Introduction to how to manufacture a product in China
How to manufacture a product in China? Unless you have done this professionally for years, it might be a very painful experience resulting in you ‘losing your shirt!’
I have been working with companies in your situation for over 10 years, and this guide is just for you. It won’t give you a precise map, as there is no such thing. What it will give you is a warning about the 3 major pitfalls you need to avoid, and a series of ‘best practices’ the best companies follow.
Everything in this guide is written from the point of view of a startup or SME launching a new electromechanical product. Nothing here is outside of your reach (or ‘just for big companies’).
But wait… isn’t everybody leaving China and manufacturing somewhere else these days?
Large companies that sell a lot in the USA are moving some of their mature productions to Vietnam, India, Malaysia, Thailand, and so on. That’s correct.
However, if you want to develop a new mechanical and/or electronic product fast and without unnecessary hurdles, you will very probably need to do the manufacturing in China for several reasons:
Keep reading the guide or jump to the section you prefer directly by using the links in the table of contents below:
This guide is written to help you manufacture a new product in China without running into problems that will damage your business and result in products that don’t meet your expectations. The initial building block for good results is finding and vetting the right supplier.
If you’re still at that stage, you will benefit from first reading these blog posts about vetting a suitable new supplier or, if you prefer your content in audio form, you can listen to our podcast series on vetting new suppliers, too.
This section could have been entitled “The Domino Effect of China Manufacturing”. Making 2 or 3 critical mistakes at the start of a new product development project will usually trigger a sequence of other serious problems.
I looked at the many millions of dollars wasted on the Coolest Cooler (a Kickstarter project that failed miserably) recently, and I discussed this topic with a few people who confirmed my observations:
The same types of issues tend to plague companies who are wondering how to manufacture a product in China, and they are usually caused by a few mistakes made early in the process. Here is the way it usually unfolds.
No appropriate strategy & plan
This often leads companies into the hands of the wrong type of supplier. Here are a few examples:
Many companies have come to us after getting frustrated by a bad-fit supplier. And we noticed that this original error was usually at the source of many other problems:
There’s so much to do when working out how to manufacture a product in China that a proper agreement is often set aside and forgotten… until the buyer starts to have doubts (or clear signs of misconduct). Make no mistake, though, it’s essential! Here are a few key benefits it would provide:
The most important is to do this at the very start.
Once you have started working with a Chinese supplier, you have invested some time, and they have made some progress, they know you won’t switch away from them. Good luck to get them to sign your agreement at that stage… it is often too late.
What happens in this case? It doesn’t always happen, but the supplier might raise prices. Or they might deliver poor quality. Or they will take your tooling and/or products hostage when you start to threaten them with penalties.
These situations have killed thousands of new product manufacturing projects. Don’t be one of these casualties. The solution is well-known and applicable to your situation with a bit of adjustment.
Since you tend to fall in love with a manufacturer and entrust your entire project to them, you fail to take any precautions.
(This is in addition to the absence of a proper agreement, and it compounds the effects I mentioned above.)
The most common symptoms of this mistake are as follows:
This is at the heart of what our company does, and many importers come to us for that kind of work. Unfortunately, when they realize how little information they have in their hands, and how bad their alternatives look, they sometimes decide that their only viable solution is trying to salvage their current supplier relationship…
This decision drives them to get even deeper into their hole. Sometimes they find a way to get some products to market and get some oxygen. Often, though, they are digging their own project’s grave. When they have run out of funds and there is no clear path ahead, it is often wiser to admit defeat.
A friend told me once that many companies coming to Shenzhen or Shanghai to buy products are not “China-ready”.
Thousands of companies are formed every year to develop and make new products, they are not “China-ready”, and they have the confidence to go at it without proper advice and support.
This is like attempting to learn how to make a parachute after jumping from a plane. Buying off-the-shelf products can already be challenging. Developing a new product from scratch is orders of magnitude harder and riskier. Doing it without first spending time to understand the playbook about how to manufacture a product in China is really brave…
What are some signs that you may not be “China-ready”?
Note that one should not generalize these observations.
Not all China-based manufacturers are unethical and incompetent — though many certainly are. Some are very good… and very busy, which means they are less likely to be interested in a small project requiring a lot of engineering work.
If you assume there is a high chance that a random supplier you meet is risky, you will take more precautions. That’s the right state of mind when operating in China.
And, to reduce this type of risk, the first step is to identify the type of “ideal supplier” you need to find. This brings me to the next point.
Importers who are learning how to manufacture a product in China excitedly start devising their new product concept in a hurry to see it become reality, and at the same time they’re afraid of competitors getting to market before them. Is this you?
Beware of the ‘entrepreneur in a hurry’ syndrome. As I wrote above, you are about to explore quasi-uncharted territory. You need to gather some information first about what is expecting you. Don’t rush and find yourself in trouble you could (should) have avoided.
Think about all aspects and implications of your product design
What causes the most delays? Fixing issues too late in the process. Issues are 10 times more expensive in both money and time if you catch them in the middle of prototyping rather than in initial design, or in production rather than in prototyping.
Here are a few examples of important considerations that are often skipped early on, at great cost:
Spend some time planning your next steps
Keep Dwight Eisenhower’s famous quote ‘plans are useless, but planning is ‘indispensable’ in mind.
Have you been thinking of the different steps of your project, all the way to “the first batch has been manufactured and shipped out of China”?
People with no prior experience in product development systematically underestimate the time and effort needed. Here are two examples:
This is why, last year, we suggested a roadmap for complex hardware products that are developed and made in China. It is not exactly optimistic, but it will get you thinking about what you might do right or wrong (and that’s the whole point). Work with people who have done it before, in order to adapt this plan to your specific situation.
Any milestones?
In your plan for how to manufacture a product in China, you will probably want to include milestones, and ideally a stage-gate approval process (to do a review before moving on to the next phase).
Note: this is common in established organizations and in certain startups that need to convince investors; it is usually not handled this formally in most newly-formed companies.
Here are examples of classic milestones:
Example: how consumer electronics companies plan for new product introduction
In the consumer electronics business, new products are the lifeblood of companies. In the USA, particularly on the West Coast, they have defined that activity with relatively precise codes.
Here is a video overview of their new product introduction process:
Expect some delays
It is a sad reality that most projects are delivered late. And, the more complex the project, the more they tend to fall behind schedule. Many studies have shown this to be true.
We showed a typical example (where the project actually took twice as long as planned) in this article. Psychologists call this tendency the ‘planning fallacy‘. You will probably not escape it.
Take it into account when you prepare your financial projections — every fixed expense such as monthly salaries will make your overall costs balloon. Paying fees for services rendered, rather than employing full-time people, usually de-risks the project in that sense.
There are often solutions to save time… but they might come with high risks
Here are a few examples of time-saving moves:
If you are unsure about compliance, you can do laboratory tests on the components, before production, and wait for the results. Or you can take a risk go directly in production.
Doing a small pilot run before mass production is very useful to catch any issues in the process and sometimes also in incoming components. You and the factory might decide to go directly in mass production, with the risk of generating much rework, scrapped material, and shipping delays.
Your prototypes may incorporate parts from untested suppliers. Searching and qualifying good suppliers can take time. Again, you and the factory might decide to take the risk of quality issues on the components of the first batch.
I hope you have read the start of this article. The “3 deadly mistakes” I mentioned above are the pitfalls you absolutely need to avoid when learning how to manufacture a product in China.
You also need to know what the biggest risks, and assumptions, are in your project. Here are two examples.
In particular, spend some time reducing the market risk
As consultant Eric P Rose advises hardware startups, you should make sure there is a demand for your product, and you should understand the nuances of that demand before you invest a lot of money and energy in making that product a reality.
Research has shown that 42% of startups that fail, fail because they deliver something the market does not value. That’s actually the number 1 reason for startup failure!
In addition to market research, one way to keep the market risk limited is by developing a “minimum viable product” as version 1.0 of your product:
What certifications will be needed in the countries of sale?
You need to know this from the start, and that may require a bit of research (with a service such as ComplianceGate.com, ProductIP.com, or others).
For example, many of the electronic products we have developed for our American clients require an FCC, and sometimes also a UL, certification. This has to be planned from the initial design stage:
What type of factory should you work with?
A business learning how to manufacture a product in China needs to look for the type of supplier that will be a good fit for its needs. One way of categorizing suppliers is based on their business model:
Another way is by their size. I generally classify them into 3 broad levels:
Smaller factories might be ‘light’ on engineering resources and on quality control. Larger organizations tend to be much slower and more expensive. Finding the ‘best match’ might take some work.
What is the most appropriate process for prototyping custom-designed parts (if any)? Conventional CNC machining, 3D printing, or more seldom used approaches such as stereolithography, selective laser sintering, or vacuum casting?
This information can drive your search for the best partner for initial prototyping. Typical Chinese factories usually don’t have such processes in house, but can help with later-stage prototypes. We’ll discuss this in more detail in ‘Element of solution 4‘.
Your new electro-mechanical product may count tens of components. In many cases, what makes or breaks a development project is a succession of mistakes when setting up the supply chain. Here is how to avoid that.
(By the way, if you want to go deeper into this topic, I have written e-books on how to find and develop suppliers, and on how to verify suppliers.)
Identify, screen, and qualify suppliers
By now you have an ideal supplier type. There are probably thousands of options in your product category, so you need to screen them down.
First, make sure you are not dealing with a trading company pretending to own & operate a factory. A business registration check is simple and quick, and it can help you weed these out.
You also need to make sure they can do a good job when the time comes to ramp production volumes up. Do a process audit on one or two key factories. An engineer can visit them and look for risks in the most important areas.
In-depth conversations, as well as astute observations, are also important. If the owner used to be a salesperson and has been re-investing his profits in real estate, these are usually not good signs.
Never let a middleman obscure visibility
Don’t let an assembly factory set up and “own” your entire supply chain. (We cover this in more depth in the next section.) If you do not know where the critical components come from, it will cause several issues in the mid-to-long run:
Don’t try to control every aspect of your supply chain
Some suppliers are critical, others aren’t. You don’t have unlimited resources. Let your manufacturer pick the suppliers of screws, connectors, etc.
However, you need to identify a few critical lines in the Bill of Materials (BOM):
Have a backup for every critical supplier
This may not be possible when you develop your product and at the time of the first order. You need to think about it at some point, though.
It can also be useful if your order volumes pick up faster than expected — that’s a good problem to have, but still, a problem if your primary supplier cannot follow as quickly as needed.
Keep in mind that onboarding a new supplier takes time. If you wait until you need a backup, you might lose a lot of time.
One of the three key mistakes I outlined at the start of this guide on how to manufacture a product in China is the failure to set a proper agreement from the start with suppliers. It is actually more complicated than that since there is more than 1 document to prepare.
Also, documents and legal agreements are not sufficient. You will need to adopt the right strategy and make the right decisions.
Clarifying your needs and your standard
First things first. Communicate your needs clearly! No Chinese supplier will be able to guess what your product users need or require, as well as you do.
Start drafting a product specification sheet (including tolerances wherever possible). It will be very useful at all levels — for engineers working on prototypes, for purchasers, for the manufacturing staff, and for all the inspectors along the process.
Once a look-alike and a works-alike prototype is approved, it must be catalogued as part of your standard. Once a pre-production prototype (with parts coming off the tooling made for production) is approved, it will become the new standard. And so on.
Strategies for maintaining confidentiality
Once your product is on the market and is successful, it is likely to be copied by Chinese companies (whether it is made in China or not) and fighting them might be very difficult. Before that, though, there are ways to reduce the risk of being copied. Here are 4 classic strategies.
Have a lawyer draft a non-disclosure, non-use, and non-circumvention (NNN) agreement that is applicable in a Chinese court, and have every Chinese supplier sign it before you disclose anything confidential to them.
When you contact and screen potential suppliers, show them a part or product that is different from yours but requires similar processes. Then, only show your product to the 1 or 2 ‘best fits’.
Make sure to check your potential suppliers on these two dimensions:
Avoid raising money on Kickstarter and Indiegogo too early in your project, because some unscrupulous companies might even re-use the photos you prepared as part of their marketing materials!
Compartmentalizing the supply chain (the ‘black box’ concept)
In China, some buyers have had a particularly nasty surprise: a bad actor in their own supply chain noticed the product’s success and decided to take advantage of it by making extra quantities and selling in competing channels.
It is particularly destructive because they might beat you to the market when you develop your version 2.0 if they have sufficient information about it.
In order to avoid this situation down the road, we have set up this approach for several clients:
Development & manufacturing agreement(s)
Companies learning how to manufacture a product in China who choose to develop a new product with their new supplier very often forget to specify their requirements in these two areas:
Negotiating all this is usually straightforward when working with a contract manufacturer, might be difficult with an OEM, and is always very convoluted (or outright impossible) with an ODM.
Quality verification & validation plan for prototypes
If no testing plan is documented for your product, how will the engineers working on prototypes be able to know if they have done a good job?
For example, you’ll want to test your prototypes:
(As you document this plan, and as you update it, make sure its content ends up in the specification sheet we mentioned above.)
Pushing the product to its limits
You are also advised to plan for functional testing outside of ‘normal’ use.
For example, we worked on the development of a battery-powered skateboard. We did tests on smooth roads, but also on dirt roads, on slopes, with a very heavy user, and so forth. Basically, don’t limit yourself to the optimal operating window (shown in green below):
The same logic can be applied by a reliability testing laboratory. You don’t have to set all this up by yourself.
All the results you gather this way will inform you of the limits of the product as it is designed. And you might decide on design improvements.
Tooling and other non-recurring engineering (NRE) investments
Spend time planning before giving the green light on these types of investments. Buyers tend to trust their suppliers way too much at this point.
For example, for plastic injection molding, how many shots will the mold allow you to make? The type of steel used will make a large difference — for example, a mold made in P20 steel might start to require a lot of rework after 40,000 shots, while H13 steel might be good for 1 million shots.
The harder, and more durable, steel is harder to machine. The tooling takes more time and is more costly. But it might be just what you need. You need to understand and specify all this.
Pilot runs before mass production
I have already mentioned this, but it is worth repeating:
Quality monitoring of production
You approved a prototype, you feel the R&D engineers know what you want… but what about the production and quality staff? Be there if you can during the first mass production batch. Observe their own quality control processes.
Now, do not think inspectors will fix all your issues. They only detect problems — ideally at the source, but often hours or days later. The key, once your scale volumes up, will be having the manufacturer set up and fine-tune the right process controls.
When the time comes for the second or third batch, do not expect the production ramp-up to be smooth. With Chinese assemblers, there are often long delays, as I described before.
Let’s say you followed all the advice I laid out above because you want to know how to manufacture a product in China successfully. You have a strong plan and a good idea of what to do. You have found and qualified the right suppliers. You have clarified all the right requirements and got written agreements.
You still need to keep control of technical aspects. Getting competent and experienced people focused on your project and working on the right things is not easy
Don’t go to a Chinese manufacturer too early
Some people don’t spend sufficient time working on their product design, and they hand an immature design to a manufacturer. This is usually misguided for a few reasons:
In other words, work with a design firm and with a supply chain management firm until you are at the point where you can bring a mature design to a manufacturer. It will be faster and they will give you better work quality. (And there is a price for it, obviously.)
Work with people who have already done it before
Your product is unique. It comes with its own challenges. Don’t work with engineers who are trying to figure out how to use CAD software, or what protocols to use, otherwise design & development will drag on for a long time!
There is usually a logical process to follow (example below).
PCB logical design process
Designers and engineers should be able to explain it to you. If they can’t give you examples of similar projects, as well as the usual steps to follow, it is a sign that you are about to work with the wrong people.
DFM (Design for Manufacturing)
The more unique your product, the more vital good DFM suggestions will be for entrepreneurs and SMES who’re wondering how to manufacture a product in China. Any improvements done at the design stage will take much less time and money than in subsequent stages.
A part of this analysis can be reduced to a checklist — here are a few examples:
In addition, a good designer or engineer can review your product design and will usually have a number of questions and remarks, simply by pulling from their past experiences interacting with Chinese manufacturers.
Prevent design-related defects
Most quality issues found in the field come either from design or manufacturing. Poor design can cause many problems that might only appear after 6 or 12 months of use.
The more robust the design is, the less likely you are to experience quality issues down the road. But what makes a robust design? It simply means it will be more forgiving of variations in the manufacturing conditions, and defects will be less likely to appear.
Let’s say a critical operation relies on a physical and/or chemical process. There is always an optimal operating window (in green below). For example, the parameters might be pressure and temperature, in an injection molding press.
If the optimal operating window is tiny, small variations (which might be unavoidable) will result in quality issues. And, if the manufacturer identifies this phenomenon, they will not take responsibility when you come back to them with customer complaints.
Manufacturing and testing processes
You need to design your product, give it shape (prototypes), and test it. At the same time, someone also needs to start designing the process and testing it.
We have seen buyers push their manufacturers to hurry up, to the point where they started assembling products without having thought of the assembly steps, without training operators, and without preparing any inspection/testing process. These are the cases where everything goes wrong, and shipments end up being very late.
How to avoid being in such a hurry that important preparation steps are skipped? Start to work on it at the same time the final prototypes are being validated and the tooling is made. It takes a bit of planning and coordination, but it is worth the extra work.
These are just a few of the many considerations you need to keep in mind when it comes to the design and engineering work, which will shape the final product’s cost, quality, and success in the marketplace. Once again, make sure to work with experienced people and allocate the right resources.
Many people who come to us asking about how to manufacture a product in China are worried, and they say “new product development is messy, and we never know where it is going”. I will say this is very true if you don’t work hard on planning and if you place an untested manufacturer in charge of all the development work.
Your product is new, and you will have to handle associated risks (technical choices, market acceptance…). Make sure you don’t add extra risks to the mix.
Three years from now, when you have successfully brought your innovative product to market and you are working on its second (or third) version, you will need to repeat this process. You will probably decide to simplify certain aspects of the design and spend more engineering time in one crucial area. You will probably take measures to prevent certain risks, and spend time planning your next steps. You might even switch to a more suitable type of factory.
Ideally, you will get all this (mostly) right the first time you embark upon a new product manufacturing project. It was this guide’s objective. Hang on — it will probably be a long journey. And let me know how it goes.
If you still want even more information on how to manufacture a product in China successfully, try these resources:
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