You have an idea for the coolest new product in town--be it über-trendy purses or a nifty new kitchen widget. You'll need some manufacturing help, though, to make your idea a reality. Thankfully, the internet has made it easier for startups to find information on overseas outsourcing. Just keep in mind, it's going to require some serious legwork.
Tova Friedman learned that firsthand: She started her line of women's handbags using an overseas manufacturer, but only after she did a ton of research. This New York City entrepreneur was designing children's backpacks for another company when she started conceiving more sophisticated designs and decided to strike out on her own. Launching the first Teeze Accessories & Stuffline of handbags in 2003, Friedman knew that to get the bags to a reasonable price point, she'd have to produce them overseas. Thanks to contacts from previous jobs, she knew of some manufacturing houses in China and Korea.
"I made my first run of bags over there through an agent in New York [City], but they made me do really high minimum [orders], and I had a limited budget," Friedman, 28, recalls. "So I narrowed down my collections to one main piece... [The overseas company] manufactured that first piece for me."
Finding an overseas manufacturer that can create a quality product for you and also give you terms amenable to a small business (such as lower minimum orders) is a challenge, according to experts. A startup's first step to a successful overseas manufacturing relationship is solid research. Start by speaking to others with experience in overseas outsourcing, including entrepreneurs, lawyers and consultants. "There's no substitute for due diligence," says Philip D. Porter, who specializes in helping companies structure outsourcing transactions and is a partner with McLean, Virginia-based law firm Hogan & Hartson LLP. He suggests getting references and doing background checks to make sure your international manufacturing partner is on the up and up, and also urges entrepreneurs to thoroughly investigate any information and sources found online.
Though Friedman did some online research, she found her best contacts through real-life pavement pounding. She also finds she gets a much better product when she travels overseas and sets the specs in person. Today, she sells her products through specialty boutiques nationwide and expects 2005 retail sales to approach $100,000.
Meeting your overseas manufacturing partner in person is a definite plus if you can manage it, says Amar Gupta, professor of entrepreneurship and management information systems at the University of Arizona's Eller College of Management in Tucson. For startups, he suggests looking for a midsize overseas manufacturing partner with good references, since larger, more established manufacturers might be too costly at first. Weekly phone meetings can also help you stay in sync with your manufacturer, as communication is key in making any overseas manufacturing relationship work. "If the idea is something that you can explain very well in written form--you can communicate it--then by all means, you should [opt for] offshoring," says Gupta. "If on the other hand, the idea is very raw--you haven't done much on it--then the early work should be done close to where you are located."