What Does "Factory Second" Mean?

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Nothing in life is ever perfect. This is a truism that applies to manufacturing as much as it does to everything else. Serious flaws in the manufacturing process result in a product that's unusable, but smaller flaws may only represent an inconvenience. Products with these minor flaws can still be sold at a discount as factory seconds, which is great if you're the buyer but not so good if you're the manufacturer.

TL;DR (Too Long; Didn't Read)

Factory seconds are typically products with minor manufacturing flaws that mean they can't be sold for full price.

A Working Definition of Factory Seconds

Every industry and every company has its own standards of what's acceptable in a product. Those standards vary pretty widely depending on the product itself. Inexpensive plastic toys may have very broad standards of acceptability, for example, while parts destined for a nuclear reactor or an orbital vehicle are manufactured to very high standards of precision.

For most products, being classed as a factory second is the result of minor cosmetic flaws that don't affect their function or durability. More serious defects generally result in the product being scrapped or, where possible, being melted down or broken down and reused to manufacture new products.

The Example of Tires

Tires provide a fine example of the difference between manufacturer seconds and outright factory rejects. Tires are made through a high-heat, high-pressure molding process, and when the tires are unmolded, they're given a stringent inspection to identify any flaws. If there's a flaw affecting their function or performance, the tires must be scrapped by law. In that case, the rubber is recycled as raw material. If the flaws are cosmetic only, the tires can still be Department of Transportation certified and sold to consumers, though blemished tires, or "blems" for short, are treated as factory seconds and sold at a discount.

Seconds Can Provide Great Value

For value-conscious buyers, the frugality of buying seconds is compelling. Usually, the products' flaws are not much different from the normal wear you'll put on them within the first few weeks. Factory second shoes and clothing may have the smallest of imperfections in their stitching or molding, for example, which can only be seen from up close.

Electronics may have discoloration or scratches from the molding process or from being previously unboxed. The savings can be substantial. On the websites of Dungarees.com and popular retailer Sierra Trading Post, seconds can be found at discounts of 40 percent or more.

Businesses Can Benefit as Well

Factory seconds can be a great money saver for businesses if you're prepared to dig for them. When you're first setting up your office, you can save on your computers and electronics, your desks and office chairs and decor pieces for the office and reception areas.

On the practical side of things, you might find discounts on anything from the tires on your vehicles to the coveralls you provide to your maintenance staff. Almost anything you can think of is available from someone as a factory second, from the wristbands sold at amusement parks to the molded plastic handholds used for indoor rock-climbing walls.

It's Not Ideal for Manufacturers

Although seconds are great for the customer, they're not so pleasant if you're the manufacturer. Any product that's sold at a discount represents lost revenue and reduced profit since their cost of production is just as high as it is for the flawless products you'll sell at full price.

Outright factory rejects are even worse since you pay the full cost of manufacturing but get nothing back except potentially the product's value for scrap or recycling. There's no easy answer to reducing or eliminating manufacturing flaws, though there's a wealth of information and a raft of new technologies to help you refine your production processes.

References

About the Author

Fred Decker learned business fundamentals at second hand as an insurance and mutual funds broker, and at firsthand as a retail store manager and the chef/proprietor of his own restaurants. He has written hundreds of business-related articles for sites including Zacks.com, Chron.com, Vitamix.com, Bizfluent and GoBankingRates and many others. He was educated at Memorial University of Newfoundland and the Northern Alberta Institute of Technology.

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