How to choose a manufacturer
The right manufacturer will fit your budget, your timeframes and your vision for your product
Turning an idea into a tangible product is a huge step for your business. However, finding the right manufacturer for a physical product can turn out to be one of the most cumbersome, frustrating, tiring and complex experiences in developing a successful business. Failure to find the right manufacturer can be the difference between the success and failure of your product.
Given that there are tons of manufacturers out there, it can be quite challenging to find one that suits your needs. While it's important to go with a manufacturer who's able to transform your idea into a tangible product, there are many other factors at play that are equally important. For instance, it's important that the factory is reputable for quality manufacturing. Also, factors such as the location of the factory in terms of whether local or overseas and the budget are central when selecting a manufacturer.
Overseas or domestic?
One of the very first steps in choosing a manufacturer is determining whether to select a locally based or overseas manufacturer. Given that both options have their pros and cons, you need to choose the option that serves you best while, at the same time, working within your budget. On one hand, selecting a domestic manufacturer can mean lower delivery costs, better communication and positive public perception. But, cons such as relatively higher costs of production and lack of suitable production equipment and technology have to be taken into account, too.
On the other hand, overseas manufacturers such as those based in China have pros such as low production costs, innovative technologies and the ability to produce high volumes. But, overseas manufacturing has its drawbacks as well, which can include communication breakdown, the general perception of poor quality attached to products manufactured overseas, time zone challenges, customs problems and high costs of product delivery.
With all this to sort through, you need to be able to make an informed decision. Carrying out some thorough market research on the available manufacturers can go a long way towards finding one that can fulfill your requirements. If you're looking for a domestic manufacturer, you can do this through the in-person approach, making personal visits to the factories. Or, if you're looking overseas, you can scour the internet for profiles and reviews of potential manufacturers. While researching online is good for initially narrowing down your choices, nothing beats an in-person look at a manufacturer's facilities.
What to look for in a potential manufacturer
One of the most important factors to consider in a potential manufacturer is their technical capability. Check if the manufacturer produces similar products to yours. This puts them in a better position to not only understand your needs, but to further understand and be able to work within your given budget. And it shows they have the technical know-how to produce your product. You should also consider crucial elements such as the manufacturer’s limits for the minimal order quantity, their turnaround time and their pricing for both the sample and final product.
Check whether your manufacturer can produce recent audits, certifications and proof of inspections.
Reviews and reputation
A good starting point in selecting a manufacturer is searching for testimonials and references from companies that have worked with the manufacturer. Alternatively, getting in touch with other businesses in the same industry will help in identifying reputable manufacturers. Have a look in B2B forums to see what your peers think about the manufacturer. The feedback in these forums paints a picture of the manufacturer’s quality of work.
The reputation of the potential manufacturer should be at the top of your checklist. It is vital to identify whether or not they work with or have in the past worked with big names and major brands in your line of product and see that they are upfront regarding their regulatory fines if present. Other elements such as the manufacturer’s turnover, as well as their level of knowledge and expertise in your line of production further speak volumes to their reputation.
Quality and materials
For companies based overseas, it is crucial to know their labor policies, their acceptable payment options and whether or not they can handle material sourcing for your product. Also, it can be good to know where they source materials from in cases where the materials are not produced in-house. Ask relevant questions such as what quality assurance steps the manufacturer takes and how often are they're taken throughout the production process.
The size of the factory in terms of the number of employees employed and how big the facility is an indication of their level of expertise. In essence, a bigger manufacturer with many years in operation is an indication of the level of experience as opposed to a relatively smaller and new company. A bigger manufacturer comes with quality control advantages, which may not be the case for their smaller and newer counterparts.
How to negotiate price with a manufacturer
After ascertaining the credibility and building a rapport with the manufacturer, it's now time to talk price. To begin with, you need to reiterate how important your quality requirements are. You don't want to compromise quality as a result of the price negotiation process.
Before going to the negotiation table, set a realistic target price. Research market prices for the raw materials and contact other stakeholders for quotes in order get a realistic price baseline for the product
It also helps your negotiating when you're upfront about your budget and your product's price point. Price negotiations are expected in the industry, so your manufacturer should be willing to give a bit on their initial quote. However, in some cases, the manufacturer may be adamant about reducing the price to match your unit price. If this is the case, find out the reason why.. Is it because of the machinery to be used or the amount of work that will be keyed in?
It also helps make sure the manufacturer knows you've looked into other company’s prices. You don't have to play hardball here. You can tell them in a professional, non-threatening way. Just make sure they're aware that you know a reasonable market price for manufacturing your product. This gives you a bit of leverage.
In cases where the manufacturer completely disagrees to lower the price, you could consider increasing your order to get a bulk discount. Or, you could negotiate longer credit terms. Also, cutting down on unnecessary customizations is another option that can help with price reduction.
Either way, locking in a deal with your selected manufacturer quickly can go a long way in cutting down on the costs through price drops and potential discounts.
Factors to consider when importing your product
There are several factors to consider when importing the final product. For instance, you need to look at the modes of transportation, and choose the one that's the right fit for both your deadlines and your budget.
For instance, while air freight is a faster mode of transport, it's more expensive. When compared to air freight, sea freight is relatively cheaper, but considerably slower.
Also, customs processes vary in different countries and with the type of product. It's good to understand that there's always a possibility of delays since products can be stuck in customs.
The importing process is complex and involves loads of clearances in terms of customs brokering, import tariffs, import agreements, regulatory declarations, certificates of origin, transport logistics and import clearances. Hiring an import company can save you both time and frustration.
Import companies can also reduce costs in terms of classifying your products in the right manner to reduce your tax liability, submit any legal or commercial documents required by customs and ensure that your products comply with the set regulations.
There's a lot to consider when you choose a manufacturer. It's unlikely you're going to find one that checks every single box for you. But if you know what to look for, you can find a manufacturer that represents the right mix of speed, cost and quality.