Manufacturing Beyond the Borders
So why does manufacturing overseas cost so much less per unit, anyway? Labor and materials are simply less expensive. For example, an injection mold produced overseas can cost as much as one-tenth that of a U.S.-made mold. And if you can produce your product for less money while maintaining high-quality standards, you'll have a better profit margin in the end.
The greatest disadvantage to overseas manufacturing is that it adds another level of complexity to your business. Besides the obvious complications of overcoming differences in language, culture, currency, time zones and distance, you'll also need to understand the fundamentals of freight-forwarding, tariffs and U.S. custom payments. And with potentially frustrating communication issues, you must trust your vendor implicitly.
However, because you're working with people who are economically motivated to make the process work, the greatest challenge is less a meeting of the minds than it is of logistics.
While the media is rife with stories about overseas production problems, be assured knowing that thousands of inventors and U.S. businesspeople have good experiences with manufacturers in foreign countries--these stories simply don't make the news. This is evident by the predominance of products on our shelves that are made abroad. Once you learn the steps and your systems are in place, working with an overseas manufacturer is as simple as any of the other processes you put into practice when running a business.
Finding a Manufacturer
Of course, finding a reliable, trustworthy and quality-oriented manufacturer is of critical importance no matter where you decide to manufacture. Where do you start?
The first step is short-listing appropriate factories that can meet your specific manufacturing and material needs, budget concerns and volume requirements. For instance, you wouldn't approach a manufacturer that specializes in plastics to make a luxurious pillow.
It can seem like an overwhelming task--after all, unless you're living within a large metropolis it's unlikely you'll find a local factory that specializes in precisely what you need. Fortunately, there's a terrific resource that can help you identify and narrow down your options: www.thomasnet.com . This site includes a network of 650,000 sources to choose from domestically. You can search by materials (vinyl, wire, cotton, etc.) and/or by state.
Other means of finding appropriate manufacturers is to flip through the Yellow Pages, conduct a general internet search, or via word-of-mouth. Recommendations from other inventors can be invaluable to ensure you're working with someone reliable.
There are also some good strategies for investigating in overseas manufacturers. Most countries also have offices focused on attracting foreign business. For example, the Hong Kong Trade Development Council ( www.tdctrade.com ). This organization offers up-to-date business information about working with companies in Hong Kong and China. You can also look to the American Chamber of Commerce in most countries. For specific contacts, visit www.uschamber.com , scroll down the page to the "Full Site Directory," and under the "International & Trade" heading, click on "Find Chamber Abroad."
No matter where you're seeking to manufacture, plan to identify several appropriate companies, and then visit their websites so you're better informed about their services before you call. I suggest you interview at least three manufacturers before settling on one to partner with. Be sure to ask some pointed questions so you can compare and contrast your options. As a novice, I made some costly mistakes that could have been prevented had I known what to ask. Here's a list of questions to get you started:
- What types of products do you make?
- Do you have reference customers I can contact?
- What's your strength (i.e.,textiles, plastics, metal, etc.)?
- Do you have minimum requirements? What's the smallest manufacturing run I can do for my first order?
- Do you charge extra for samples? How long does it take you to produce samples, and when can I expect to receive them?
- Is product packaging included in your pricing? Or do you outsource or subcontract the packaging?
- If your product involves plastic, do you make plastic molds? If so, how long will it take to produce a new mold? (Note: A company typically won't offer a price quote at this point without seeing either a prototype or computer-aided design (CAD) drawings.)
- If your product involves fabric, do you make textile products? Do you work with my particular textile (i.e., cotton, canvas, silk)? If not, do you recommend any alternatives? How do you want product designs communicated? Do you expect a professional pattern or will a hand sketch suffice?
- Do you comply with any particular standards? For example, are they ISO certified? (This is an international standard that applies to good business processes.) Or have they been inspected and approved by any other bodies or private companies? (Wal-Mart and Target, for instance, are both known to inspect and certify overseas manufacturers for compliance to certain standards like child labor and quality control.)
- How much do you charge for your services? How do you break down your costs (e.g., cost of mold, per-unit cost, packaging)?
- What are the payment terms?
- How do you handle damaged or defective product runs? Is there a percentage of product that must be damaged to reimburse my money or to justify a new production run?
Once you've weighed the pros and cons of domestic vs. overseas manufacturing, completed your research and interviewed potential manufacturing sources, you're on your way to making a critical decision. Don't be hasty, and remember to keep your options open. And when you get your first shipment of your very own product, you'll have a sense of accomplishment you never before imagined.
Tamara Monosoff is the author of Your Million Dollar Dream: Regain Control & Be Your Own Boss and The Mom Inventors Handbook, Secrets of Millionaire Moms, and co-author of The One Page Business Plan for Women in Business. She is also the and CEO of www.MomInvented.com. Connect on Twitter: @mominventors and on Facebook: facebook.com/MomInvented.