This post was originally published on Open Source Fashion in 2013
Are you looking for an overseas factory for your product idea, or considering moving your domestic production offshore to save costs, or increase volume? If so, chances are that you’ve had (or will have) one of the following 3 questions about your potential Supplier. While looking for a suitable supply partner can be an overwhelming job, deciding on the right one is a lot easier once you understand how to answer the ‘Big 3.’
1) How do I know if I can trust the Supplier?
This is usually the most common concern, since long distances and cultural barriers make getting a feel for a potential partner more difficult. Questions arise about labor practices, the factory’s expertise, and if the person on the other end of your e-mail message is actually in charge of a manufacturing facility, or a scammer looking to take your money and run.
The best way to calm your fears is to physically visit the Supplier in question, and see what’s going on with your own eyes. This isn’t always practical though if you’re working on a budget, or trying to decide between several possible candidates (visiting all of them would be quite an expense)!
Thankfully, performing a professional factory audit can be done for as little as a few hundred USD with a third party certification agency; a small price to pay for the assurance that you are partnering with a qualified Supplier. Enlisting the help of an agency means an inspector will visit your factory and provide a detailed written report on his or her findings. Check out Asia Quality Focus and Sofeast for more information on the affordable audit services that are available.
2) How do I know if I’m getting a good price?
The answer here is to first do your research. Ask 5 similar Suppliers to price the material, process, or product you are trying to source. Their answers should fall in a bell curve, with one at the high end, one at the low end, and the rest in the middle. Understanding this range will give you an educated means of comparing the prices you have been given.
The second step in gauging price is to understand your Supplier’s quality standards. Quality problems present hidden costs, and a low price can sometimes mean expensive issues down the road. To determine if quality control is being performed in a responsible manner, ask to see the Supplier’s Quality Control Manual for the item you are producing, inquire about whether there is a staff member that directly oversees Quality Assurance activities, and ask if you can see metrics from recent quality tests. Keep in mind that some smaller Suppliers may not have a full-time employee dedicated to QA, or if you are making a completely new product, the facility may not have an existing manual. Still, their answers should shed light on the Supplier’s level of professionalism and attention to detail.
3) How do I know the Supplier won’t steal my idea?
The unfortunate answer is, that you don’t. But first, let’s talk a little bit about how knock-offs typically happen. A factory will produce an authorized run of a product (say you’ve ordered 500 handbags), but instead of making your requested quantity, they will add extra units to the order (so the total run might be 700 pcs), and then slip the extra pieces out the door. Because they have to absorb the cost of the additional materials and production, they are more likely to do this with big, famous brands that they know they can resell without much effort. They don’t want to deal with promoting, advertising, or, hard-selling, so lesser-known, smaller brands are not ideal targets.
Regardless, even if you’re just starting out, it’s a good idea to exercise caution. One way to prevent knock-offs is to have an inspector on-site, counting finished product while your goods are in production. This can be achieved by hiring one of the inspection companies noted above, at an average rate of $260 USD per day.
A second, and arguably better way, for those especially concerned about imitations, is to split your supply chain so that no one factory has all the information or materials needed to make your product. For example, Supplier A makes Component 1, Supplier B makes Component 2, and Supplier C receives both components and puts them together to make the finished product. Supplier C doesn’t have the means to make unauthorized goods, because you are shipping them the exact number of components needed for each purchase order.
Did you notice that legal documents haven’t been mentioned yet? It is worthwhile to have trademarks and patents in place, and to have them filed by a lawyer who specializes in IP protection in the country you plan to work in. In this way you can press charges if someone illegally imitates you. But don’t you think that the big, famous brands who get knocked-off have rock-solid legal protection in place? Of course they do. The reality of today’s manufacturing landscape is that creatively trouble-shooting your supply chain may prove to be more effective at protecting your ideas than traditional tactics.
Sourcing overseas may never be a simple process, but having the answers to these simple questions will certainly help you navigate foreign waters!
Liz is currently teaching an online course: How to Make a Product – The A-Z Guide to Product Manufacturing