10 Things to Know about when Working with Factories
Looking to place your first order from a Chinese factory? Or maybe you’re currently doing it and still crossing your fingers that it is going along well. Here are some tips learned from my own experience (importing Kitchen and Bar products) as well as experts in the field. 1. Make Clear Specifications
If you want to avoid problems with a Chinese factory, then look professional from the beginning. If you come to them looking like an amateur, then they will treat you like an amateur. Do as much upfront research as possible on your product before approaching a factory. Is it a pre-existing product, an enhancement, or a brand new innovation? Each one of these requires different levels of specifications, but the more homework you do the better. The goal is to have a sample of the product in your hands before sending it off to the factory where they can look at it and give a full and complete estimate. However, be very careful and do as much research as before to make sure this factory is trustworthy and reliable before sending over your work.
2. Don’t Focus on Price Alone
If a factory can tell that you are only considering them on the basis of price (and price alone) then, in my experience, the good factories will step away and the lower quality, more desperate factories will step forward. I’m sure you want the best quality product with a top supplier, so don’t show them that you are a cheap buyer.
I can speak from firsthand experience. In my early days in China, I kept pushing down the price of a wine corkscrew, and the factory finally “broke” and agreed to my price. Unfortunately for me, the metal was a cheaper one that would rust quicker and I had many returns on my e-commerce website for the next year or so.
3. Be Patient
If it’s your first time to buy from China, don’t rush it. I’d say give it at least six months to do your first order. Between finding the supplier, shipping samples back and forth, negotiating, making a sales contract, sending a deposit, inspecting for quality, and finally shipping to your facility, the process will definitely take more than six months.
4. Do a Test Order
You might want to buy lower quantities from a couple of factories. The best way to get to know a factory is to do a practice run with them. After all, this is when their true colors come out and now is the time to see if they can execute.
5. Always Get a Production Sample!
This is where people get impatient and rush. They get one sample that is kind of close to what they want. These people are typically based in USA and Europe and tired of spending the $80 U.S. dollars for UPS to ship the samples back and forth each time, so the factory convinces them that they know what the client wants. Afterwards, the factory will charge whatever they want and make it how they (not the client) wants it. In conclusion, get them to make the sample and send it back! Yes, it is exhausting and a bit costly but if you cut corners in the beginning, it will cause a lot bigger headaches later on.
6. Consider a Trading Company
Many people always talk about going “factory direct” and “cutting out the middleman.” Yes, while you can save more money doing this, there are sometimes a few extra value-add services that the trading company can do. Another reason to use a trading company is that they have a network of factories, so you can do lower quantities across multiple product categories. Factories, on the other hand, have higher minimum order requirements and you would need to coordinate with all of the factories yourself.
7. Use Third-Party Services
Similar to potentially using a trading company, there is a wide range of third-party service providers out there that you should be aware of. From quality control, CAD design, sourcing, to logistics, the more of these you use yourself, the better control you will have of the entire process. Normally, the factory will tell you not to worry about these things. They will tell you that they have their own partners they work with or that they don’t do these services at all. But, of course, if you pick your own third party vendors you can be rest assured that they will help make sure that the factory you work with is doing things in your best interest.
8. Location Matters
I remember when I was first searching for a factory back home in the US. I had no idea where these factories were located, and I thought they were all in the same vicinity. I didn’t comprehend at the time that China is a massive place, and various “clusters” of factories form in certain cities. For example, Ningbo is where a lot of gifts and home decor is made, Shantou for toys, and Shenzhen for electronics. Learn where all these clusters are and then determine if you can source all your various products and components in that area. Why? This will reduce a lot of problems in the long term when consolidating shipments and doing just in time (JIT) scrambles for unexpected situations.
9. It’s Better To Lose / Waste Money At The Beginning Than At The End
When many people evaluate the necessity of research and development (R&D), they think that it’s a worthwhile cost to design a new product. But, in my experience, they tend to not classify things correctly which is a big mistake. I put a ton of money into R&D, such as flying to the factory, sampling shipments, and buying samples from various potential factories. You can’t cut corners on these upfront investments and you need to look at them as investments- not expenses. As with any investment, the value increases over time, and the knowledge, awareness, and correct suppliers you choose in the beginning will save you countless of hours and dollars in the long term.
Sadly, it’s harder to notice our right decisions than our wrong ones. Remember that if you’re not facing troubles in the years ahead, count your blessings then and thank yourself for making the right investments and decisions during the early stages.
10. Make a Contract in English and Chinese
This one I wish I knew when I first started buying from Chinese factories. You can’t just find a contract on a Google and tweak it as this is something that will be with you for years to come. Find a qualified lawyer. On my podcast, GlobalFromAsia.com/episode71 we have Mike Bellamy sharing some of his legal contacts there to use. Another options, of course, is to use the recommendations in your own network. If you’re a smaller buyer, a contract may be hard to enforce. However, it does set the rules of engagement from the very beginning and reduces miscommunication later.
Michael Michelini is an American internet entrepreneur in South China. He has a blog and podcast at GlobalFromAsia.com and also hosts training via ChinaBusinessWorkshop.com