Note: This is the second installment from
Nathan Resnick, owner of Sourcify, regarding
sourcing manufactured products from China. If you’re interested
in sourcing products from overseas check out his pervious
post, How to Source Products from
Chinese Manufacturers.

When you’re starting your ecommerce store, figuring out where
you’re going to manufacture can be one of the biggest hurdles
you will face. Though there will be lots of competing products
with similarities, you unfortunately can’t just ask one of
these companies who their manufacturer is.

In the world of manufacturing, your supply chain is a trade
secret and the company who has the best manufacturing partners
will often be better suited to scale. That is why entrepreneurs
rarely share their process of bringing a product to life—why
would they eliminate this barrier to entry?

Luckily for you, this article is going to dive deep into what
you should do to prepare for your manufacturing search and how
you know you’ve found a good manufacturing partner who can save
you costs when just starting out.

I’ll start with my own experience manufacturing products
through Sourcify:

Background

The first products I ever helped manufacture were shirts for
one of the programs at my school. This was during my junior
year of high school in 2010 where I was a foreign exchange
student in Beijing attending a local Chinese high school and
studying Chinese four hours a day while living with a host
family that didn’t speak English.

My school just needed a few hundred shirts and I worked
alongside one of our program directors to manufacture them.
Interacting with a factory fascinated me and by the end of that
experience, I wanted to learn more about manufacturing.

I spent most of my weekends during the year at the local
markets across Beijing where I befriended several shopkeepers.
Back then in 2010, there were several markets in Beijing that
openly sold knock-off goods. You could purchase everything from
a fresh pair of Nike shoes to Beats By Dre headphones that
sounded just like the real ones (we did a sound comparison).

The shopkeepers explained to me that while most the goods
people bought were indeed fake, some of them were actually
runoff goods from the factories producing the real products.
When a company goes to produce 100,000 units of the same
product, a factory can’t produce exactly 100,000 units. There
is always runoff and this left over product is then sold on the
black markets. That is how some of these fakes seem so real.

Since that year in 2010, I became eager to manufacture more
products and in late 2013 I started going through the
manufacturing process for my first ecommerce company, Yes Man.
We invented the first leather watch strap without holes that
worked like a zip-tie and ended up growing that store to over
six figures in revenue.

It literally took us over five months to get to our first
prototype though and after bringing dozens of new products to
market over the last four years, I now understand where our
first pitfalls were. Those pitfalls that I fell for will be
explained in this article so you don’t have to spend five
months bringing your product to life.

Along the way, I realized that the manufacturing mixup stems
from not only finding the right manufacturer but also having a
suite of project management tools to understand where you’re at
in the product development cycle.

This problem faced by almost every ecommerce entrepreneur is
what motivated me to transition from a ecommerce store owner to
the founder of Sourcify, a platform that is on a mission to
make bringing a product to life easy.

This article explains what we do to help users cut costs and
lead times.

Before Searching

If you start your manufacturing search by
first contacting dozens of manufacturers through open databases like Alibaba,
you’re doing it all wrong. To have a smooth manufacturing
process, you first need to understand what you want:

Specifications

When you first think of bringing a product to life you need to
know what that end product is going to look life. Though
several manufacturers can be there to help you finalize your
specifications, before you even begin your manufacturing
search, it is important to know about the colors, materials,
and even dimensions of the product you’re looking to
manufacture.

As an example, we recently worked with an ecommerce company
looking to produce a new line of messenger bags. They came to
us looking for a smooth manufacturing experience, yet halfway
through the process, they completely changed the material
requirements. Instead of seeking a bag made from mostly
leather, they were now looking for a bag made with canvas and
nylon. Though this was an easy change, it cost them about two
weeks in their manufacturing cycle because they had to switch
manufacturers.

Specifications you should have already set when starting to
find a manufacturer include your logo, estimated order size,
material, color, and size. The needed specifications depend on
the product, yet those are a basic rundown. For watches, as an
example, you’re going to need to know the watch case material,
watch movement, type of hands, watch case width, watch case
diameter, and more.

These specifications can be made clear in the following forms:

Renderings or Drawings

Designer drawings are life-like renderings of the product
you’re looking to bring to life. To make renderings or
drawings, you often need to consult with a designer who will
use a software like Adobe Illustrator to help
design your product.

Though I have seen some manufacturers deal with drawings that
are done by hand, most of them always prefer a computer
generated rendering.

CADs

CADs are Computer Aided Designs that are specific engineering
drawings that detail your product down to the exact
measurements. CADs are made by engineers using software like
AutoCAD. CADs are usually
needed when producing hardware products out of any metal.

Now that we have an understanding of what to do before starting
the manufacturing search, it’s time to get into the analysis
you should conduct when trying to find the right manufacturer.

Finding the Right Manufacturer

One of the trickiest parts of starting an ecommerce store is
the process of finding the right manufacturer. With so many
possibilities out there, sorting through them all can be a
nightmare. This is why it’s important to have a systemized
approach to understanding who your manufacturer should be.

To start your search on the right foot, use the following
tricks:
Finding the right
manufacturer for your online store is tricky, check out this post
for tips & tricks:Click To
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Location Analysis

This is counterintuitive of a business competitive analysis,
yet most manufacturers who produce the same products are
located in the same areas. This stems from the access to raw
materials or location of the smaller component manufacturers.

It also stems from the fact that many factory founders once
worked for a factory themselves where they learned the ins and
outs of manufacturing that specific product. This is most
common in Asia, specifically in China where there are certain
cities that are known for producing specific products.

For example, whenever I go to Shenzhen to visit factories,
there is a specific part on the outskirts of the city that has
over a dozen watch factories. Even with their close proximity,
it is rare that I am able to visit more than three factories in
a day as meetings average two-three hours with each factory.
This stems from the cultural driven business environment in
China—on a typical factory visit we’ll start with a
conversation to get to know each other, then see the actual
factory facilities, then have lunch, then head back to the
factory and discuss our specific details, then have tea, and
then head out.

Since business in Asia is relationship based, you need to
expect your meetings to last longer than usual. Once you
understand the manufacturing landscape for your product, you’ll
start to notice that many manufacturers who produce your
product are based in the same city.

Detail Manufacturer Size

The size of a manufacturer is mostly based around their monthly
output capacity, which is dictated by the number of production
lines they have and number of employees they employ. Your
estimated order size will dictate the size of the manufacturer
you should work with.

Small manufacturers deal in the hundreds to tens of thousands
of units range. These manufacturers often have scrappy
facilities and lower quality production than middle size
factories that produce a few thousand to hundreds of thousands
of units a month. The middle tier manufacturers are your sweet
spot, as they’ll not only have cleaner facilities but will also
have the needed certifications often required to import into
America.

Big manufacturers are the ones who can produce millions of
units per month and are the Foxconn’s of the world (Apple’s
main manufacturer).

When analyzing which manufacturer to work with, think of it
like this: would you rather be a big fish in a small pond or a
small fish in a big pond? When manufacturing you usually want
more attention so being a big fish would be a better approach.

Use Existing Molds

If you’re looking to cut lead times dramatically and save
thousands of dollars, try to find a manufacturer who has
produced near identical products to the one’s you’re looking to
produce. This enables you to use their existing molds, meaning
you don’t have to spend the money or time opening your own.

Since opening a mold can cost thousands of dollars and take
weeks, finding a manufacturer who has an existing mold you can
use is game changing. To find this manufacturer, you really
need to be specific about the product you’re looking to produce
and conduct a very thorough search.

When we were producing our second round of designs at my old
watch company, Yes Man, we saved thousands by working with a
manufacturer who already had the exact watch case mold that we
were looking for. This enabled us to easily get started in the
production process and save costs.

Since our watches weren’t the most unique, it wasn’t too hard
to find a manufacturer who had a mold to fit our
specifications. The more unique your product is the harder it
will be to find a manufacturer who has existing molds you can
use.

Prepare Payments

Most manufacturers take payment on a 30% upfront, 70% once
production is complete basis—100% paid before shipment. This is
common practice and having your finances aligned when you start
a production run is crucial.

For an ecommerce business, paying 100% of your inventory
upfront drains your cash. If you’re looking to explore other
ways to pay for your inventory, give Kickfurther a look. This unique platform
crowdfunds your inventory so you don’t have to pay for it all
upfront. They retain ownership of your inventory on a
consignment basis and you can pay for it as you sell it.

If you’re starting your company through a crowdfunding platform like
Kickstarter, one trick you can apply to get your products
produced on time is by paying that 30% upfront payment once
you’ve reached your funding goal. If your project has reached
its funding goal, you know you’ll get that money once your
campaign is complete. By fronting the 30% to your manufacturer
before your Kickstarter campaign is complete, your production
run will be started as your campaign is still going.

When nearly 50% of crowdfunding campaigns don’t fulfill their
backer rewards on time, taking this approach could be huge to
meet delivery expectations.

Shipping Options

Once you’ve paid for and finished your production run, it’s
time to figure out how to actually get your products to your
end buyers. Most manufacturers will recommend a freight company
that they usually use, yet if you want to try something more
secure and streamlined, you may want to find someone on your
own.

If you’re producing at scale and looking to ship a container,
taking a software driven approach would be smart. That is why I
often recommend Flexport to the clients at Sourcify
who are producing at a larger scale.

For straight ecommerce fulfillment, we often recommend FloShip. This Hong Kong based company makes
ecommerce logistics easy and they can also handle crowdfunding
campaign fulfillment. By having a Hong Kong based location,
they can easily get products from your factory to their
fulfillment center.

The key to understanding your best shipping
options will depend on your shipment size, location, and
time requirements.

Next Steps

Preparing for your manufacturing search is a vital, yet often
overlooked part of the process. If you don’t know exactly what
you want, how can you expect a manufacturer to know?

Finding a good manufacturing partner
who can save you money and time is a complex process. The
ability to use an existing mold doesn’t always come often and
you’re going to spend a lot of time researching potential fits.

That is why it’s best to track progress and be detailed
oriented when starting to find a manufacturer. The best way to
start is to first understand your own company goals. Once you
have that set, it’s time to start finding your manufacturing
partner.
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