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January 6, 2020

It’s undeniably more affordable to outsource your product manufacturing to a factory in China or India. Discerning which factory is the best fit is relatively difficult for most entrepreneurs. Instead of learning how to vet a manufacturing partner, many people rely on a sourcing agent to help navigate the process.

It’s easy enough to find a manufacturer yourself or through a third-party. However, sourcing agents and factories on Alibaba take advantage of entrepreneurs who haven’t learned how to vet a manufacturing partner.

Working with the wrong factory can lead to vast amounts of waste and unnecessary costs, including:

  • Defective and poor-quality products
  • Missed production deadlines

Here’s what entrepreneurs need to know about assessing a potential manufacturing partner.

Ask the right questions

The biggest issue you will have is cost: how much the factory will charge for manufacturing your product. But the cost isn’t the only thing you need to consider. There are plenty of factories out there that will charge pennies to deliver a product with terrible quality.

In addition to asking for a price quote, Shopify recommends you ask these questions to vet a manufacturing partner:

  • What is your minimum order quantity? Especially with a new product, make sure the minimum order quantity (MOQ) is a manageable amount of inventory. Deadstock is costly, so make sure your MOQ matches your business plan and projections.
  • What is your sample pricing? The price of a sample ranges dramatically, depending on the supplier. It could be free, discounted, or the full retail price. So make sure to ask upfront. 
  • What is your production pricing? Shopify’s experts recommend you “ask for pricing for several quantities to get a sense of if and how the factory does discounted pricing for bulk orders.” 
  • What is your turnaround time? Including the time it takes to ship, how fast can a factory get the product to your business?
  • What are your payment terms? It’s common for suppliers to ask for new clients to make the full payment upfront. Therefore, it’s essential to find this out ahead of time. See if there’s room to negotiate if your relationship goes beyond the first order. 
  • Do you subcontract work to other factories, or is all the work done in-house? This question is a big one: make sure the factory you’re vetting is the one who will be creating your product

If you’re outsourcing to an overseas company, they are likely to run your email through a translating app. Keep your email short and to the point.

Ask to see the business license

Reputable manufacturing companies in India, China, and elsewhere will have a business license. If they can’t show proof of legal incorporation and that they are allowed to export, this is a red flag. 

A business license helps to ensure quality control. It also “provides valuable information about the company’s business scope and registered capital,” according to The Next Web. A company’s business scope outlines the purpose of founding the company. A company is likely not as reliable with manufacturing tasks if its core strength is distribution. They could be a trader, meaning they outsource to other factories. 

If a company has a small amount of registered capital, it could be a sign the company is a trader. Look for manufacturers that have a large amount of registered capital

A quality manufacturing partner should send you a copy of their business license. If you want to verify the document, check the relevant government website. Alibaba and Globalsources both provide automatic business license verification. 

Get references from other companies

Checking reviews from other clients who have outsourced to a factory is the most critical step in vetting a company. Ask the manufacturing partner to provide references from other clients. 

Get in touch with those clients directly to make sure they had a good experience. Then, ask your manufacturing partner who else they’ve worked with, and to put you in touch with someone at the company who can verify the relationship. 

Of course, the easiest solution is to work with a partner like Gembah. Gembah’s reputation and experience working with factories give the team a deep understanding of costs and high expectations on quality. Factories know if they treat Gembah’s customers right, they’ll get more business. 

Gembah helps Amazon sellers, brand builders, and growing small businesses confidently navigate the product creation process. Click here to learn more about our process and how we can help you develop that next great product to take to market!

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