The biggest challenge business owners that invented a product face is finding a partner to manufacture their product. Most of the small business owners in my network use foreign manufacturers in China. Here are some tips on how to do your due diligence with potential manufacturers.
The first advice I give is to look for word of mouth referrals from other small business owners. Have your prototype built in the US; if you use a foreign manufacturer, you always want to approach them with a prototype. If you are going to use a broker, make sure that you speak to at least 5 references they have worked with in the past. Many small business owners get ripped off by people who promise things they cannot deliver.
Here are 5 important questions to ask when considering a manufacturer:
- Where is their factory located? You need to travel to see the factory in person.
- What are the payment terms? How will they take the order, what percentage do they need up front? Who responsible for the banking fees? Many manufacturers require 30% down and full payment before shipment.
- Can the manufacturer deliver on your timeline? You want to know up front that they have the capacity to produce your product.
- What are their quality control policies? You want to know what are their policies for quality control inspections, and need to understand a policy about returns.
- Who is going to warehouse the goods? You need to know if the manufacturer will store finished goods or if you have to have a warehousing facility.
Partnering with a foreign manufacturer could cut costs significantly in your small business; just be clear about your expectations.
Once you have basic answers to your questions, you will need the following tips.
Do your homework – Ask for client references from your manufacturing partner and check them. Ask them for banking references as well.
Work directly with the factory – Try to avoid the middleman. Working with an agent, representative or distributor can be a bad idea. Those people make 5%-40%, and it will slow down the decision making time and increase your cost.
Understand how manufacturers work – Factories are interested in producing 10,000 items at one time and not 300 pieces a month. They will try to push you to use a broker if your quantity is too small. You will need to have certain dollar amount and quantity volumes to work directly with the factory as a house account.
Send Samples – Things will get lost in translation. Send examples of everything you want them to do, and how you need the finished product.
You must be prepared to be the problem solver – If there is a problem, the small business owner has to come up with a solution. All factories do is to make the products based on a pattern that is provided. It’s best to send someone to the factory to make sure you get what you want. Don’t be afraid to take a hands-on approach.
Have someone on the ground doing quality control – You must have someone inspecting your merchandise before it is shipped. Otherwise damaged goods or incorrect items will be shipped to you.
Porcelain Vessels courtesy of graur razvan ionut / www.freedigitalphotos.net
Do you have any other tips for finding a foreign manufacturer?