If you are in the manufacturing of products game, suppliers, factories and collaborators will be a significant part of what you do. And when you are on the search for new partners to work with, one thing that will always be at the front of your mind is the price.
The trouble is, focusing on the cheapest option could end up costing you more than you bargained for in the long-term. Sure, you might be able to save yourself a few cents per item produced, but if there is a significant dip in quality, you need to understand that fewer people are going to buy your stuff.
How are the finances?
Once you start looking at potential partners, you will realize there are more companies out there than you might think. This is especially true if you are looking beyond our borders and into international markets – which can be significantly more cost efficient than choosing home-grown manufacturing companies. But here’s the thing. As a buyer, you have to be very careful about who you work with. According to research, almost half of all businesses have been affected by working with suppliers that have ended up failing unexpectedly. It is essential that you do some evaluation and risk management before you establish any kind of contract. This advice is for any business, of course, but it’s especially true for companies trying to get a product to market – the investment you make and trust you place in the manufacturer can be considerable.
How are the politics?
Global, political disruption can have a considerable impact on the supply chain, so it’s essential that you understand the risks involved with using a manufacturer or supplier from a particular area. Again, it can be an incredibly cheap option if you choose an overseas partner to mass produces your stuff. But what happens if there is a general strike, for example? What if the upheaval is so high that transport routes are blockaded – or even destroyed? It’s critical that you are confident in your chosen area, in that there will be little political unrest in the foreseeable future. This is a particularly pertinent point in today’s unstable geopolitical climate.
How is the expertise?
Some manufacturers are more expensive because they provide superior services – it’s really that simple. And while you may not have need of a particular finish or quality assurance, in some cases you most definitely will. For example, if you are producing something like medical devices, you may need to work with a company that is reputable for wielding a drilling laser, or that works in a highly sanitized area. Make sure you do a thorough check of the manufacturer’s previous customers to ensure they are meeting the relevant standards and regulations for your industry.
How is the certification?
On the subject of expertise, most manufacturing industries have to work within very specific requirements. And when it comes to validating those requirements, a quick way of checking is to ensure you are working with suppliers that are appropriately certificated – with ISO and QS, for example. While this sounds easy, not all companies will make it easy for you, so make sure you have evidence before making your decision.
At the end of the day, manufacturers have to strike a delicate balance between price and quality. And a big part of that is connecting with the right suppliers. Here are some essential guidelines for ensuring you end up with the very best partners.
How are the logistics?
Every product is different, so be careful to align your manufacturing and shipping so that they meet your exact requirements. Maybe you only need a single warehouse for storage, for example, or perhaps it is necessary to use multi-location manufacturers to get the product to market as soon as possible. Similarly, perhaps you need your manufacturing base to be central to your market, rather than outside on the periphery.
How is the growth potential?
One thing many new product-based businesses forget when they choose their manufacturing services is that if all goes well, they will experience growth. Nothing is guaranteed, of course, but the reality is that if demand for your product increases significantly, but your manufacturer doesn’t have the means to meet it, it could spell trouble for you. If you are looking to build prototypes or small quantities, then there are plenty of manufacturers out there that can help. However, if you estimate that growth and sales will go through the roof, the fact is you need a manufacturer that can handle that. And while it’s easy to say that you can just move on elsewhere, don’t forget that you are likely to have a contract, tying you in for a specific period. Ideally, try and find a supplier that can meet your needs and grow with you as demand increases.
How are the payment terms?
Payment is a thorny issue, of course. While you want to increase the length of time you wait until making a payment, your manufacturer will want as much as possible as soon as possible. It’s the way the business world works, unfortunately, and many potential suppliers will make considerable demands. However, don’t underestimate how beneficial it can be to find a company willing to work a close as possible to your demands. It can significantly increase your cash flow in a multitude of different ways, which will – hopefully – result in a more stable business and an opportunity for a prosperous future.
How are the references?
As a final point, don’t forget to establish the manufacturer’s references. You can really tell a whole lot about a company just by talking to the people and businesses that have used them before. It speaks volumes about their ability to provide first-class customer service and, more importantly, results. Of course, there will be occasions where legal issues get in the way of contacting satisfied customers – non-disclosure agreements for defense companies, for example. But any manufacturer worth their salt will be able to provide you with at least a few different happy – and possibly loyal – clients.