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Four Key Steps When Outsourcing Your Production to China

Mar 14, 2018

 

Contract outsourcing to chinaWorking with a supplier in China to outsource production for a product may at first seem straightforward once you’ve chosen a manufacturer from a sea of options. However, souring and product development in China should be approached with caution as the confusion can be high and misunderstandings many. There are a number of steps you can take to reduce speed bumps in what can be a long and difficult process.

Here are 4 precautions when outsourcing to China:

Examine the Market

It may seem obvious, but don't forget to think through a solid business plan. 

  • Has an idea like yours already been patented by others? 
  • Do you know which target buyers on which you'll be focusing? 
  • Can you articulate a clear "why buy" value proposition...in a single sentence? 
  • Have you worked out a pricing strategy not just at launch but over time? 
  • Which distribution channels will you use?  How will potential competitors react? 
  • Are you planning to market your solution in the West, or also include the East?  If yes to the latter, how will you localize your solution to capitalize on China's growing middle class? 
To avoid potential lawsuits, do your due diligence.  Research every angle of  your innovation.  Proactively anticipate the questions investors will ask.  
Size up a Budget 

Before approaching potential contract manufacturers in China, it’s important to have a budget in mind. Understanding how much capital you'll need to raise in order to build, launch, promote, and sustain your product’s growth to break even on your investment.  There are extra costs when outsourcing to China that you won't incur domestically.  In our 30 year history, we have yet to receive a set of drawings, that is ready for manufacturing (not just a marketing concept...), with critical to quality measures...in Chinese.  This is just one example of a development cost (of many) that you'll need to be ready for when outsourcing production to China.  

Research Is Key

The Internet will yield thousands of options for those who are looking to outsource their manufacturing, but don’t believe everything you read as many sourcing websites frame their capabilities to look much better than they really are.  More traditional routes might serve you better than an Internet search – there are no substitutes for good old fashioned networking and word of mouth.  Find out what is working for others.  

Factories that don’t provide name or location are not to be trusted. Look for transparent factories that show production experience with your product. Don't expect to hear a word of English, and know that a lack of English doesn't mean the factory is sub-par.  There are hundreds of criteria for measuring a sound factory source in China and a third party, neutral opinion, like that you'll get working with experts at CMD, can go a long way.  

Prepare an RFP

A Request for Proposal will immediately convey credibility for your project, and will ultimately build a distinction from a sea of people who are asking for just quotes on their projects. A well thought out RFP will speed up the quotation process.  Ask for a breakdown of costs for the entire product - for each component, packaging, logistics, tooling, and more.  

Take all these factors into consideration when you seek to outsource production to China (or anywhere else) for your product. The odds of you making the right choice, and getting your product to market faster is likely to increase if you’re diligent with the details.

Like to accelerate your big idea to market?  Let's Talk. 

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Topics: Operations, Risk Management