Selecting the best contract manufacturer is one of the most important decisions companies make when launching a new product. Finding a manufacturer in China is much more than just researching suppliers and sourcing websites on the Internet. There are hundreds if not thousands of factories who make the same categories of products. Identifying the correct partner takes more time and resource than most believe. Following are some critical steps to take in preparing for a sound manufacturing outsourcing strategy.
Create a Database
You will want to create a database of every potential supplier you can find. Consider building a list of at least 50-100 potential suppliers based on specific criteria and include general information such as factory name, contact name & email, location, years in business, number of employees, equipment, materials used, types of products, minimum order quantities ( MOQ ) and existing customers. Create fields for initial date of contact, any follow-up activity and comments. Also very important is to confirm whether the contact is a direct employee of the factory or a broker. In many cases finding a China sourcing agent is not always a negative option as these individuals may have existing relationships with suppliers and a firm grasp of your category of products.
Things to keep in mind:
- Avoid responses that refuse to list the name or location of the production facility.
- Ask for references or at very least good examples of clients they currently serve.
- Have a professional product deck prepared which has a narrative of your project, information on the product potential, 3D drawings, material specifications, fit and function testing requirements, and certification requirements and annualized product volumes.
- Look for good communication—both language and technical. This will be very important throughout your project.
- Determine how the sourcing agent in China is compensated. Often times they work off a straight commission based on product and invoice value. In this scenario there is no real incentive to keep product cost to a minimum.
Ask About Quality Control
In all of your dialogue, the most critical of findings is to determine a factory’s commitment to quality control. Ask about the supplier’s QC department, processes, staffing and conflict resolution. Determine how committed they are to quality control and ask whether they have specific certifications such as ISO, PPAP or other.
Plan a Factory Visit
Finally, there is no substitute for personally visiting the factory to assess quality, skills, and equipment. Even finding the best sourcing agent in China doesn’t always mean you can mitigate risk. People often ask “how to find a sourcing agent in China.” LinkedIn Groups are likely one of the most direct and efficient ways to do this. Experience is key. Are they familiar with your product and materials? Can they provide examples of helping clients through complex assignments and can they provide examples of successful outcomes?
Location is also important. You will want your sourcing agent to be close to the supplier for product development and trouble shooting. In China relationships are key. A sourcing agent should know his or her territory and have solid relationships in place. The other reasons location is significant:
- Tax and SEZs (Special Economic Zones) may present VAT and other economic advantages
All goods produced in China are assessed a Value Added Tax (VAT), a percentage of which is rebated to the factory once its goods are exported. But that rebate rate varies from province to province. So, in theory, a product can cost 10% more just because you made it in the wrong province.
- Is the factory close to a port? This can cut down on shipping costs
- Is the factory convenient for air travel?
If you are unable to develop a firm grasp on all of these, a China intermediary may be the best solution. There are several Asia supply chain consultants who can complement your product launch strategy. These are fee for service models and not typical broker or sourcing agent arrangements. Often these companies have specialties in all aspects of China product sourcing such as engineering, QA/QC, trouble shooting and logistics.
Selecting the best sourcing agent in China or best Asia supply chain consultant is a careful and detailed process. You will get out of it what you put into it.