Switching Suppliers: Key Signs, Strategies, and Success Stories for a Smooth Transition

We tackle the complex but essential topic for anyone manufacturing in Asia: when and how to switch suppliers.

With years of experience guiding companies through the challenges of changing manufacturing partners in China, Fabien Gaussorgues, CEO of Agilian Technology in Dongguan, provides insight into recognizing key signals that it might be time to move on. From quality inconsistencies and communication lapses to disruptive delays, he outlines the factors that can lead businesses to seek more reliable partnerships.

Switching suppliers, however, is no easy task, and Fabien offers practical advice for a smooth transition. We also discuss strategies like setting up phased production shifts and establishing clear expectations upfront to avoid costly setbacks. Through real-life examples, Fabien reveals how proactive management during these transitions can result in improved product quality, shorter lead times, and significant cost savings.

If moving production to a new supplier is on your radar, this post offers essential guidance to make the shift successfully and maximize long-term gains.

Listen to the audio here.

Here’s a summary of some of the main points, but remember to listen for the full episode…

Reasons for Switching Suppliers

Common factors for switching suppliers include quality control issues, inconsistent communication, and supply chain disruptions. Fabien emphasizes the importance of identifying specific triggers that may indicate it’s time to look for a new partner. (01:47)

Real Case Studies of Customers Who Encountered Such Issues

Fabien gives a couple of examples of customers who originally worked with factories displaying red flags (especially in quality processes and transparency), what the issues were, and how they should have been handled. One of the factories had 1,000+ staff, so ‘bad’ suppliers aren’t always small workshops. (12:06)

Managing Supplier Transitions Effectively

Fabien shares strategies for managing the transition smoothly, including setting clear expectations, gradually shifting production, and keeping thorough documentation to avoid disruptions.

Customers to assess their current supplier/manufacturer for warning signs such as poor quality control, lack of transparency, and uncontrolled pricing.
Customers to plan carefully for switching suppliers/manufacturers, including assessing the new supplier, preparing the old manufacturer, and ensuring continuity of tooling and inventory.
Customers to ensure proper documentation and testing before transitioning to mass production with the new supplier.
Customers to request a video tour or on-site visit to assess the new supplier’s capabilities and quality control processes.
Ensure you have a tooling contract and other contracts enforcing who owns what.
Avoid conflict with the old manufacturer if possible as this will be more costly, it may even be worth paying them something even if it seems unfair (if there is no contract to force them to act).
Prepare new SOPs for the new mfg, including setting up quality processes where needed, and your quality expectations.
Prepare to transfer the components.
Keep extra stock to insulate you from disruption during the transfer. (19:30)

Risks when switching to a new manufacturer

There is a risk that your old manufacturer continues to produce and sell your products, so you need leverage over them to prevent it, like a trademark.
Some may also register your own trademark like a brand to ‘protect you’ (or something so similar it is obviously about you) to ‘allow them to produce for you,’ but this is a con, and in China, it could allow them to legally own your brand if they registered first making it hard for you to stop them producing ‘your’ products.
The same is sometimes true for when a manufacturer ‘helps’ develop your product, they may later claim ownership of them and not release the designs and IP, meaning that you don’t even have control over your own product’s designs.
Let’s say the old manufacturer is not reliable for assembly, but their plastic injection molding is great. In a situation like this, you may leave them with the plastic business. Many suppliers outsource injection molding anyway, so continuing to use that third-party supplier may be possible unless the old supplier will not release that information (which could also leave your tooling in limbo there). (24:30)

Key points in the process of transferring to the new manufacturer

Verifying that tooling works during the transfer process (Agilian’s process).
When we receive tooling we assess it.
Sometimes it was not designed well by the old manufacturer leading to poor quality and low yields.
The tooling may need to be reworked or even remade to reach your desired quality standard if it was only designed for ‘cheap production.’
A low yield costs you a lot in money, but also in time, as it requires maybe two to three times more products to be produced to reach your quality standard, resulting in big delays.
The new manufacturer should review the supply chain and BOM in depth.
Some components may be ‘at risk’ such as being end-of-life, or some suppliers just can’t reach the right quality standard, so in order to improve results or maintain those that are expected, changing some suppliers might be required. Suppliers on the BOM may be audited and assessed, and sometimes we will send auditors on-site to check the first batches they produce if they’re a new supplier.
Ramping up production carefully.
Dropping a large order onto the new supplier and expecting them to just start manufacturing immediately is unrealistic. There are a series of steps to follow to ensure that quality and performance are achieved before mass production can start. Transferring production actually takes around 2-6 months to go from the old manufacturer to ramping up with the new manufacturer. Why? All documentation, learnings, IP, and tooling need to be in hand, but a PVT (Production Validation Testing) stage is needed where a pre-production ‘pilot run’ involving everything exactly as it will be in mass production from end-to-end is needed to check that manufacturing will perform as needed. This allows you to eventually start mass production with minimal risks. (31:54)

Conclusion

Switching suppliers can be challenging but essential when quality and communication issues arise. Fabien’s insights illustrate that with careful planning, clear expectations, and hands-on oversight, businesses can manage supplier transitions to benefit from better partnerships and enhanced manufacturing outcomes.

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