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How to source a quality supplier

Follow These 6 Steps Simple Steps To Prevent 80% of Your Production Headaches.

Imagine this...

You have an idea for an amazing new product. You hop on the Internet to find a factory that can make it. You send your designs off with no fear of stolen IP or getting knocked off. And, in a few short weeks, you have a golden sample.  You then roll into production on time with zero quality problems.

Does that sound like a fairytale?

It does to anyone who has experience in this area. Finding the right factory can be tricky, for sure. Unfortunately, too many companies lose precious time and money by working with factories that were never the right fit to manufacture their product.

You usually only know this in hindsight. For a lot of existing companies, they've had ongoing frustrations with their current factory because the quality isn't exactly what they want. Or, maybe it's been frustrating to communicate with your factory. It seems like any time you don't specify every nitty-gritty detail, the factory fills in the gaps and gets it wrong. They get it wrong, and it bites you in some way.

“You’re in a really intertwined relationship with your factory. And, like any relationship, it requires good communication skills, work, and trust.”

You’re in a really intertwined relationship with your factory. And, like any relationship, it requires good communication skills, work, and trust.

We speak with over 200 new factories for our clients every year. So it’s safe to say we know a thing or two about sourcing Chinese factories for new product development. 

We’re here to share our system for choosing the best partners. 

Let’s get started.

 

The Exact 6 Step Process We Use To Find Reliable Suppliers

First and foremost, we recommend some structure to guide you through the process. We’ve created a template for this. Download our Factory Scorecard for free by following this link. Once in hand, read on.

 

Step 1 - Know Where to Source

Use These Resources To Find Potential Suppliers

 

There are valuable resources to identify potential factories. Most product managers and entrepreneurs are well aware of Alibaba. It’s still a great place to find new factories if you know how to look. Here are some lesson known ones that we recommend:

Sourcing Platforms

These platforms are similar to Alibaba, but offer access to different factories.

  • Made-In-China 

  • Global Sources

Import Database Platforms

You can use these services to look up a competitor’s product and see the manufacturer of record on the import documents.

  • Panjiva.com ($150/mo.)

  • ImportGenius.com ($99/mo.)

  • AllImport.com ($20/mo. base)

If you decide to use a sourcing platform like Alibaba, be sure to read our "10 Step Due Diligence Checklist For Chinese Factories" blog post.

Knowing where to find partners is just the tip of the iceberg.  Knowing how to get the right information you need from them quickly is where the work is. Keep reading to learn our best practices.

 

Step 2 - Send A Request For Quote

 

How To Get Quotes From Factories Without Getting Your IP Stolen

After you have identified a handful of factories that look like a good fit for manufacturing your product, it’s time to write up your Request for Quote, often referred to as an RFQ.

One mistake we see companies make far too often is sending samples or designs of their product off to total strangers in China just to get a quote.

Your goal at this stage is to sift through the plethora of subpar manufacturers quickly and identify the few that seem to know their stuff. 

So, for now, we’re only going to provide just enough information to quickly qualify factories for additional quoting so that you can start to get a “grouping of quotes.”

But, keep in mind that this process is a two-way street. Factories are qualifying and shortlisting buyers like you just as much as you are qualifying and shortlisting factories. 

If you want to be taken seriously by good factories and get reasonably accurate responses, you do have to walk the line carefully. Give them enough information that you look like you know what you are talking about, but not so much information that you could compromise your Intellectual Property.

Here’s an excellent checklist for what you should include in your initial RFQ:

  • Product Description

  • Total Number of Units Per Order

  • Number of Sizes Per Order

  • List the sizes or dimensions

  • Number of Color Per Order

  • List the Colors

  • Category / Industry sports outdoor

  • Function

  • Usage

  • Material

  • Any Unique Product Specifications

If you want to use the same RFQ template that we use internally to get accurate quotes quickly from factories you can download our RFQ Template here.

One thing that you’ll discover quickly is that nearly all of the factories that contact you will ask for a sample of your product for quoting. 

Be careful here. 

You’ll need to send this at some point–but not quite yet. You’ll want to shortlist and qualify Chinese Manufacturers first.

 

Step 3 - Shortlist A Few Good Factories

Make Sure You Are Working With A Factory, Not A Trading Company

People often assume they are working with a factory when it’s a trading company. Unfortunately, many trading companies claim to be factories. 

The problem with working with a trading company on a custom product is that if they don’t have a technical background in the processes or materials your product requires, they will fail to pass on critical details to the actual factory. They’ll also ask bad questions and give the factory poor guidance if they have to answer a question for you.  

We go into a lot of detail about this in the 10 Step Due Diligence Checklist For Chinese Factories blog post. You’ll learn techniques to determine if a potential supplier is a manufacturer or a trading company.

 

Confirm Their Experience

The default answer to any question in China is “No problem.” If you’ve done any kind of work there, you’ll know exactly what we mean, LOL. There have been countless times that we see people trust a factory at first encounter. If you ask if they can weld, they say, “No problem.” If you ask if they can develop a custom PCBA, they say, “No problem.” If you ask if they can do injection molding, “No problem.” You get the idea. 

We’ve learned to operate under a “Show Me” instead of a “Tell Me” policy here. We’ve also discovered that at any time a factory claims to be able to work with two or three very different processes or materials–it’s a signal to start probing a lot deeper. 

We typically find that many factories outsource specific processes–or entire projects–to “cooperated factories.” Or, a project is so interesting that they decided to buy brand-new machinery or open a new line. And guess what? They’re now learning at your expense.

“If your factory doesn’t have all of the equipment for vertical production, they are going to have to rely on various other “cooperated factories” to make your product.”

 

Confirm Their Equipment

Speaking of outsourcing to “cooperated factories,” if your factory doesn’t have all of the equipment for vertical production, they are going to have to rely on various other “cooperated factories” to make your product. 

It’s pretty uncommon for small to medium-sized factories to be vertically integrated. So, it’s perfectly normal and acceptable for your main factory to rely on other suppliers for specific processes. 

An aluminum factory relying on an outside anodizing supplier is a great example. Another typical example is a garment factory depending on a fabric mill to supply the fabric.

Some of what your Chinese supplier outsources is common and expected. But, if you are having ongoing issues, it’s probably because your manufacturer doesn’t have the right equipment for your job. As a result, they are most likely outsourcing a critical component or process–and their supplier is slowing things down.

This is why due diligence is so important.

 

Step 4 - Complete Due Diligence

Simple Hacks To Complete Initial Due Diligence Without Having To Fly Overseas

After shortlisting a few factories that appear to be qualified, do a little bit of due diligence on them. Here are some simple tools and tactics we recommend to get to know your potential supplier before you invest significant time or money into working with them.

Online Resources

We’ve used these online resources with limited success in verifying companies, but it’s still worth a few minutes to see what you can dig up:

Do Initial Due Diligence

Use our 10 Step Due Diligence Checklist For Chinese Factories. It’s a great guide for due diligence with new factories. And, it’s the exact same training we give our new project managers when they start working for us.

Here are a couple of bonus tips that will help you complete due diligence without compromising your IP.

Send A Competitor’s Product

We often send a sample of a competitive product for quoting. It’s a great way to kill several birds with one stone. You can protect your IP, get an estimate of your competitor’s cost, and start a dialogue with a company before you invest significant money with them. It could also help you down the road if you want to reverse engineering and build on an aspect of your competitor’s product.

With this approach, you can still get a really good sense of the production cost and the potential production challenges for your product. The factory will usually help you identify materials and production methods at the same time.  

You’ll get to work through some of the initial design challenges and questions with these shortlisted factories during this process. We’ve found that it gets obvious very quickly who knows their stuff and who doesn't.  

We recommend keeping a dialogue going with a few factories at the same time because you’ll learn something different from each one of them.  That will help you in the future. Not to mention– you’ll be able to get competitive quotes that will come in handy during negotiations.

Send Partial Designs

If sending a competitor’s product isn’t feasible, we prefer to send 2D designs or a single sub-assembly for initial quoting and due diligence. This way, the factory wouldn’t get access to your full IP, and you can still engage in good conversations with them and get price estimates to figure out who you’re ready to move forward with. 

If you want help with this process, you can always schedule a Strategy Call with our team.

We’ve paid the price to develop our processes the hard way. However, you can benefit from our hard lessons and save thousands of dollars in wasted time, money, and bad products due to working with unqualified factories. Click here to get started. 

Even after due diligence, you want to proceed carefully. That’s why we always test the waters before sending large payments.

 

Step 5 - Test the Waters

How To Find Out If The Factory Is Able To Manufacture Your Product Before You Invest Big Money With Them

 

Now that you have a good idea of who can make your dreams a reality, take it one step further before you finalize your decision. Have them send you a sample.

Ideally, the most promising factory can send you a sample of your custom product. There will probably be a small cost for this. However, it’s worth every penny if it helps you find a great supplier and avoid wasting time with an unqualified factory.

If it’s not practical for them to make a custom sample, see if they can send you a sample of a similar product they’ve made or a product that uses similar materials or production methods so you can examine their work. 

This method will be significantly faster and cheaper than a trip to China, and honestly, you’ll learn loads about what it’s like to really work with them and whether or not they can actually deliver for you.

“Your goal here is to test the working relationship and the communication further to determine if you’re ready to commit to partnering with this factory.”

Your goal here is to test the working relationship and the communication further to determine if you’re ready to commit to partnering with this factory.

A couple of the common things we watch for at this phase are delays and capabilities.  I’ll give you two quick examples.

A factory will tell you that they can build your sample in 14 - 30 days.  Unfortunately, 60 days and dozens of emails later, you still won’t have your sample in hand and you can’t get a straight answer from them.

The other thing to watch for over time is whether or not they can get your sample right. It’s not uncommon to get five samples in a row, and it's still not right. That's a good indicator that they don’t have the expertise or equipment they need.  

They may also take shortcuts in building your prototypes because they think they can get it done faster or cheaper in some way. This can be great if they include you in the decision making process.  But, when they surprise you with the change it can be really problematic.

Keep your eyes wide open during this phase before you make your final selection.

 

Step 6 - Make Your Selection

Prevent Future Headaches By Choosing A Great Factory To Work With

Find the factory that can deliver on your timelines, hit your quality requirements, and be an ongoing partner for you years to come.  

Once you’ve followed these steps, the best factory for your product will be an easier choice. If not, repeat the process until you’ve found your ideal match. Here’s a shortlist of the steps:

  1. Identify potential factories

  2. Send a request for a quote (RFQ) using our template

  3. Shortlist a few good factories using our Factory Scorecard

  4. Complete Due diligence 

  5. Test the waters

  6. Make Your Selection

Remember, choosing a good factory up front is critical to eliminating headaches down the road. While sourcing isn’t rocket science, it is a lot of work. Be patient. We always tell our clients that slow is fast, and it’s true. 

If you’d like us to help you with a more hands-on approach, schedule a strategy call with one of our expert product managers to see if we might be a fit to work together.

 

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