You have a product idea and you want a manufacturer to produce it for you. But you’re on a limited budget so sourcing in China seems like a good idea. You know that China has many low-cost manufacturers. But how do you find the right one?
Where Do I Start?
You can get leads on potential Chinese manufacturers from many sources, including:
- Your industry trade association
- Recommendations from business contacts and online or offline networking groups
- Online directories of overseas manufacturers, such as Global Sources and Alibaba
- Your nearest Small Business Development Center (SBDC) or SCORE office
- International trade shows. While there are trade shows in China where you can meet manufacturers, a better place to start is attending U.S. trade shows that attract Chinese manufacturers. Trade Show News Network has global trade show listings. At the show, you can look for exhibitors selling products similar to yours and make connections.
How Do I Narrow Down My Options?
You may have a long list of possible manufacturers at this point. To narrow it down, look for:
- Manufacturers that make products similar to yours. Ideally, you want a manufacturer that specializes in this type of product, as opposed to one that makes it as a sideline business. Some small Chinese manufacturers will offer to make just about anything—but that means quality may be poor.
- Ratings and reviews. Do Internet searches and look at online ratings and reviews to see what others are saying about the manufacturer.
- Manufacturers that do most of their exporting to the U.S. or other Western countries. These Chinese manufacturers will generally have higher quality standards, and have proven they are able to meet the expectations of Western importers in terms of compliance with product safety, labeling and packaging regulations. They're also more likely to have experience with the logistics of shipping products internationally and a greater ability to get your products through the accompanying red tape.
- Honesty. Reputable Chinese manufacturers should be willing to provide you with their business license, documentation of their quality control system and any related certifications.
Come up with a shortlist of three to five possible Chinese manufacturers that you're considering. Before proceeding any further, have them sign a nondisclosure agreement specifically for overseas manufacturers.
What Questions Should I Ask Potential Manufacturers?
Once the manufacturers have agreed to nondisclosure of your idea, your next step is getting a request for quotation (RFQ). Send them images of your product prototype with details such as what materials you want to use, the size of the product, and anything else they’ll need to know in order to make the item.
In your RFQ, find out:
- Minimum order quantity (MOQ). The more units of the product you’re ordering, the less each unit will cost. Every factory has a minimum order quantity. You need to strike a balance between not spending too much to buy way more than you need, but not seeking such a small amount that you have to use a second-rate factory.
- Prices for samples. Before you choose a Chinese manufacturer, you need to get a sample of your product made and inspect its quality. Prices for samples can vary widely, from free to a discount to the normal price of manufacturing the item.
- Prices for production. Find out how prices change depending on order volume. Ask for a breakdown of costs, such as the cost for the item, the cost of shipping, the cost of tariffs and anything else that the manufacturer includes in pricing.
- Time to manufacture. How long will it take to make your order? This can make or break your choice of supplier, since you don’t want to wait too long to get your products.
- Payment terms. How and when does the manufacturer expect to be paid? As a new customer, be aware that you might have to pay the entire amount of your first order upfront. Be sure to ask about future payment terms if you become a regular customer.
Be sure you get the same information from each Chinese manufacturer so you're making a straight comparison of what they offer.
How Do I Verify Product Quality?
Once you’ve gotten the RFQ from several manufacturers, choose the ones you like best and ask for a sample of your product. It’s rare that a manufacturer gets it right the first time, so don’t worry if there are slight disparities in the sample and your prototype. You may need to go back and forth a few times to fine-tune the sample until you're satisfied. This process also helps you and the manufacturer get comfortable with each other and feel that you can work as a team.
Do I Need to Visit the Factory in Person?
Unless you're placing a very large, complicated order, it shouldn’t be necessary. If you're at all concerned that the company is not legitimate, you can tell them that you will conduct a factory inspection before sealing the deal. Fraudulent companies will be scared off by this tactic, while legitimate ones will welcome it.
Of course, it’s also wise to do a background check on any company you're seriously considering. This can include:
- Obtaining verification from a background check company that specializes in international business, such as GloBIS or China Checkup
- Asking for reference letters from the manufacturer’s bank
- Asking for references from current customers and contacting them
By doing your due diligence in this way, you greatly lessen the risk of running into problems, and increase your chances of a long and happy relationship with your Chinese manufacturer.
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Photo: iStockphoto
