Feel like you’ve had that million dollar idea and want to get started with the product process? Don’t know where to start in terms of sourcing products and finding a manufacturer?
Join the ranks of countless other entrepreneurs. Many enterprises hit a wall as soon as the creative process finishes and they have to turn their ideas into actual, physical products. One of the most common barriers to bringing product to market is not being able to find manufacturers - and therefore not following through with the product process!
- You have a new and unique product in mind, or want to make a variation of a current product that doesn't exist currently
- You have tested your minimum viable product (MVP), discovered market demand and now want to go into full blown production
Out of the three possible ways to source your products, manufacturing is the one that requires the greatest upfront financial investment. It's important that you pick the right manufacturer straight away.
Finding A Manufacturer: What Exactly Am I Looking For?
Before you begin your search for a suitable manufacturer, you need to understand what exactly it is you are looking for. Answering the following three questions can help you decide:
- What are the risks I need to consider when picking a manufacturer?
- Where should my manufacturer be located?
- What makes a good manufacturer?
What risks do I need to consider when choosing a manufacturer?
Minimum Order Quantities
One of the biggest drawbacks when beginning the manufacturing process is minimum order quantities. This is a requirement set by most manufacturers, stating that there is a minimum number of items you have to request with each order. This might be any number between 100 and 1000, depending on the type of product you want to make, the size of the manufacturer, and the profit margin on your product.
For example, if your product requires specialty machinery, skills, or moulds, it is likely that your minimum order quantity will be relatively high. In this case, the production of your product requires the manufacturer to invest their own time and money, so they need to make it worthwhile.
Minimum order quality poses a major risk, as your product at this stage in your business development is not guaranteed to sell. Even if you have developed and tested an MVP, there is no guarantee as to whether your product will do well in the market. The higher the minimum order quality, the higher your loss in case your product idea fails.
Slow Sales and Possible Fraud
Particularly if you decide to work with an overseas manufacturer, it is almost impossible for you to vet the production before placing an order. You cannot be 100% sure about a product's quality and delivery times. Worst case scenario, you fall victim to fraud, which is still a relatively likely possibility if you cannot visit a manufacturer in person.
Ethical Business Practices
Another risk associated with choosing a manufacturer is unethical labour standards and poor sustainability practices. Not paying minimum wage, a lack of safety standards in the work place and environmental pollution are not only moral concerns for your own conscience: it has also been found that being completely upfront and transparent makes your business better. When deciding to work with particular manufacturers, you want to make sure that their business practices are ethical and sustainable.
Where should my manufacturer be located?
Location is an important factor you need to decide on before beginning to look for a manufacturer. In general, you can choose to either work with a local manufacturer in your country, or partner with an overseas manufacturer - most of them located in China, India or Taiwan. There are advantages and disadvantages to both options:
Working with a domestic manufacturer
- Likely to produce higher quality products
- Likely to comply with higher standards of ethical labour practices and environmental pollution regulations
- No language barrier, therefore allowing for smoother communication and decreased likelihood of production mistakes
- Easier to vet and verify
- Faster delivery times
- Better intellectual property protection practices
- Marketing appeal: Made in Australia, Made in England, Made in America
- Secure payment options.
- Higher manufacturing costs
- Possible restriction of product variety and choice.
Working with an overseas manufacturer
- Lower manufacturing costs
- Greater choice due to high number of manufacturers
- Innovations and developments that make working with overseas manufacturers a lot easier, e.g. Alibaba.
- Likely that customers perceive products to be of lesser quality
- More likely to have lower manufacturing and labour standards
- Limited intellectual property protection practices
- Longer delivery times
- Cultural differences in business practices and possibility of language barriers
- Difficult to vet and verify manufacturer, i.e. costs of on-site visits
- Product importation and customs clearance
- Less secure payment options.
What makes a good manufacturer?
After having considered the risks associated with manufacturing as well as location, you need to decide what your ideal manufacturer might look like. In accordance with your business idea and business standards, what makes a good manufacturer?
- Price: Considering minimum order quantities, the price of manufacturing your product allows you to make a profit and be competitive in the market.
- Reliability: Your manufacturer delivers within agreed upon time frames.
- Competency: Your manufacturer is able to produce your product to the degree of your quality standards.
- Ethical Practices: Your manufacturer complies with your standards of ethical labour and sustainable environmental practices.
Once you have decided on what you are looking for, your search becomes a whole lot easier. Based on the above criteria, you now know exactly what to look for when searching the web for a manufacturer, and can easily distinguish been suitable and non-suitable manufacturers.
Where Should I Start Looking For A Manufacturer?
In the initial stages of your search for a manufacturer, Google is your best friend. But unfortunately, many manufacturers have not kept up with the times - or Google’s algorithms. Their websites are often very basic and often malfunctioning, so that you may not be able to vet them from behind a computer screen. However, if you are committed to your Google search, be aware that you might have to go through more than 10 page results to find a match.
You may have more luck searching through online directories. Below is a list of manufacturers, both domestic and overseas. Note for some of these, you do have to pay a joining fee. Some examples are:
- Alibaba (read our tips for finding a product manufacturer on Alibaba here)
You can also use your personal network to collect leads for suitable manufacturers. Can anyone in your family or friendship circle refer you to a trusted and reliable manufacturer? Or do they know someone who can?
It could also a good idea to dig through your LinkedIn contacts. There might be someone in your 2nd or 3rd connections who is able to point you in the right direction. Even if you contact a manufacturer and they turn out not to be a suitable maker for your product, you can ask them to refer you to someone in the industry that could help you.
Who Can Help Me Find A Manufacturer?
Once you have identified a potential manufacturer, you can get in contact with them online or via phone. It is wise to keep the conversation short and focused to avoid wasting anyone’s time and quickly determine whether it’s a good fit. You should aim to get a response to the following questions in your first conversation:
- Can you make my product?
- What is your minimum order quality?
- What is your sample pricing?
- What is your product pricing?
- What is your turnaround time?
- What are your payment terms?
If these questions are answered to your satisfaction, you can begin the vetting process. Depending on your resource and time availability, the vetting process should include extensive online research and phone enquiries, or if possible an on-site visit.
On-Site Visits of Overseas Manufacturers
Visiting and conversing with a domestic manufacturer in your own country shouldn’t be a big hassle. Where entrepreneurs struggle is the vetting process for overseas manufacturers. Simply flying to China and speaking to factories usually doesn’t work. If you decide to partner with manufacturers in, for example, China, we recommend that you find a local guide to help you negotiate with factories.
First, get online and head to website a such as Alibaba, find some suitable manufacturers, contact them and set up meetings. A meeting will help you first and foremost to distinguish between actual manufacturing factories and middlemen trading companies. You want the first option. The latter are operations set up in small offices that make business purely out of connecting entrepreneurs with factories and taking a fair cut of the profit in the process.
Brokers and Fixers
Once you have come up with a visiting schedule, hire someone who can help you negotiate. Ideally, this person has knowledge and/or experience in business negotiation. The people that can help you find manufacturers overseas are usually called fixers. You can find them by searching on Google or through Shopify groups and chats.
Even if you are remaining on your home turf and are looking to connect with overseas manufacturers, hiring a broker or fixer can save you a lot of time and money. Chinese manufacturers, for example, often have representatives in the US. You can usually find them by visiting local trade shows where they’ll be looking for new clients like you.
LinkedIn is your best bet when looking for a fixer. You might know someone, that knows someone, that knows someone who can be your translator if you decide to visit factories in China. And even if the six degrees of separation doesn’t apply to you, LinkedIn groups are a good way to find out more about overseas manufacturers. For example, the following LinkedIn groups focus specifically on working with Chinese manufacturers - and similar groups exist for other countries, too:
- China Sourcing
- China Sourcing Forum
- China Sourcing, Networking, Import, Export, Trading, Manufacturing
- China Sourcing and Procurement Group
- China Trade Group
If there’s one thing most entrepreneurs in the product-based business who collaborate with overseas manufacturers have learnt from their experiences, it’s this: go to trade shows. Rather than traveling through all of China, you should make sure to visit trade shows in Hong Kong or Shanghai. Similar events also exist in other countries such as India and Taiwan.
Rather than having to make separate visits to all the manufacturers, all (or at least most) manufacturers will be at the trade show where you can visit them. This means you can speak to numerous manufacturers in one or two days and figure out which ones might be a good match. You can then narrow down your on-site visits to a much more manageable volume.
Getting Started With Manufacturing
Taking your product into production and starting the manufacturing process is a big step, and an important one at that. Especially when it comes to the question of ethics and sustainability. Sometimes it seems almost impossible to audit manufacturers as a single entrepreneur with limited market power, but that doesn’t mean you shouldn’t try.
Pay attention to social media and make sure you complete extensive online research about your manufacturer of choice. If possible, conduct impromptu site visits and ask to see the labour processes with your own eyes. Enquire about their labour and environmental best practices. And if you still have that queasy feeling in your stomach, it might be a good idea to find a manufacturer in your own country, where you know that they have to comply with high level regulations.
At Elkfox, price is not everything. We value our fellow humans and the environment, and encourage every business to invest into producing their products ethically and sustainably. If you have an idea for a great product, and need help getting the word out and finding manufacturers, give us a shout and we will support you along the way.