So, you have weighed the pros and cons, and have decided you are going to manufacture your product in China. Now what?
I will make the assumption (although I could be incorrect), that you have not manufactured offshore before. I will also assume you do not have any associates that can point you in the right direction, or refer you to a manufacturer. My final assumption is that your product is a basic item.
So where do you start?
As this is a quick start guide, I will look at the quickest way to get your manufacturing going.
Just keep in mind that this does not preclude some due diligence and common sense on your part.
Firstly, no matter what your product is, do a little bit of research on manufacturing in China.
Even if you have manufactured in other countries, every country differs in many ways, so getting a feel of the place is important.
A quick Google search will bring up many results. For someone in the apparel field, a search of apparel manufacturing in China, brings up nearly 600 000 results.
Try to pick some unbiased or neutrally sounding websites. The first two pages of the Google search, should give you a broad idea of the current situation from regulatory requirements to the exchange rate.
Once you have done a little bit of research and have an idea of what you can expect, it’s time to look at actually manufacturing in China. This seems like a daunting task, but with a bit of common sense can be done with relative ease.
The quickest way to get started is to use the internet’s multiple B2B sites.
You can either search directly for potential manufacturers, or place a buying lead where manufacturers will contact you based on your lead. Either way keep in mind the following.
- Many suppliers on all these sites are “dead”. What this means is that they are not in business anymore, or they do not make use of the site anymore. So, if you contact them via the site, you will not get a reply. Most sourcing sites have a number or percentage indicating the supplier’s response rate to enquiries. For example, Global Sources will indicate both the response rate and average response time.
- Try to stick to verified suppliers. Whether this verification status means they are paying a fee to be on the site, or have been audited by the site, is debatable. However, it usually indicates they are active on the site.
- Narrow down your geographic area. China is a huge country. It does however, have manufacturing clusters or hubs. These are areas that specialize in manufacturing specific products.
- Be extremely specific as to what you are looking to produce. Give an accurate description, units per order, any required inspection levels or quality levels, required certification for both the manufacturer and the product, country that you importing to, payment terms, and Incoterms.
- Ensure your profile is as complete as possible. All these sites require registration by buyers, and an accompanying profile. The better your profile, the more seriously manufacturers will take you.
Expect to start getting responses within ten minutes. All these sites will notify manufacturers of a buying lead as soon as it is posted or as soon as you contact a supplier through the site.
Once you get responses, and you will get plenty, you need to sort the responses. You are only looking for certain responses.
- Ignore all responses that look generic or cut and pasted. These are easy to pick out.
- Ignore all responses that mention any terms different to the ones you have requested. For example, if you state you are looking for 500 units, and the response from the manufacturer mentions an MOQ (Minimum Order Quantity) of 1 000 units, ignore them. If you state you pay using a Letter of Credit, and they mention a deposit and balance on delivery, ignore them.
- Ignore all responses that are badly written, such as those with a lot of spelling or grammar mistakes. Remember, you are dealing with someone thousands of kilometers away, so you want good communication.
- Ignore all responses three or four days after placing your lead or contacting a manufacturer. You want timely communication.
To sum this all up. You only want to deal with manufacturers that communicate well and in a timely manner, read your buying lead or enquiry properly and take note of the specifics, and take the time and effort to give a proper response.
Once you have narrowed down the manufacturers to a manageable amount, it is time to start looking at the manufacturer or manufacturers (you may need more than one), that you think are suitable.
Keep in mind that these manufacturers will usually contact you via the site’s messaging service. Once you have narrowed the manufacturers down, move outside the messaging service to email.
It is much easier as most of the messaging services are not user friendly, and require an app for a smartphone.
Now you need to send the potential manufacturers information for costing. Ensure this information is complete and laid out in a logical manner, with all specifications.
Also ensure that at this time, you re confirm all your business terms, such as lead times, sampling requirements, payment terms, Incoterms, inspection requirements, quality requirements, target prices, etc.
I suggest you have at least 5 potential factories at this stage, as some will drop out of the race for various reasons.
Some of these manufacturers may have been audited by third parties or by customers. Ask if they have been audited and for copies of the reports.
You can also get a third-party inspection agency to do an audit on your behalf. An audit is usually in the range of US $ 250 to US $ 350. Intertek and SGS are the biggest and most well-known of these third-party inspection agencies.
Also ask for factory profiles. A professional factory should have a profile giving information on the factory’s product, machinery, in house peripheral services, customers, and any certification.
Once prices start coming back, lay them out in a spreadsheet to get a comparison. Some will be ridiculously high, while some may be very low.
Resist the urge to take the lowest prices. A simple average of the prices you get back, should give a decent idea of the market price you should be paying.
A common tactic to look out for, is manufacturers who give a low price for the first production run, and then hiking this by 20% or more for the next production run. They will all give you the same reason when this is queried. “You were a new customer, so we gave you a special price.” There logic is that it will cost you more to find a new supplier, than to pay them extra. However, once you give in to this it will continue.
I personally mention this to manufacturers, and tell them I am aware of this tactic, so they must not try it, when I send items for pricing. Do not be afraid to be direct, as long as you keep it professional.
Also keep in mind that there is room to negotiate in all these prices. No manufacturer will give their best price first, in the same way the target price you gave them is not your best price.
When you are costing, remember that the manufacturers price is not the price you are concerned with. You need to calculate your landed price. This is the price of getting the product to your door, in your local currency. You can usually work this out using a factor, relatively easily.
I suggest you try to narrow down your suppliers to a primary manufacturer and a back-up manufacturer, in case things go wrong with the primary. It happens.
If your product can be counter sampled, get your primary manufacturer to do so. This might have a cost. Ensure you agree that this cost will be deducted from the cost of the confirmed order. They may also have samples based on product similar to yours that they can send you.
Once you have confirmed all the prices and you are happy with the counter samples, an order can be placed, and your China manufacturing journey has begun.