In this article I want to give advice to importers of custom products (i.e. not “off the shelf”) who just spent many months getting a new product development right and that are ready to launch manufacturing in China.
Chances are, they did not work with a big factory on this. Bigger factories tend to be less flexible, more expensive, and less interested in unproven product concepts.
However, there are two problems with relatively small manufacturers in China.
1. An immature quality system
The biggest risk is that they show their inability to manufacture at the right quality standard. Good communication and development skills DO NOT correlate with good manufacturing skills.
The very worst situation goes something like this:
- The buyer does no inspection in the factory before shipment,
- The factory sends a few well-chosen samples taken out of production, which reassures the buyer,
- Upon arrival, the buyer finds that most products are defective,
- All the supplier offers is a discount on the next order, as well as profuse apologies (or excuses),
- The second shipment is bad too (there is an 80% chance that the second shipment is no better than the first one).
Why does this happen? Here are the main reasons:
- The customer did not audit the supplier’s manufacturing facilities,
- The customer did not send any inspector to check product quality,
- After the complaints, the factory sees this customer as a troublesome customer who actually cares about quality (and who might leave at any time),
- The discount means factory managers don’t care about the second order (no profit, no attention).
2. The factory can’t ramp up production volume quickly enough
In case the product sells well, can the original manufacturer follow this growth?
In the consumer electronics business, volumes can be multiplied by 10 over a 6 months period, and production delays are very, very painful.
Unfortunately, most factories are unwilling to invest in new equipment and to hire tens of new people without clear long-term visibility. What if your version 1 is successful but your version 2 is a flop?
If capacity is insufficient and orders shoot up, subcontracting will be necessary. And guess what… the subcontractor will have to learn how to make the product, and will have to be checked too! If you don’t do it, you are counting on your supplier and that’s usually not very wise.
The sad reality of getting a new factory started
Onboarding a new Chinese manufacturer to make a complex customized product can take as long as it took to onboard the first one… And there is always a chance that they give up if the boss’ priorities shift in the meantime.
The key is to get as much done as possible during the first 2 months, while they are still excited. After that period, everything takes longer. So the buyer needs to have a process for getting all the information to the right people in the factory (not the salespeople) in a short time period.
This is hard work. Engineering firms that are based in China can help, fortunately, but few people think of this option.
First, one thing should be pretty obvious by now: be pessimistic and don’t believe what you are told without asking at least a few questions.
Second, don’t get locked in one relationship. The last thing you want is to start looking for a new supplier while all the product information is in your head. It is extremely time consuming and your current suppliers know this. Not to mention, the re-order deadline might be coming up fast.
There are ways to avoid it. Prepare engineering designs, specification sheets, and even a few rough samples on your own if you can. It makes onboarding a backup factory faster and easier.