Outsourcing product manufacturing to a factory in China or India is more affordable, but it’s hard for entrepreneurs to determine the best fit.
Many rely on sourcing agents to help them navigate the process instead of learning how to vet a manufacturing partner. However, sourcing agents and factories on Alibaba often take advantage of new businesses, which can result in defective and poor-quality products, missed production deadlines, and wasted costs.
To avoid these issues, entrepreneurs need to assess potential manufacturing partners properly.
When vetting a manufacturing partner, cost is significant, but not the only factor. Many factories charge low prices but offer low-quality products.
To evaluate thoroughly, Shopify suggests asking about the minimum order quantity, sample and production pricing, and pricing for different quantities.
This way, you can ensure that your MOQ matches your business plan and projections, avoiding costly deadstock. Sample pricing varies dramatically and should be requested upfront.
When vetting a manufacturing partner, there are several other questions you should ask besides cost. These questions include: what is the factory’s turnaround time, including shipping? What are their payment terms, and do they allow any room for negotiation?
Additionally, it’s crucial to ask whether the factory subcontracts any work to other factories or if all work is done in-house. If outsourcing to an overseas company, it’s essential to keep emails short and to the point to avoid any issues with translations.
Reputable manufacturing companies in India, China, and elsewhere will have a business license; if they can’t provide proof of legal incorporation and export authorization, it’s a red flag.
A business license not only helps ensure quality control but also provides valuable information about the company’s business scope and registered capital. A company’s business scope indicates the purpose of founding the company.
If it was founded for distribution, it might not be experienced or reliable in manufacturing and could be a trader outsourcing to other factories. Small registered capital could also indicate that the company is a trader. Therefore, look for manufacturers with a large amount of registered capital.
A good manufacturing partner will send you a copy of their business license. To verify the document, you can check the relevant government website. Moreover, both Alibaba and Global sources offer automatic business license verification.
When vetting a company, checking reviews from other clients who’ve outsourced to their factory is perhaps the most critical step. You can ask the manufacturing partner to provide references from other clients and get in touch with them directly to ensure they had a good experience.
Additionally, you can ask your manufacturing partner who else they’ve worked with and request to be put in touch with someone at the company who can verify the relationship.