How to Cut Costs and Production Lead Times
February 2, 2018
Finding a manufacturer is one of the biggest hurdles any e-commerce company faces when starting out. The manufacturing landscape is full of frauds and, more often than not, you’ll meet a factory who claims to meet your requirements, but ends up producing poor quality products.
Finding the right factory can save you hundreds of thousands of dollars over the years, and is even more critical for startups who are strapped for cash.
This article will share how cutting manufacturing production costs and lead times through Sourcify can save you money and time.
What is production lead time?
Production lead time (or manufacturing lead time) is the period of time between a merchant’s purchase order being placed and the manufacturer completing the order. A short production lead time is better than a long production lead time, as it ensures customers get products quickly.
To secure the highest profit margins, working directly with the manufacturer is almost always the best method.
Alibaba is flooded with trading companies and wholesalers that act as middlemen. Be aware that these wholesalers and trading companies take a cut on top of the actual cost from the manufacturer. These trading companies and wholesalers sell products they obtain from manufacturers at a raised price. Learning how to avoid Alibaba scams can help your business save money and time.
So, with scammers out of the way, where do you start looking?
How to find a manufacturer
Oftentimes, retailers will start looking for a manufacturer using open databases such as Alibaba.com, GlobalSources.com, HKTDC.com, or Made-In-China.com.
With all the trade companies and wholesalers pretending to be manufacturers on these sites, sorting through them all can be overwhelming.
Here are some tips to help you find a manufacturer.
Understand the regions where your products are manufactured
Most manufacturers in China actually produce the same type of products in the same region. This is because manufacturers want to be in close proximity to the raw materials required and/or there are smaller factories nearby that produce necessary components nearby.
In China, there are certain cities that are known for producing specific products. For example, textile manufacturers are mainly located in Zhejiang and Jiangsu, with the rest in Fujian, Guangdong, and Shandong Provinces.
This map of China’s manufacturing distribution will give you a better look.
By locating where your product is predominantly manufactured, you will have several manufacturers to research and pick from. Learn more about why you should manufacture in China.
Attend the Canton Fair
One way to find a manufacturer is in-person at China’s Canton Fair. The Canton Fair is an annual trade show designed to connect Chinese manufacturers and wholesalers with buyers and exporters.
Attending this enormous event will give you an opportunity to meet a vast number of suppliers in person, in a relatively short time period. It is not rare for buyers attending the fair to talk over lunch or dinner with the potential factory. It is also common for potential buyers to be invited or request a tour of the manufacturer’s factory. Visiting your manufacturer in China will allow you to build some rapport with your potential factory.
You can fill out an application to attend the Canton Fair here. Obtaining a Canton Fair invitation can make it easier to get your visa to visit China.
A plane ticket and a few days’ stay in China to go meet your potential manufacturer can be a good investment if you’re looking to start an e-commerce company. Meeting your manufacturer in person will give you an opportunity to develop a strong understanding of your potential supplier, which will pay off in the long run.
Find a factory with an existing mold
In China, most injection/precision molds cost thousands of dollars. If you have a product that has 4 pieces requiring 4 molds, it will be a hefty fee to just produce the mold. You have to pay this fee upfront in cash before any manufacturing begins. Also, the process to create your molds can take weeks.
Try to find a manufacturer who has produced near-identical products to the ones you’re looking to produce. This permits you to use their existing molds, meaning you don’t have to spend the money or time shaping your own.
For most products, a manufacturer will probably have existing molds you can take advantage of. Be specific on what you are trying to produce and the parts necessary to produce your prototype. Then do a thorough search to find existing molds you can utilize.
Communication tricks and tips
Good communication is the cornerstone of a great business partnership to bring your product to life. However, with all the cultural differences, the time difference, and the language barrier, how do you communicate with your potential supplier effectively?
Keep it simple
Avoid complex words and long, run-on sentences. In your emails, keep everything clear, concise, and to the point, so it’ll be easier for them to understand.
We found that when communicating with your manufacturer, it can be helpful to send a set of questions in numerical order, like the following:
- What is your minimum order quantity?
- Where in China are you located?
- Do you produce product packaging?
- What are the prices for 200, 500, 750, and 1000 products?
Asking these simple questions in an organized manner will make it easier for you and your manufacturer to communicate.
Phone calls aren’t very effective
To save time, we recommend communicating with your supplier through written communication instead. In China, the most common channels are email, Skype, and WeChat. WeChat is utilized by practically everyone in China and by using WeChat, you will have immediate access to your factory when they are awake. You may also make calls through WeChat.
Examples of effective ways to communicate
Here is an example of an effective message to a supplier:
My name is Nathan Resnick and I am searching for a supplier of [product]. I found your company and wanted to get some more information about the [product] I saw on your website.
- What are your minimum order quantities?
- Do you do your own packaging?
- What are the prices on 1000, 500 and 200 Pieces?
- What is your production lead time?
Could you please get back to me with the above information? My email is XX and my WeChat is XX.
Please give me at least three options of similar items that you have so I can review with my team. I will look at these options and get back to you as soon as possible.
Thank you and I look forward to hearing from you and hopefully placing an order with your company.
Notice how direct and concise the message is. This will make the message easier for the potential manufacturer to comprehend.
How to achieve faster prototype and production completion
Finding the right manufacturer can cut logistics costs, order lead times, and increase your margins by going directly to the source. Here are some tips to save time and money when contacting your manufacturer to develop your prototype.
Have your designs ready
When you approach a manufacturer, we recommend you have all of the design specifications already concretely mapped out. It is important to know the colors, dimensions, and materials of the product you’re looking to manufacture.
3D printing is the fastest way to make something custom. 3D printing is a process of making three dimensional solid objects from a digital file. Creating your own molds can come at a hefty cost and you should look into an injection mold if you have thousands of pre-orders and sales pending. There are plenty of services that can help you rapidly manufacture a custom prototype.
All in all, you will move a lot faster in producing a prototype and avoid a lot of expenses, time, and headaches by getting your designs ready before you take your production process overseas to a manufacturer.
Analyze manufacturer’s size
When searching for a manufacturer to partner with, be sure to take into consideration how large the manufacturer is. While a large manufacturer probably has many buyers and produces large quantities of products, you will also be one in a large pool of buyers. You might prefer to find a smaller manufacturer that can give you more detailed attention.
A mid-sized manufacturer would be your best bet. Small factories tend to have lower quality products and do not always have quality certifications like ISO or BSCI. Midsize manufacturers will have the certifications and will be able to give you the attention and high quality you seek.
It’s time to cut costs and lead times
Finding the right manufacturer is critical to both inbound and outbound logistics processes and the overall success of your business. In the early development stages, it is especially important to find the most cost-effective and efficient manufacturer to elevate growth.
We hope this post helps you find the best manufacturer. If you would like help with the supplier research process, try Sourcify.
Interested in additional business partners that help with inventory management and fulfillment? Learn about how partnering with a modern 3PL like ShipBob can help your business scale. Get tips for choosing an ecommerce fulfillment partner by downloading “How to Choose a 3PL for Your E-Commerce Business.”