Save time, money, and headaches when you know what to look for and what the red flags are.
There has never been a more lucrative time to start an e-commerce business than right now, and with so many first-time entrepreneurs attempting to start private label brands or operate a dropshipping business model, I wanted to touch on one topic I'm very familiar with: aligning with the best manufacturing partner.
Your manufacturing partner plays a tremendous role in the success or failure of your business. I have firsthand experience sourcing manufacturers and dealing with every stage along the way, from idea inception to the final design rolling off the production line. One of my businesses, REX Fitness, is a portable home gym, which took off quickly due to COVID-19 and many gyms across the country closing.
Let's dive into seven ways you can identify the best manufacturing partner for your e-commerce brand.
Understand the pros and cons of U.S. vs. overseas manufacturing.
One of the biggest decisions you will have to make is whether a U.S.-based manufacturer or an overseas manufacturer is the best option for your specific brand. There are pros and cons to both.
While the cost to manufacture items will typically be lower overseas, you must pay close attention to shipping costs and production delays.
It's important to look beyond the cost per item; the pandemic has caused shipping costs to skyrocket, and it's created a production backlog. While the price per item might be much lower, when you factor in the shipping costs, they might be very similar.
Evaluate everything as a whole – cost, shipping, quality and production time – to find the best option for your business.
Research various resources to identify potential manufacturers.
When looking for overseas manufacturers, Alibaba is one resource. You always want to be very careful, regardless of where you are looking for suppliers and manufacturers.
There are other online resources, including DHGate and AliExpress, that you can use to find potential candidates. If you are set on a U.S. manufacturing partner, use Google. I'd suggest looking into all available options.
Conduct proper due diligence.
Never assume all of the information listed by a manufacturer is correct. You will find that some are not the actual manufacturing facility, acting as a middleman to source your needs. You can do a lot of digging on your own simply by searching online.
You can then take that a step further and conduct Google map searches to make sure they have a listing and their address matches what is shown on their listing. If you need more reassurance, request a video tour of their facility. This can be conducted via FaceTime or Skype, and it shouldn't be an issue if they are serious about winning your business.
This is also a good way to see how organized and clean their manufacturing facility is, both of which are good indicators of how they conduct business. Messy, filthy, unorganized facilities are a major red flag.
Interview to find the best options.
Once you have several candidates lined up, schedule a time to speak with them. The ones in the U.S. will be easy to coordinate with, but the overseas companies will require that you wake up very early to get this done.
Zoom is a great way to communicate, and it allows you to get a good sense of their personality and how prompt they are. Remember, this is an audition. If a company is late to the call or cancels at the last minute, it's a strong sign that you may face problems with them in the future.
If someone cannot show up to the very first call on time, I cross them off my list of potentials. Talk business, but also exchange back-and-forth small talk to get a sense of whether or not your personalities will be able to communicate well. You must have a strong relationship with your manufacturer and be able to easily communicate with them.
Negotiate pricing and MOQs.
There is typically some wiggle room available with the price quote and minimum order quantitity (MOQ) given by a manufacturer. In addition to these two items, ask for a shipping quote, and cross-reference it with your own shipping quotes. It's not uncommon that the quote they provide for shipping, for example, is higher than what the shipping companies will quote you directly.
Test quality and speed with a sample order.
While starting a new e-commerce brand is exciting and you want to get rolling as quickly as possible, you don't want to go all-in on a huge order without first testing the manufacturer's quality as well as their speed and communication.
Place a small order so you can examine the product in-hand, and if you are doing a custom branded product, pay extra if you have to for the manufacturer to customize every aspect, which is exactly what you will be doing when ordering in large quantities.
You need to examine everything, from product labels to the overall presentation and packaging of the item. The quality of your product is a direct representation of your business. A consumer isn't going to pick up a product and say, "Wow, brand X's manufacturer is sloppy." They will say, "Wow, brand X is a low-quality product."
Always have a backup option.
Even after you spend the time conducting your due diligence and putting every prospective manufacturer through a rigorous screening process, it doesn't mean that your first manufacturer relationship is going to be smooth sailing.
In the best interest of your business, you should have a backup in place at all times. Your second choice needs to be kept on the back burner, and you can implement a 90/10 rule to keep them on standby.
Have 90% of your manufacturing done by your first choice. Have the second choice, and your backup, do 10% of the manufacturing. This keeps that backup option warm at all times, and in the event you need to switch to them, they will be up to speed, and it can result in a much smoother transition.