Outsourcing manufacturing in China has become common practice for many businesses worldwide. The business drivers range from reducing costs, to gaining access to expertise, to achieving faster time to market, and more.
Given the manufacturing powerhouse China has become over the last couple of decades, there may be dozens of factories there that have the capability to produce your product. The question then shifts from, ‘how to find A manufacturer’, to ‘how to find A REPUTABLE manufacturer’.
Those building a business case often ask questions like these.
Where do I get started?
This is one of those rare instances where Google will not have the answers. Chinese manufacturers operate in local languages (which may not be Mandarin). Your search will not pick them up. This calls for more targeted approaches:
- Sourcing websites: Two low-cost, low-commitment resources are Global Sources and Alibaba, amongst others. While these websites will point you towards potential manufacturers, caution is advised. Watch out for fraudulent listings and firms claiming to be manufacturers…when they are not.
- Your network: Take advantage of your own network for potential leads. It could be reaching out to peers or posting on your personal platforms such as LinkedIn. How did others go about the process? What results are they getting? Would they refer their resources to you?
- Industry trade associations: Industry trade associations oftentimes can share a wealth of information. You’ll open yourself up to a network of individuals who have experience in the space you are looking to enter.
- International trade shows: Attending trade shows give you the advantage of meeting the staff in person to give you a feel for their culture as well as initiate in-person connections. China Exhibition is one place to start learning more about how to do business in China.
- Intermediary: Employing the help of a sourcing service provider can give you access to talent, as well as visibility and an understanding of the landscape that might take you months or possibly years to build. It also instantly gives you access to reputable suppliers with whom you can build connections to accelerate your business. A good partner bridges the language and cultural divide.
How do I narrow down the list?
Similar product: You’ll want to outsource to a manufacturer that has experience with making your product (or a complimentary process, when IP is a concern) to confirm they have the proper resources to deliver. In other words, you don’t want to be their guinea pig, taking on unnecessary risks.
Product specialization: Many Chinese manufacturers will make just about anything that comes their way. Seek out a manufacturer that has declared specialization – and track record – in your product scope to improve quality outcomes.
Ratings/reviews/references: Conduct internet searches or ask around to find out what others who have worked with them have to say.
Track record of exporting to US/western countries: Companies who have a history of exporting to western countries will typically have higher standards to meet expectations of Western importers.
Compliance. Confirm your target manufacturer is compliant with local and regional environmental laws. Loose compliance can result in unexpected factory closures and cause major supply chain disruptions from which you will take months to recover.
Transparency: Look for manufacturers who are willing to provide you with their business license, quality control system, certifications etc. These are items that reputable manufacturers will routinely provide to prospective customers.
Your own due diligence: Be prepared to put in the time and effort in researching Asian manufacturers. This can include obtaining verification from a background check company that specializes in international business, asking for reference letters from the manufacturer’s bank, or looking into their public records.
What do I include in my Request for Quotation (RFQ)?
In other words, what questions do I need to ask a potential manufacturer?
Minimum order quantity (MOQ): This is something you would want to know upfront, especially if you’re not looking at a large-scale order. If you don’t meet the MOQ, there’s no point continuing the conversation.
Target price: It goes without saying that the production price is perhaps the most important aspect of the RFQ. Generally speaking, the bigger the order, the lower the cost per unit, but this is where you’ll want to find out exactly how order volume influences price.
Additional costs: In addition to production price, find out on the front-end what additional costs look like. You don’t want to get tripped up mid-project on these hidden costs. E.g., tool / die / mould costs (some of which might be amortized), shipping costs, tariffs, and anything else the manufacturer might include in the final price.
Time to manufacture: The time it takes for you to receive your product in hand should be laid out clearly in an RFQ. This includes manufacturing time for the entire order, all the way through shipping time.
Payment terms: Details on how and when a manufacture expects to be paid should be ironed out right from the start. As a new customer, you might be expected to pay the entire amount upfront. Be sure to ask about future payment terms should you become a regular customer.
How do I verify quality?
After receiving back your RFQs, narrow down fit based on specific, critical to quality (CTQ) criteria. Then, ask for samples from your shortlisted companies (lead time may be longer for a highly engineered solution, where you’ll have to pick a supplier and develop tooling). You should never commit to a manufacturer without seeing a sample first. It’s rare that a manufacturer gets it exactly the way you want it at the first go. Be open to working with them to fine tune the product to your specs.
Do I need to visit the factory in person?
There isn’t a clear-cut answer here – it depends on magnitude of order and the complexity of your product. In most cases, it is best to make multiple trips out to the factory to make sure everything is in order – to confirm tools/moulds are correct, as well as quality requirements for incoming material, in-process inspections, and finished products are met. There are many points of failure and it’s important to have eyes and ears on the ground.
For over three decades, clients have turned to Complete Manufacturing and Distribution (CMD) to accelerate results. CMD experts help clients strategize, source, manufacture, perform quality control, coordinate logistics and more – for hundreds of millions of dollars in products and services.