PRS Guitar Business Operation System/Process

[fair.child]

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

Very well written and great insight, totally college level.

thank you for your kind words. I appreciate that you recognized my effort to this thread.

What’s driven me actually came from my MIT professor (the program is called LGO and joint with UCSD as well). He mentioned that he has desire to bring back the best manufacturing operation back to US. I think I’m connected with this goal and really care about PRS can sustain business in the next 20-30 years from now. This also comes with assumption that PRS will stay private and not bought out by some investment company. With that being said, PRS needs to have stable cash flow and growing revenue. Though in my assessment, the Maryland government still gives loan to PRS to keep the company operation running. Simply put, PRS operation affects the local county income as well, which is really good move.

I can see this can be done in guitar manufacturing. Sometimes, manufacturer only cares and focuses in getting ROI, high throughput, and lower cost. Simply said better, faster, cheaper end-product.

Also, if you think deeper, why would we buy a private-stock PRS? It’s not cheap guitar though it’s beautiful and well-engineered musical instruments. Another thing, why we consider purchase Silver Sky? Because John Mayer? On the top of that, how is the resale value and so on. The questions keep growing.

I found out over some interviews with players and reading out of the forum. We tend to agree at one point for PRS, it’s Value of versatility and the user experience.

To hit $40M+ revenue is already challenging, going beyond that is going to be a huge steep and requires PRS to drive the innovation in manufacturing at some point.

One of the topic I brought is to adopt the lean-manufacturing principles like Tesla for an example. The principle of machines create machines, so PRS would create its own custom proprietary tools to create faster custom guitar manufacturing process. This would apply in grading the wood process. It seems that the most time consuming process.

Again, this all based on hypothesis, it can be completely wrong, but if it’s the case, then also PRS can utilize machine learning/deep learning to use camera and sensors to automate the process of grading the wood. I think if PRS can implement that it’ll save them cost in wood grading system. I’d love to see that innovation happen in near future. It’ll help Paul to spend more time connecting with PRS users and future artists.

PS: I also found out that Paul is a co-founder of Digital Harmonic which it makes him aware about Artificial intelligence.

https://www.washingtonian.com/2019/04/04/paul-reed-smith-guitars-spy-technology/

 

[CandidPicker]

@fair.child:

Your last paragraph resonates, but may be in need of some adjustment. For many reasons, PRS has used the personal human element in building its products because to automate them would lose the personal aspect of handbuilt quality. For this reason, PRS has implemented and invested in people as its workforce, utilizing automation in the cutting and drilling aspects, and well as pickup winding, of its guitar builds. Additional aspects, such as sanding, handwiring, fretting, polishing and spray finishing, for the most part include the human element (Spray finishing may also now be automated to some respects).

It's the combination of these aspects that are constructs for PRS guitars. What you say about camera sensors automating the wood grading system has merit, but it may play a smaller role in reducing costs because it may cost quite a bit of R&D to improve wood grain recognition, the same way Apple integrated facial recognition into its phones. If this was what your line of reasoning was, your view of technology is in step with the times...

 

[Black Plaid]

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.

Sorry, was a joke, just word-salading this stuff as I've been around it so long in corp.america for decades and I'm completely jaded.

 

[Nice F Holes]

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.

You might want to change the thread name, or start a new one, that mentions business operations instead of manufacturing process/operations. There is a ton of information about PRS manufacturing on YouTube. There are also videos with Paul talking about things like: while PRS wasn't a household name in guitars, or 'big names' weren't playing as many PRS guitars, there were tons of people in studios recording albums commenting on the reliability and tuning stability of PRS guitars.

I didn't mean to be a d1ck about mentioning YouTube videos - if you're actually interested in how PRS works, like I am, there are hours and hours of enjoyable and informative videos. You might find some good information that supports your thesis, or inspires a shift in thesis.

 

[fair.child]

Sorry, was a joke, just word-salading this stuff as I've been around it so long in corp.america for decades and I'm completely jaded.

Oh no worries, don't be sorry. I was just confirming and I appreciate your view as well.

You might want to change the thread name, or start a new one, that mentions business operations instead of manufacturing process/operations. There is a ton of information about PRS manufacturing on YouTube. There are also videos with Paul talking about things like: while PRS wasn't a household name in guitars, or 'big names' weren't playing as many PRS guitars, there were tons of people in studios recording albums commenting on the reliability and tuning stability of PRS guitars.

I didn't mean to be a d1ck about mentioning YouTube videos - if you're actually interested in how PRS works, like I am, there are hours and hours of enjoyable and informative videos. You might find some good information that supports your thesis, or inspires a shift in thesis.

Good idea. I have changed it. Thank you for mentioning another hint here: reliability and tuning stability. I didn't consider that as part of the value proposition for the user. Good point of view.

@fair.child:

Your last paragraph resonates, but may be in need of some adjustment. For many reasons, PRS has used the personal human element in building its products because to automate them would lose the personal aspect of handbuilt quality. For this reason, PRS has implemented and invested in people as its workforce, utilizing automation in the cutting and drilling aspects, and well as pickup winding, of its guitar builds. Additional aspects, such as sanding, handwiring, fretting, polishing and spray finishing, for the most part include the human element (Spray finishing may also now be automated to some respects).

It's the combination of these aspects that are constructs for PRS guitars. What you say about camera sensors automating the wood grading system has merit, but it may play a smaller role in reducing costs because it may cost quite a bit of R&D to improve wood grain recognition, the same way Apple integrated facial recognition into its phones. If this was what your line of reasoning was, your view of technology is in step with the times...

I like your point of view here. PRS most important value is in the wood grading. If the wood grading gets digitally transformed using AI as part of the company strategy, it might have a different result for the end product. That could potentially change the direction of user experience. Okay, instead of the wood grading, how about electronic inspection in PRS amp/electronics? I mean this is something that can objectively calculated, forecasted, and analyzed over historical data (based on R&D).

 

[CandidPicker]

I like your point of view here. PRS most important value is in the wood grading. If the wood grading gets digitally transformed using AI as part of the company strategy, it might have a different result for the end product. That could potentially change the direction of user experience. Okay, instead of the wood grading, how about electronic inspection in PRS amp/electronics? I mean this is something that can objectively calculated, forecasted, and analyzed over historical data (based on R&D).

Ever consider working for PRS' R&D implementation team? My suggestion to you is to also research some older R&D feasibility studies that speak about these things...the studies likely have already been done some years ago; we're just waiting for technology to catch up so the cost of building this technology can be reduced. This is where my personal expertise is lacking...though I do know that many R&D feasibility studies have been done that have not been brought to fruition simply because of the cost of producing them. For example, cell phones were R&D'd back in the '50s, but it wasn't until the early 80's that cell phone technology was developed...IIRC. Growing technology had to catch up with cost-effective production.

Best wishes, and yes, you're on the the correct path, because automated electronics QC is already occurring in many aspects of electronics today.

If not mistaken PRS may already be implementing this with their TCI pickups. The assembly and QC of their parts could easily be adapted as well.

My suggestion, though, is not to attack this too vigorously. You'll understand later.

 

[fair.child]

Ever consider working for PRS' R&D implementation team? My suggestion to you is to also research some older R&D feasibility studies that speak about these things...the studies likely have already been done some years ago; we're just waiting for technology to catch up so the cost of building this technology can be reduced. This is where my personal expertise is lacking...though I do know that many R&D feasibility studies have been done that have not been brought to fruition simply because of the cost of producing them. For example, cell phones were R&D'd back in the '50s, but it wasn't until the early 80's that cell phone technology was developed...IIRC. Growing technology had to catch up with cost-effective production.

Best wishes, and yes, you're on the the correct path, because automated electronics QC is already occurring in many aspects of electronics today.

If not mistaken PRS may already be implementing this with their TCI pickups. The assembly and QC of their parts could easily be adapted as well.

My suggestion, though, is not to attack this too vigorously. You'll understand later.

That would be the dream job for working with PRS R&D Implementation team. I don't know much about their hiring situation these days. I used to work with Amazon Go implementation, using deep learning for autonomous checkout. I think we are at the pace of getting there (check out standard.ai) that computer vision will lead mundane and tedious process. On the top of that, it can be done by camera only solution. I did R&D studies in automation, but yet I haven't seen one implemented in guitar manufacturing (don't know about Fender/Gibson).

Plus, to implement this kind of state-of-art system can be really expensive and see what you're saying with the cost-effective production. The strategy here is when PRS ready to make up consistent revenue/cash flow then absolutely this innovation can be implemented. Or showing that this initiative will have positive net present value within 20 years from now.

 

[BEZERKER]

Yeah, having a guitar is cool, but when you study business, owning a guitar company is even better. I tried starting a business and selling ukuleles with my best friend. We even had some guys employed to help us with the delivery. But what I learned is that owning a business is harder than they teach us in school/university. It requires a lot of work, especially with people. And when your business is unstable, you should always have a Pre Pack Administration, which ensures little disruption to the day-to-day running of the business, cause you know, you never know, lol. https://antonybatty.com/company-administration/pre-pack-administration/

 

[Robert0s]

Indeed, the guitar business is very cool! Do you have a lot of orders around the country? If there are or will be orders to countries where the leading currency is the euro, I have a question, how do you choose the right time for the most profitable currency transfers? Do you keep track of the exchange rate of the leading currencies? It seems to me that this is a very important topic. Also, do you use cash flow scenarios to mitigate the crisis? And to prevent an unprofitable transfer to one currency or another, I can advise you to read the article: https://www.calxa.com/cash-flow-scenarios-to-mitigate-a-crisis/ In it you can learn a lot of necessary information, which, hopefully, will bring you even more success!

 

[ScottR]

I didn't read a lot of the posts in this thread so, if my mention of this has already been covered...please disregard.

First, it seems as if you have the "book" part down. Good job.

I was a business major (many moons ago) and one thing they don't/can't teach you about is passion. More importantly, how to instill that passion with each and every employee, but more importantly with your target market(s). That is where Paul; and from what I can tell; his staff do an amazing job of creating an atmosphere of pride and ownership with every product they create. The attention to detail, as well as quality of said widget, is unmatched by any of the other "big" guitar companies.

IMHO, Paul is the master of this. Not only is the man a brilliant engineer in his own right, but also a serious and experienced guitar player and has been since day one. Try finding that at the tippy top of F or G...you won't.
That being said. I for one believe that's the ultimate differentiating factor for PRS and has helped a small guitar builder go from a small attic to a major player in the guitar industry.

I know "passion" doesn't have much of a "place" in academia, but if you want to know how to be successful in a business of ANY kind, it has to start with that passion and belief that the product your offering is THE best. At least that's what I believe to be more important than any other aspect of the game.

Word to the wise, you may p!ss off your professor if you debate him/her on this, so tread lightly (speaking from experience).
Good luck.

 

[Orbeck]

You can look on youtube for guides.

 

[Astora]

This was once a complex topic for me to get involved in for a long time. The only thing that helped me was a friend of mine who was already an experienced businessman and had done many deals in this industry up to that point. I was lucky enough to work with him and absorb some valuable knowledge that came in handy in the future. I also got some extra help from https://factorforyou.com/illinois-factoring/. I found it a fascinating resource that showed me how to work correctly with these types of strategies and systems. That's why you can use this tool to gain experience.

 

[Rod/]

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!

All of what @HANGAR18 wrote is what Gibson and Fender do not do…. Amongst many other attributes of Paul Reed Smith Guitars….. the list is long……. And… they only produce 1000 guitars a month… period…… 2 year wait at this point. It will get longer…….
Watch ALL of Paul’s videos, then you’ll start to get the idea why they are the pinnacle of electric guitar building in America

 

[aphantomvaper]

I had to pick up the Bong and think about this...again.

 

[Rod/]

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.

Sorry, John Suhr builds some nice guitars, but they’re just really upgraded Fender copies…Nothing innovative IMHO ..That’s simply not what PRS Guitars does or is about….not at all…. They’ve simply done the impossible.. it used to be Fender and Gibson. Now it’s PRS, Gibson and Fender….And PRS is the only builder who designs all their own hardware, bridges, tuners ect…No other builder does this! and the woods and drying process to 6% or less? That’s on a whole other level and unheard of with F and G…. Revolutionary Finishes as well…..

 

[sergiodeblanc]

Sorry, John Suhr builds some nice guitars, but they’re just really upgraded Fender copies…Nothing innovative IMHO ..That’s simply not what PRS Guitars does or is about….not at all…. They’ve simply done the impossible.. it used to be Fender and Gibson. Now it’s PRS, Gibson and Fender….And PRS is the only builder who makes in house all their own hardware, bridges, tuners ect…No other builder does this! and the woods? That’s on a whole other level. Finishes as well…..

Yeah, PRS does not build all their hardware in house. Never has.

 

[Rod/]

Yeah, PRS does not build all their hardware in house. Never has.

I should of phrased it differently. They design and have built all their own hardware…

 

[Boogie]

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.

Business operations are as much IP as are production techniques. Since PRS is a tightly held private corporation, direct insight may be a pipe dream. I never shared at that level in my own companies and wouldn’t expect other shrewd business people to be any different.

 

[Jhoe Kollen]

Creating a guitar business is quite difficult, but creating any business is not easy. I often have to use the help of a powerpoint slide makeover to optimize my work. First, they create modern presentations for our products, which is important for presenting products to customers. And what I think the best is creating charts that I can use to track sales and compare them to each other. It is very convenient for businessmen!

 

[aphantomvaper]

Maybe I need a PowerPoint presentation during my shows to assist people with understanding my music.