How to Succeed At Overseas Manufacturing

Many years ago, David Dayton over at the Silk Road International Blog did an excellent post on overseas manufacturing, entitled, “What to ask for at a trade-show (and afterwards too).” Daytons starts by saying he is writing the post because he is always getting asked what to look at for at trade-shows. The post is full of excellent advice, some of which I highlight below.

Dayton starts by listing “First questions” to ask of manufacturers you meet at a trade-show and are considering using. A select portion of those questions are below, along with my comments in italics:

  • Where is the facility and can you go to visit (this week while you’re in the country)? Visiting the facility may be the single best thing you can do to determine whether you are going to be dealing with a high quality manufacturer and, on top of that, I am convinced that just visiting your factory increases your chances of being taken seriously by your manufacturer, which in turn, increases your chances of getting good product.  
  • Do they have business documents they’ll let you see?  I am not sure exactly to what business documents Dayton is referring, but generally it is a good idea to, at minimum, make sure that the company with which you are dealing  is actually registered in its country as a company and is truly the same company that makes your product.  It also never hurts to see documents showing that your potential manufacturer has done this before. American companies tend to be reluctant to ask for this sort of thing, but you should know that companies in most countries (China, Vietnam, Thailand, Taiwan, Mexico, etc.) are not. Your asking for these documents will separate you from many others and earn you increased respect, which definitely can impact product quality. 
  • Will they let you talk with engineers and other managers?  If they will not allow this, you should be suspicious. 
  • Will they allow 3PQ?  If they will not, you should be suspicious.
  • Can they give you references?  Note that manufacturers sometimes refuse this request for valid reasons.
  • Will they sign NDAs? If they will not, don’t do the deal.  For more on the importance of NDAs (or NNN Agreements, as we call them) and why you should not be doing business with a company that will not sign one, check out The China NDA (Non Disclosure Agreement). Shut The Barn Door BEFORE The Horse Bolts.
  • Can you meet and QC sub-suppliers?  If your manufacturer is going to keep the identities of its sub-suppliers a secret, your odds of quality control problems just went up. 
  • How do they deal with non-conforming product? Not sure if I agree with this one as we are of the view that our clients should be telling (not asking) their manufacturers how to deal with non-conforming product. Generally, we seek a refund of any amounts paid, along with the destruction of all non-conforming product.  

Dayton goes on to point out that even once you have find a “great factory,” you still have to determine whether it is a good fit for you and he sets forth the following excellent questions to help you determine this:

  • What is their average order quantity? Is your order similar?
  • What is their average order time? Is your lead time sufficient?
  • Have they done similar projects (similar levels of customization, similar components)?
  • Can you communicate with them effectively and do you feel comfortable working with them?

Lastly, Dayton lists the following ten things Western companies need to do on “their end of the deal”:

1. Always keep you word concerning dates and monies and anything else that is your responsibility. Check.  

2. Always take into account the reality that if you’re late with art (or money or answers) it will cause production delays (usually longer than your delay). Check

3. There will be problems, so take notes and keep records and follow up on anything that you’re not clear on. Check.

4. NEVER MAKE ANY ASSUMPTIONS. Double-check. For more on this, check out China Legal Issues For Business. The Ten Minute Version.

5. Never make any changes to your specs or to your contract. I disagree with this one, so long as the changes are handled appropriately, which they almost never are. 

6. File all legal work in your home country and in the country in which you will be doing your manufacturing BEFORE you start passing out specs to anyone (even at the show). I think what David is saying here is that you need to make sure all your intellectual property protections are in place BEFORE you start flashing around your IP. For more on this, check out Register Your China Trademark Now. Then Register It Again With Customs, How To Protect Your Brand In Vietnam and China and the Rest of the World Too, and Giving Your IP to China Out of Love, all of which discuss how easy it can be to lose your IP to your overseas manufacturer (or to someone else in the manufacturing country) and also how easy it can be to prevent that.

7. Spec out all your details and present them in a consistent and clear format. Check.

8. Meet FACE TO FACE with your factory as much as possible. Check.

9. Admit when problems are your fault and take responsibility for them. Check.

10. There will always be problems—usually you can work through them. But always find a back up facility just in case.  Check

David’s post has many more tips for those looking to or already manufacturing their products overseas and if you fit either of those two categories, I strongly urge you to check it out. I also suggest you check out Product Development Agreements Don’t Get No Respect (written earlier this year) for the basic legal protections you should have in place before you start manufacturing overseas.

What do you think? Any more tips?