanche in 2015. This might be good for PRS because Paul still stands with his mission.

Sources of research below:
ttps://sheshreds.com/prs-women-leadership/
https://guitar.com/features/interviews/paul-reed-smith-future-of-guitar/
https://www.prsguitars.com/index.ph..._x_acto_knife_master_and_serial_number_writer
https://www.prsguitars.com/index.php/blog/post/from_the_archives_the_scrapbooks_vol_1
https://www.prsguitars.com/index.ph..._the_mccarty_594_instruments_to_the_s2_lineup
https://www.prsguitars.com/index.php/blog/post/prs_usa_factory_tour_stevensville_maryland
https://www.prsguitars.com/index.ph...uthall_customer_and_technical_support_manager
https://www.prsguitars.com/index.ph...odel_crossroads_pre_factory_santana_i_limited
https://www.prsguitars.com/index.php/blog/post/se_factory_tour_surabaya_indonesia
https://www.prsguitars.com/index.php/blog/post/behind_the_scenes_the_mccarty_594_models
https://www.prsguitars.com/index.php/blog/post/behind_the_scenes_the_private_stock_wood_vault
https://www.prsguitars.com/index.php/blog/post/paul_reed_smith_tells_the_carlos_santana_story
https://www.prsguitars.com/index.php/blog/post/prs_employee_spotlight_jeff_taylor_amps
https://www.prsguitars.com/index.php/blog/post/prs_featured_on_voice_of_america
https://www.prsguitars.com/index.php/blog/post/the_story_of_the_prs_bird_inlays
https://www.prsguitars.com/index.php/blog/post/meet_the_builders_private_stock_acoustics

Good reference to understand Paul's process of thought: ( I read the entire book and took some notes that I'm interested to align with PRS mission)
https://www.amazon.com/PRS-Electric...p-1480386278/dp/1480386278/ref=dp_ob_title_bk

Dude, I had to put down the Bong and think about this some.

Very well written and great insight, totally college level.

 

[CandidPicker]