Your guide to finding off shore partners that will help lower your costs and increase your profit margins.
Any business owner or employee can agree with the idea that increasing profit margins and reducing operating costs are critical to sustaining business success. This concept becomes especially important when you are a company that specializes in manufacturing and selling your own product.
Compared to a service company, manufacturing companies are not only faced with fixed overhead expenses, but other variable costs as well. For example: changes in raw materials pricing, production down time due to faulty manufacturing equipment, expensive second- shift labor, and worst of all, product waste resulting from the production of a defective product.
Whether you are a small factory or a large conglomerate, the goal for your production business should be centered on streamlining your manufacturing and minimizing those variable costs. So, a couple of questions to ask are: "how does one begin to outsource manufacturing and/or product sourcing" and "which country will provide the best service, raw materials and price for mass production?"
To answer these questions (and more) listed here, are points to consider when choosing foreign vendors:
- Quality: Be sure that your outsourced vendors will maintain the same quality and safety standards you are producing in house.
Try to obtain physical proof (certificates) that the factories are certified and recognize such quality production processes as CCC (China compulsory certification mark), PPAP (Production Part Approval Process) and ISO-9000 series certifications. Also, be sure factories are open to allowing third party inspection companies into their facilities to conduct quality control investigations. - Location: When you begin the offshore manufacturing process, stick with one country of origin for your manufacturing. Preferably select a country that has ample supply to your required raw materials and favorable labor rates.
- Customer References: Work with suppliers that are willing to provide customer references.
- Export Experience: Insist on working with foreign suppliers that have prior experience exporting product into the United States. Working with a vendor that has knowledge of USA export documentation and procedures is invaluable.
- Letters of Credit: Work with vendors that accept payment by foreign letters of credit. You want to be sure that your foreign manufactured products appear (as promised) at the USA port.
- Foreign Credit Check: Work with foreign credit companies to obtain real time credit reports on your chosen manufacturing vendors.
- Manufacturing Capacity: Know that every manufacturing company is different. Make sure that your foreign supplier is capable of producing the demand/quantity your company will need for long term sales. Also, be aware of lead time (30, 60, 90 days) to produce your desired products.
- Manufacturing Design: Ask if the facility can offer manufacturing design services. This will help perfect your initial product design. This step will help to prevent further rework after manufacturing begins. This is also a good time to ask about their costs for sample production.
- Culture: Can the factories speak English and are they knowledgeable of Western business practices?
- Site Visits: Work with suppliers that will allow you to visit and communicate with them on a regular basis.
Choosing the right vendor/supplier for your outsourced manufacturing is truly an exercise in locating a long-term partner that will help lower your manufacturing costs. Take the time early in the process to perform the necessary due diligence and educate yourself about every facet of the factory's processes, certifications, credit worthiness, and experiences with foreign customers. Your company will gain critical knowledge and respect from the potential suppliers. Any reputable supplier will be willing to share appropriate business information as well as ask for information from you. So, be prepared to share your business information in return.
Michelle Bonn is the owner of Expedient Trade, LLC, an international sourcing and manufacturing service company, based in Buffalo, NY. For questions about this article or other international business information, contact Expedient Trade by visiting their website, http://www.expedienttrade.com/ , or view their international business profile at www.connected-women.com/en/directory/view/expedient/