You had an idea and you wanted to turn your idea into a product. You did the market research, did all the feasibilities, and lit the green light. Luckily, you have your network, you gathered the development team quickly. All the design, and engineering is done, and prototypes are ready and working fine. Congrats! This was the easy part because you have all the resources besides you and I assume everything went well so far.
Now it is time to go to the next level. You want to make mass production and one of the first countries you think of is still China even though the trade wars made it complicated. So how do you choose your Chinese manufacturer?
Here the difficult part comes. Finding the suppliers? NO! Finding the suppliers is the easy part. You can ask your own network, use online searching tools (Google, Alibaba, etc.), and check YouTube with tons of advice videos from ‘experts’, etc. This would be enough if you were only a drop shipper.
But you actually spent precious time on your product. You and your team did the product industrial and mechanical design, hardware, and software engineering. Finally, you created a beautiful and unique product. You have bigger risks and bigger concerns.
Maybe you have been to China as a tourist, but you have never done business in China. You are not familiar with the environment and you don’t know how to approach the Chinese suppliers.
At home, you probably have a lot of good quality products that are made in China. On the other hand, the product which ‘battery caused fire’ or ‘is recalled due to safety regulations’ you saw on the news last week was also made in China. As of today, there are around 3 million factories only in China, good and bad sitting together. Then how will you choose your factory?
Considering the quality vs. price of your supplier, which one will you choose in the end? Good quality at an expensive price? Bad quality at a cheap price? Ok, you choose the expensive one, but does it make the quality better? Can you achieve the same quality at a cheaper price? Or you choose the cheaper price factory, can you achieve better quality?
While you are thousands of kilometers away, how will you manage the project with your supplier? You have a lot of unique features in your product; so how will you control the IP? And there are more questions to come out once you move further, but in this session, I will only explain the beginning.
You did your online searches, used 3rd party sourcing agencies, and narrowed down your potential manufacturers list.
First of all, you need to have an NDA (Non-disclosure agreement) with the factories where you will share your design. This first layer of protection - the initial agreement needs to have the terms that will help you to protect your design from being shared with third parties also it is the starting point of your supply chain management.
Second, you need to prepare an RFQ file. Your RFQ file should include as many details as possible therefore you will minimize the back and forth questions with your manufacturer and save time. When the details are not clear about your design, color, material, finishing, functions, user interface, or user experience, the factory will take initiative and decide the details by themselves. In the end, the product they will offer will not meet your requirements. So, your RFQ should include these details at least.
A very important note should be added here; when sending RFQ to your candidate suppliers and ask them to send you their offer with a breakdown. You will see the cost structure of your product. Electronics, mechanical, packaging, NRE, certification, etc. This will also give you an insight into the factory you are approaching.
You have all the offers now and you need to compare these offers ‘apple to apple’. You will find out there are a lot of questions pop up in this period. If the costs between the factories are showing a consistency, it means you are on the right way. After spending some time, you clarified all the offers from several candidates.
No, you are just in the half. Here I just explained how to approach the manufacturers in China. There are more parameters to consider before you give your final decision. I will explain these other parameters in my next article.