To Source or Not to Source?™
By Edith G. Tolchin, "The Sourcing Lady" – EGT Global Trading
Courtesy of Inventor's Digest Magazine
You have a great invention. You've done lots of research, have a patent or patent-pending status and a working prototype. You have made several unsuccessful attempts at licensing, and have decided you might like to consider manufacturing on your own so you can have better control of sales and marketing. Now, the big question... Should you source your product in Asia?
Many factors should be considered before sourcing in Asia. I always like to end my articles on a positive note, so I will list the cons first, and then the pros!
Cons:
1. Difficult Communication: If you are not experienced in corresponding with China/Taiwan, your first attempt – typically by e-mail nowadays – may be very trying. Although the office personnel at most Asian factories do speak English, it is not the same "English" that we speak here in the USA. Many do not understand our local idioms or jargon, so remember to keep it simple and do not commit to anything you do not understand. Best-case scenario: Pay a little more and hire a translator, or use an international trade consultant who specializes in working with Asian factories.
2. Quality and Accessibility Often Depend on the Type of Product: Many Asian factories produce excellent quality sewn and textile items. Their workers can be very talented and creative. However, forget about specialty fabrics or matching prints that you found in the USA. It can be done, but your costs will escalate if you have custom-made fabric prints produced in China. You should also be aware that typically, the best grades of cotton are not found in China or Taiwan. But electronic inventions? Very high quality. Printing for packaging is not great, but has been improving over the years. The bottom line is – you really need to see counter-samples before committing to a purchase order. If your product must be specially made with a mold or tooling, first ask to see samples of similar stock items they have produced so you can be sure they can achieve the quality and workmanship you are looking for. Always arrange for production testing with an independent safety/testing lab. Always ask for references... and always check them!
3. Delivery delays: There will be many delays – especially for first orders – from the time you submit your prototype and the factory sends you back a counter-sample. Be prepared to go "back and forth" by e-mail numerous times before quality control issues are ironed out. You might find, for example, that a button is on the wrong side, a light bulb must be larger, printing needs to be darker, or the outer box has to be thicker. It's also important to know that during their holidays many Asian factories may close for two weeks or more (as with the Chinese New Year festival), which could delay your shipment. Ask if they can provide you with their holiday schedule so you are aware well in advance of their down times. Also, during typhoon/monsoon seasons everyone is on watch for delays. If you are told that your delivery will be 30-45 days, figure more like 60-75 days, allowing for holidays, coordinating pre-production and mass-production samples, independent testing, etc.
4. MOQs (Minimum Order Quantities): You might have heard that sourcing in Asia requires that you purchase huge quantities, and this can be difficult if you are just starting out and merely want to "test the waters" with your product. For many industries the quantity rule holds true. For most new products, the factory itself must source the components for your new invention from several different factories that in turn issue an MOQ to your factory for their products. So, that is why sometimes you must purchase large quantities (50,000 vs. 5,000 pieces). In the textiles industry this can frequently happen. With each new invention that is sourced, in order to make a counter-sample and provide a price quote, the factory must get quotes on parts such as zippers, buttons, ribbons, thread, fabric, packaging, and labels. Each supplier has an already-established MOQ. So, as you can see, it is not easy for the factory to just submit a quote for a new product within a day or two.
Pros:
1. Quality: Over the many years I have been involved in sourcing, Asian factories have improved their workmanship. Just make sure that your correspondence is completely clear and that you have good working prototypes with easy-to-understand specifications. The old saying goes, "less is more," but in this case that most definitely does NOT apply. Never worry that you are sending TOO MUCH information. The more accurate data you can furnish to the prospective supplier in Asia, the better the quality of your product will be.
2. Attitude: Most Asian suppliers are very interested in establishing a good business relationship with you. They will be eager to please you with the hope that you will continue to work with them for reorders once your product has become successful!
3. New jobs? Many worry that if they source their inventions in Asia, it will take away from jobs in the USA. This is not necessarily true. Sourcing and manufacturing products in Asia in turn opens up numerous business opportunities here at home in logistics, distribution, computer graphics, sales and marketing. For example, dockworkers will need to unload your shipment off the vessel and send it by truck or rail to your warehouse, storage facility or distribution center. Your graphic artist will design your logo, labeling and packaging. And don't forget about the U.S. marketing firm that could get you some good PR. If your product(s) are selling, reliable domestic trucking firms can make deliveries to retail outlets all over the USA!
4. PRICING, PRICING, PRICING! Did I say, "pricing?" Many new products can be sourced in China, depending on the industry, for anywhere from 1/2 to 1/8 of what it would cost to be manufactured in the USA. This is an obvious advantage to new business start-ups!
For many, the thought of manufacturing overseas is daunting, but with the proper guidance and reliable contacts it can be an option you may want to consider. As with any business plan, there are pros and cons that must be weighed. Remember, asking the right questions and understanding the answers is essential in any endeavor. Make sure the lines of communication are clear and you could find the cost savings of manufacturing overseas gives you enough breathing room to launch a product and grow a profitable business.
© 2006-2009: by Edith G. Tolchin – "The Sourcing Lady"SM – EGT Global Trading. All Rights Reserved.
Edith G. Tolchin specializes in inventions of textiles and sewn-items, baby & fashion accessories, arts & crafts, and unique household articles. She possesses over thirty years of experience in cost-cutting solutions for International Trade and Shipping. She gladly arranges seminars and speaking engagements on the topics of "Importing A to Z™" and "Offshore Manufacturing for Inventors™." Ms. Tolchin also holds a U.S. Customs Broker License. Contact her by e-mail at EGT@warwick.net or visit www.egtglobaltrading.com.
