How To: Find and Work With a Manufacturer June 9th, 2008 · 6 Comments by Ann Merlini, Ladies Who Launch member, Boston It can be quite a challenge to find a manufacturer, one you like working with and whose factory produces a quality product at a fair price. Here are some tips on how to navigate through the process of finding one, as well as how to optimize your relationship with your manufacturer so that you—and your customers—are happy. Step 1: Creating a Prototype Creating a working prototype or finding someone who can do it for you is the first step in the manufacturing process. During my early days I was able to sew most of my prototypes. But as my product, Planecomfort, was refined and the components used and the skills necessary to create the product I envisioned moved beyond my sewing expertise, I knew I needed help. Searching online, I found a wonderful, yet small, cut-and-sew business in northern California, Left in Stitches. This relationship proved valuable to me in a number of ways. They not only helped refine my original prototype, but they offered many suggestions and ideas for making the product easier to manufacture. Many of these smaller, domestic companies offer prototyping services that are invaluable to the new entrepreneur. Once you have a prototype, there is quality and design testing and tweaking. At each stage of development, and every time I received the newer version of my product, I washed, dried, pulled, stretched, zipped, unzipped (many, many times!), and put my product through the proverbial “ringer.” Making sure your product will exceed your customers’ expectations is a sure way to keep them coming back and referring your product to others. Ideally, you want to have a dozen or so finished prototypes. Manufacturers will want one or two samples sent to them as a reference to compare to the finished product their factory is making. I thought I would be able to use Left in Stitches for the long term, but due to logistical reasons and production costs, I had to find an overseas manufacturer. Moving your manufacturing operations overseas means you want large quantities (usually thousands) of the item you are producing. If you want hundreds of something, you may be better off working with a domestic manufacturer. Step 2: Finding a Manufacturer I located my overseas manufacturers through referrals, which provided me with an immediate level of comfort and confidence with these factories. One referral came from a fabric manufacturer. Most fabric manufacturers have relationships with product manufacturers. Another factory was referred to me by a marketing services company. This company manufactures both soft and hard goods and was happy to provide their contact with another business opportunity. Call domestic manufacturers and inquire about their overseas connections. Ask everyone you know if they know someone who manufactures the type of products you are creating. Search online for companies with products similar to yours and call them. Who do they use? How did they get started? My experience is that most people will want to help you. I found it was best to work with at least two different companies when trying to decide who will win your business. Who is easiest to work with? Who meets (or beats) your expectations? Is one more knowledgeable than the other? Having a comparison is essential to ensure you are getting a quality product at a fair price. There are two common ways you can deal with overseas manufacturing. You can find a broker or agent in the U.S. that represents the factory, or deal with a factory directly. I was fearful of the whole importing process because I had zero experience in manufacturing. After many hours of research and talking to others with importing experience, I decided to work with a U.S. representative of a Chinese factory. I felt having this U.S. contact who could guide me through the importing process was worth the extra money. Because this middle person is knowledgeable, you can avoid potential setbacks, such as steep fines or having your merchandise held in customs for months because of a violation of importing rules. Being aware of quotas is also important to note. If the product you are making has any kind of quota restrictions it is good to get this information early and be aware of what, if any, limits exist. While the agent you are working with should be able to guide you along the way, it is your responsibility to be informed! You are ultimately the responsible party. A good resource is the U.S. Customs and Border Protection Web site: www.cbp.gov. Under “Trade,” click on “Basic Importing and Exporting.” Once you have determined who you might like to work with, you must check references on your contact and the factory. Some of the important questions to ask: • Was the product made to specifications? • What percentage of the shipment was defective? • If there was a problem with the shipment, did the factory make restitution? • Were deadlines met? If not, what did the factory offer to make amends? • Is what was promised delivered? • How is the quality of goods they produce? • How long have you worked with this person and factory? • How many orders have you placed? • Is your contact easy to work with? • Is he/she responsive to calls and e-mails? • What type of projects does the factory excel in producing? Soft goods, hard goods? • What types of companies do they normally work with? • Who is responsible for landing the goods in the U.S.? Your contact and the factory should be excited to provide you with lots of happy customers to speak to. If not, take that as a warning, and you may need to continue your search. Have the factory and/or your contact sign a Non-Disclosure Agreement. An NDA is not a guarantee that your product will be completely protected from copycats, but it’s a level of legal protection that sets your level of expectation with the factories you are considering using. Step 3: Quoting the Project Once references and the signed NDA are in your possession, it’s time to send your sample to the factory and have them provide a quote for your project. When comparing quotes, it’s important to make sure you are comparing apples to apples. Have the factories quoted the same quantities and quality of fabric? Do the quotes include shipping, duties, customs fees, etc.? Or are you responsible for these? The quotes will include terms such as FOB (”freight on board”) China or FOB (destination port). FOB China means the price quoted to you is for the goods to be delivered to the port in China. You would still be responsible for shipping, duties, customs fees, insurance, etc. from China to the U.S. The duties levied on soft and hard goods varies greatly. Know your product’s tariff code and what these additional taxes add to the cost of your product. If you are buying goods FOB China, then you would need the services of a customs broker and freight forwarder. A customs broker or customs agent is an individual or firm licensed to enter and clear goods through customs for another individual or firm. A freight forwarder is a person engaged in assembling, collecting, and consolidating shipping and distributing less than trailer load (LTL) freight. Talk to companies that handle both these responsibilities to get a better understanding of what is involved. If the quote you receive is FOB L.A. (or another U.S. port), this means all shipping, duties, and customs fees have been paid as far as Los Angeles. You would still need to pay to get the goods from the port to their final U.S. destination. It has been my experience that the factory expects to negotiate. So, after sitting with the quote for a day or two, go back and ask for better pricing. You know what you need to “land the goods for” in order to meet your margins, have room for a distributor to get paid, etc. Don’t be shy! With the dollar fluctuating so frequently, quotes given are usually good for 30 days. If you delay the order beyond the time specified, make sure you ask if the quote has changed in any way. Step 4: Beginning the Production Process Now that you have selected the factories to work with, it’s time to start production and see who produces the best product at a fair price. I was very clear with all the factories who were bidding on my business that my desire was to build a relationship with one or two of them and to keep that relationship in good standing. I was planning on being around for a long time and wanted them to understand I was looking for a manufacturing partner who would support my efforts. With your many prototypes in hand you are now ready to send samples to the manufacturers you have decided to work with. In addition, you should have detailed drawings that clearly show dimensions and sizing for each component of the product. You should also have a “spec sheet” that details the specifications of materials used, seam allowances, etc. The more detailed you can be, the less confusion there will be and the quicker the prototyping process will be. Allow yourself 6-12 months to get the prototype made overseas. I discovered that a factory will say “we can make this exactly as your sample.” When I got Planecomfort back (from all three companies I was working with), it was not exactly like my sample. So, back and forth the product went. Every time I got a sample back from China I would put it through my rigorous quality checks. Is the size correct? What happens when it’s washed and dried? Is the color exactly as specified? There are a million little details that should not be overlooked. This is when you get to red flag anything that is wrong before your order is made. When you find corrections, take pictures, keep detailed notes, make copies, and send notes back to the factory with the sample. This prototyping phase is all about finding the glitches, the goodies, the surprises that might otherwise have been overlooked when your product was in the design phase. Learning what is right and wrong about your product during this part of production is a lot easier to confirm and/or correct than when your product is in production! Shipping to and from a foreign country takes time and is expensive. A reputable organization will do all the shipping to and from China for you and will cover that expense. You normally would just have to ship your samples to the U.S. representative. Step 5: Placing the Order and Taking Delivery of Goods After you have received a quality sample and decided which factory or factories will get your business, it’s time to place the order. Most factories will request a purchase order, and you should want to create one. This is a legal document between you and the factory— if you have left out certain information you may have no recourse if something goes wrong. It is important that you are specific and detailed. You also need to be aware of local holidays and customs that may affect the delivery date of your goods. For example, during Chinese New Year, which usually begins at the end of January, most of the factories in China close for at least two weeks. If your order is time-sensitive, you need to plan far in advance. Once you place the order, you will have to pay a portion of the balance due before the factory will begin production. Most factories require payment before the pre-production-run sample is made. Usually the payment terms are 30 percent at the time of the order, 30 percent when goods get on the boat, and 40 percent when goods reach the U.S. I would be skeptical if a factory made you pay 100 percent of the order up front. Until you and the factory develop a good relationship, you most likely will have to wire money to the factory’s bank. Depending upon the quantities ordered it will take a few weeks to make your product. You have to allow three to four weeks for your product to get from the factory to the United States. From start to finish, from the time the order is actually placed to delivery, it usually takes 70-90 days. Initially, the manufacturing process can be stressful, frustrating, time-consuming, and nervewracking. But it gets easier and less intimidating as time goes on. When your product arrives at its final destination, beautifully packaged and ready for sale, there is no better reward. Ann Merlini is a member of the Boston Incubator and the founder of Pac’nNap, LLC. For more articles like this, visit www.ladieswholaunch.com, the first company to provide resources and connections exclusively for women entrepreneurs.