Are you looking for an overseas factory to manufacture your products? Rather than searching for a factory yourself – a task akin …

Are you looking for an overseas factory to manufacture your products? Rather than searching for a factory yourself – a task akin to the proverbial needle in a haystack, especially from afar — look for a good sourcing agent or sourcing company to do that work for you. A good sourcing agent, either in the U.S. or in country, can:
1. Locate factories that have equipment and talent that matches your needs.
2. Determine which factories or suppliers will meet deadlines and provide efficient service.
3. Negotiate good prices.
4. Place orders, handle currency issues and pay suppliers.
5. Inspect factories for quality and ethical practices.
6. In some cases, inspect your finished goods before they’re shipped to you.
Here’s what you need to know about choosing a sourcing agent:

Visit trade shows

A good sourcing agent will have a deep understanding of your industry and of the country in which you want to do business. As a result, your industry’s trade shows may be the best places at which to locate a sourcing agent. Like the quality of products made by a colleague in the same industry? Ask him or her for sourcing agent recommendations. 

Decision time: a U.S.-based, global, or in-country sourcing agent?

There are advantages and disadvantages to both domestic and in-country agents. A domestic sourcing agent may be larger and broader in scope – for instance, if you want to manufacture products in several countries, a domestic sourcing company with access to, say, factories in China and Vietnam may provide you with a single point of contact. On the other hand, local representatives can help small companies get started for relatively affordable prices; they’re often paid on commission, as opposed to larger domestic companies, which typically work on contract and expect a portion of the fee up front. In either case, ensure that representatives are fully bilingual. 
Globus & NTDB.

Get the best prices

A good sourcing agent should get bids from several different factories for you. In addition, make sure that the agent doesn’t have financial ties to any particular factories. Also be aware that in some countries, sourcing agents receive commissions or kickbacks from the factories they choose; this practice can compromise their objectivity, to say the least. 

Maintain ethical practices

These days, it’s important to ensure that overseas factories aren’t employing underage workers or treating their employees poorly. You’ll need to inspect factories before you sign a contract, but you can also do business with sourcing agents who make a point of doing business responsibly. 

• Have a sourcing agent sign a non-disclosure agreement before you give him or her information about your new product.
• Once he or she has signed an NDA, give the agent as much information as possible, including specifications, measurements, and drawings, about the product you want produced.
• Once you’ve chosen a factory, start with a small product run and inspect it before it leaves the factory.
• Once you’ve chosen a factory, start with a small product run and inspect it before it leaves the factory.

You have a great new product that you want to take global. Now, you need to find someone to manufacture that product. Do you know where to find a manufacturer overseas? I do.

Contract manufacturing is when a company arranges to have a local or overseas manufacturer make all or part of the product. Typically, the hiring firm provides a design or formula to the contract manufacturer to replicate or improve. The selling and marketing of the product is left to the hiring company, unless other arrangements have been made. Now, this same process tends to be referred to as outsourcing if it involves a business function, especially if it’s done across borders, or global sourcing if it involves finding an overseas manufacturer.

Factors to consider before you select an overseas manufacturer

Before you start the process of finding an overseas manufacturer, you need to determine if you are ready. That said, I suggest that first, you read the following two articles:

1. “Is Global Sourcing For You,” which discusses 20 questions to ask before you begin. Is global sourcing a good fit for your business? Make sure you have determined that global sourcing is right for you before proceeding any further.
2. “How to Develop and Price a New Product for the Global Marketplace” because it emphasizes why it is important to check if there is a similar product to yours already on the market. If there is a similar product, see how your idea can be differentiated and, of course, use the competing product’s price point as a starting point for yours.

As you assess a potential overseas manufacturer, make sure it has most—if not all—of the following characteristics:

• A good, clean, well-managed facility
• It is ISO-certified, meaning the company is meeting quality standards
• It has drop-ship capabilities (direct to customers)
• It has the ability to be flexible and absorb market fluctuations
• It can keep up with demand on product
• It has synergies with your company
• It is highly reputable in the marketplace
• It is financially sound
• It solves your specific production challenges

As you analyze supplier pros and cons, it helps to address some other key questions. For instance, how far away is the supplier? Does the U.S. have any trade agreements with the country, and how do you plan to pay for the goods? What is the product quality like, is it satisfactory? Are you in a hurry, and will the supplier be able to meet your demands on time? For a more in-depth look at some deciding factors when choosing a supplier, see my article on Factors to Consider When Outsourcing.

Many business owners turn to overseas suppliers to curb rising production costs and to boost global competitiveness. To ensure you’re on the right track to success, keep the following things in mind:

1. Source to a country with low labor costs and good quality control
2. Source to a country where you can take a plane ride with comfort and ease
3. Source to a country where you can understand the language
4. Source to a country where you can respect and abide by the laws
5. Source to a country where you can trust the people you do business with

Where to look for help in finding a product manufacturer overseas:

Now that you know the ins and outs to selecting an overseas manufacturer, it’s time to find one. Each of these resources provides a wealth of information on potential manufacturers.

1. Global Sources 

A B2B marketplace connecting buyers, suppliers and manufacturers. For more information on what Global Sources can and can’t do, read “An Inside Guide on Sourcing in China.”

2. Alibaba 

Here you can find manufacturers, suppliers, exporters, importers, buyers and wholesalers. For more information on Alibaba’s capabilities, read “A Short Course on Alibaba.”

3. ThomasNet.com 

A product sourcing and supplier discovery platform for procurement professionals, engineers, plant and facility management.
For additional information relating to sourcing and product quality, read, “Where to Source Products and What To Do If You Receive Crappy Product Samples From Overseas.”

Am I missing anything? If so, please leave a comment and share your thoughts.

If you’ve been reading our previous posts on finding niche ideas and evaluatingg products to sell online, you may have started coming up with some ideas of your own. This can be an interesting time for an entrepreneur as momentum begins to build and excitement grows the more you think about your idea. 

However, time and time again, many entrepreneurs find themselves hitting a brick wall and losing momentum when it comes time to actually source products. Whether it be manufacturing your own product or finding suppliers to purchase wholesale from, they aren’t always easy to find.

In this post, we’re going to look at the basics of sourcing a supplier for your next project. We will look at some places to search, how you should approach them and what to ask. 

Let’s dive in.

The Basics – What Are You Looking For? 

For the purpose of this post when we refer to suppliers, we are referring to anyone that has the capability to provide you with products and inventory. This encompasses manufacturers, wholesalers and distributors.

There are a ton of helpful resources to be found online just by searching Google. However before you begin, there are a few things you should know and decide.

First, you should determine what type of supplier you’re looking for. This will help determine the terminology you need to use in your research. I would highly suggest you start by reading our post on Make, Manufacturer, Wholesale or Dropship.

There are several options, with the most common being:

• A manufacturer to produce your own product idea
• A supplier, who may also be a manufacturer, wholesaler or distributor to purchase already existing brands and products
• A dropshipper to supply products and fulfill orders of already existing brands and products

Domestic vs. Overseas Suppliers

A classic question when looking for suppliers if you plan to manufacture or wholesale is whether you want to source domestically or from overseas. Overseas can refer to any location overseas but usually, and for the purpose of this post, refers to Asian countries like China, India and Taiwan.

You likely already know that it’s almost always cheaper to source your products overseas but there’s a lot more to that decision than just the upfront investment and cost per unit.

Both domestic and overseas sourcing have their advantages as well as disadvantages which we will take a look at below:

Domestic Sourcing

Advantages

• Higher manufacturing quality and labor standards
• Easier communication with no language barrier
• Marketing appeal of being made in North America
• Easier to verify reputable manufacturers
• Faster shipping time
• High intellectual property right protection
• Greater payment security and recourse 

Disadvantages

• Higher manufacturing costs
• Less product choice (There are many items that just aren’t made in North America anymore)

Overseas Sourcing

Advantages

• Lower manufacturing costs
• High number of manufacturers to choose from
• One-stop services like Alibaba have made it easy to navigate suppliers

Disadvantages

• Lower perceived quality from customers
• (Usually) lower manufacturing and labor standards
• Little intellectual property protection
• Language and communication barrier can be difficult to navigate 
• Difficulty/costly to verify manufacturer and visit on-site
• Longer shipping time
• Cultural differences in business practices
• Product importation and customs clearance
• Less payment security and recourse

Where To Begin Your Search

Now that you have a better idea of exactly what you’re looking for, as well as the advantages and disadvantages of domestic vs. overseas sourcing, where do you begin your search? Naturally, the internet is the best place to start, but there are a few places in particular that can help with your search.

Directories

Some of the best sources can be free online supplier directories. These directories can contain profiles for hundreds or thousands of manufacturers, wholesalers and suppliers. Below, we have listed out a few of the most popular ones below for both domestic and overseas suppliers:

Online Domestic Directories

• ThomasNet
• Makers Row
• MFG
• Kompass

Online Overseas Directories

• Oberlo
• Alibaba
• AliExpress
• IndiaMart
• Bambify
• Sourcify

The Depths of Google

Over the last handful of years, we’ve become accustomed to being able to easily search Google and find what we’re looking for in the first few search results. However, many suppliers haven’t kept pace with the internet and in particular, Google’s algorithm changes. Their websites are usually old, sparse on information and most certainly are not search engine optimized. 

So how do you find suppliers on Google? For the first time ever, you’ll need to explore page ten of Google search results, and beyond. You’ll also want to use a variety of search terms. For example, words like wholesale, wholesaler and distributor may be used interchangeably so you should search for all of them. 

It may help you make yourself familiar with Google’s search shortcuts to improve the quality of your searches, thus the results.

Local Library

You may also want to consider dusting off your library card and heading to your local library. Many libraries pay monthly subscription fees for online business and manufacturer directories that you normally wouldn’t have access to, or you would have to pay a large amount of money for, like the Scotts Online Business Directory. These directories contain profiles for many manufacturers, wholesalers and distributors in North America, depending on the exact directory. 

Make sure to give your local library a call ahead of time and ask them if they have access to these types of private directories. For larger libraries, you may need to chat with the business and technology department.

Referrals

Some of the best leads can come from referrals by friends and family. Social networks have made it much easier to get the word out so make sure to use these channels.

As you do start to uncover suppliers, even if they aren’t the right fit for you, be sure to ask them if they can point you in the right direction. Being in the industry means they will likely have great contacts and many would be more than happy to refer you to someone that might be a better fit.

Other Research Tips

Another possible way to search for product suppliers is by searching for your products by their NAICS code. 

NAICS is the North American Industry Classification System, and pretty much every single industry and product you can think of is attached to a NAICS code. Sometimes manufacturers and suppliers may list their products by the NAICS code which can make your product manufactures and suppliers easier to find, especially if you’re using professional directories. 

The NAICS directory can be found at your local library or on the Internet at:

USA – NAICS Code

Canada – NAICS Code

Requesting A Quote

Once you’ve found a suitable supplier, how do you approach them? 

The biggest question you’re going to have is “how much?” but before you hastily send the supplier your request for quotation (many times referred to as a RFQ), take a few minutes to plan out what you want to say and the questions you need to ask. Planning your email will increase your chances that you will receive a response and the correct information.

Here are a few important questions to consider for your email:

• What is your minimum order quantity? – Also referred to as a MOQ, you want to make sure their minimums are manageable for you and that you can afford them. This minimum order quantity can vary wildly depending on the product and the supplier so it’s important to ask upfront. 
• What is your sample pricing? – You’ll likely want samples to inspect before making a full order. Sample pricing ranges, depending on the product and supplier. Some suppliers that receive many requests may change the full retail pricing, others will offer you samples at a discounted rate, and some may even send you samples for free. 
• What is your production pricing? – One of the most important questions is how much your products will cost. You’ll probably wan’t to ask for pricing for several quantities to get a sense of if and how they do discounted pricing at higher quantity levels. 
• What is your turnaround time? – Knowing how long it will take to produce your order is an important consideration and depending your exact business, time can be critical. 
• What are your payment terms? – Many suppliers will require new businesses to pay for the full order upfront. This is important to know since inventory is a major cost for ecommerce startups. You may want to also ask if they provide payment terms on future orders.

Suppliers get bombarded with email quote requests all the time from flaky buyers that are just ‘kicking the tires’ so it’s not unusual for many suppliers not to reply to every request. A lack of supplier responsiveness is a common complaint from new ecommerce entrepreneurs. 

So how do you avoid being ignored? There are a few things that you should avoid when you reach out to suppliers for the first time:

• Long emails – Your first email to a manufacturer should be clear and concise. Avoid telling too much about your story and background. The first email should be purely to assess potential fit at a high level. Focus on what suppliers care about the most like the details of what you’re trying to source. 
• Asking for too much – Requests aren’t always easy for the supplier to produce. It’s important to ask for a few prices for multiple quantities, but avoid asking for too much or too many quotes. Stick to asking for what you absolutely need to assess fit between you and the supplier.
• Asking for too little – If you ask for a quote well below the supplier’s minimum order you risk being met with silence. If you are unsure if your request is too small, consider giving them a quick call or send a quick one question email prior to ask what their minimum order is.

Finally, if you’re contacting a supplier from overseas, keep in mind that in many cases, they may be using translating programs to translate your email as well as their reply. Keeping your emails short, concise, well formatted and spelling error free will not only help the manufacturer but it will ultimately provide you with better replies and answers. Also, when asking your questions, it’s best to number your questions, so that they can easily reply to each number, keeping the questions and communication clean and organized.

Here is an example of an email I might send out: 

Hi, 
My name is Richard and I am from XYZ company. 
I am interested in placing an order for Widget A. I just have a few questions beforehand: 

1. What is you minimum order quantity? 
2. What is your cost per unit at the minimum order as well as if I were to order 3x your minimum order?
3. What are your payment terms for new customers? 

I would also like to order a sample of Widget A to verify quality. Can you please send me the cost for the sample, including shipping to:

Richard Lazazzera
80 Spadina Avenue, Floor 4
Toronto, ON, Canada
M5V 2J4

Thank you, 
Richard

As you can see from the sample above, it’s short, concise and it’s goal is to make sure at a high level that there is a fit between us. I have also set myself up to immediately order a sample unit, should there be a good fit between us. Once I have received the samples and I’m happy with them, I can then start getting into more detail knowing I’m not wasting their time, or mine. 

Negotiating Minimums

If you’re looking for a supplier for the first time, you’re going to quickly learn about ‘Minimum Order Quantities’ (MOQ’s). It’s not uncommon for a manufacturer to require a commitment to purchase hundreds or even thousands of units for your first order depending on the product and manufacturer.

MOQ’s make it difficult when you have limited funds, or simply want to play it safe by starting small to test the market before making larger purchases. The good thing is that MOQ’s are almost always negotiable.

Before you begin negotiating, the first step is to understand why the supplier has imposed a minimum. Is it because there is a lot of work upfront? Or maybe it’s because they prefer to work with larger buyers. Understanding the reasons behind the minimum will help you better understand their position and allow you to negotiate and propose to best counter offer. 

After you have a better understanding of your suppliers position, you can offer a lower order quantity. Compromises can include giving the supplier a deposit for a larger order, but just producing small amounts at a time or paying a higher price per unit. 

Have You Found Your Supply Partner?

Sourcing suppliers and manufacturers is a unique process, and for many, a new experience. Trying to locate suppliers that are a good fit is a critical decision for your new business and aren’t always easy to find. It’s easy to get frustrated when you hit dead ends or brick walls but in most cases, it just requires a little more patience and perseverance to find the perfect partner for your new business.

How will you get your products from China to your warehouse?

Don’t assume that the Chinese factory will do this for you or fail to include the cost in your price calculations. Did the factory quote FOB pricing – Free On Board?

You will need to find a suitable China freight forwarder to handle the shipping from China.

Firstly you should understand that China freight forwarders buy in bulk from the carriers or shipping companies. If your volume is large enough, perhaps 50 containers per year, you should look into contacting the carriers directly.

For most businesses however Chinese freight forwarders are the logical solution. Now when by buying in bulk to achieve discounts it follows that freight forwarders doing more business can achieve better discounts and therefore lower prices.

 

Contact at Least 10 China Freight Forwarders in Order to Find the Best Price

During this process use the same verification procedures that you used on the manufacturers to ensure they are real and capable of shipping your shipment and will not disappear while your container is half way across the Pacific – it happens!

 

Know the China Customs Regulations and Your Home Country’s Custom Rules

Question the China freight forwarder company on their customs procedures, ensure they aren’t making any short cuts which lower the price making them more attractive, but could lead to disastrous delays down the track.

Will your products require specialised inspections or a fumigation certificate for example?

Don’t take it for granted that the China freight forwarder will know this is required – this is how you end up with large bills for temporary storage fees while your shipment sits in customs.

 

Know the Shipping Route Your Shipment Will Take.

In many countries shipments will go through land borders and therefore may be faced by additional customs requirements.

For example we often ship to a client in Uganda, while researching the shipping route we discovered that during the land voyage across Kenya, the containers had a lower maximum shipping weight than they do during ocean freight.

From then on the client had to take this into account when ordering and we had to ensure containers weren’t loaded to exceed this new maximum weight.

Additional shipping checklist:

• Who will arrange shipment from the factory to the Chinese freight forwarders warehouse?
• Who will confirm that all the items arrived and they arrived undamaged?
• Who will inspect and where necessary replace packaging?
• Who will arrange replacement of damaged products?
• In the event of multiple factories for one shipment, who will coordinate the factories to ship everything during a 1-3 day free storage window?
• Who will oversee the actual loading of the container in China?
• Who will ensure cartons are labelled correctly and packed to your requirements?

I could go on and on, but I think you get the point, shipping of your product is a crucial time where a lot of things can go wrong.

A lot of the tasks are mundane but if overlooked your shipment could be delayed or rejected at customs.