How to have products made in China?

Expect some delays

It is a sad reality that most projects are delivered late. And, the more complex the project, the more they tend to fall behind schedule. Many studies have shown this to be true.

We showed a typical example (where the project actually took twice as long as planned) in this article. Psychologists call this tendency the ‘planning fallacy‘. You will probably not escape it.

Take it into account when you prepare your financial projections — every fixed expense such as monthly salaries will make your overall costs balloon. Paying fees for services rendered, rather than employing full-time people, usually de-risks the project in that sense.

There are often solutions to save time… but they might come with high risks

Here are a few examples of time-saving moves:

If you are unsure about compliance, you can do laboratory tests on the components, before production, and wait for the results. Or you can take a risk go directly in production.

Doing a small pilot run before mass production is very useful to catch any issues in the process and sometimes also in incoming components. You and the factory might decide to go directly in mass production, with the risk of generating much rework, scrapped material, and shipping delays.

Your prototypes may incorporate parts from untested suppliers. Searching and qualifying good suppliers can take time. Again, you and the factory might decide to take the risk of quality issues on the components of the first batch.

I hope you have read the start of this article. The “3 deadly mistakes” I mentioned above are the pitfalls you absolutely need to avoid when learning how to manufacture a product in China.

You also need to know what the biggest risks, and assumptions, are in your project. Here are two examples.

1. If you assume a particular technology can be used for the purpose you have in mind, and if that is quite uncertain, the very first thing to do is a proof of concept to address this assumption.
2. If you see the risk of being copied as the highest risk, talk to a lawyer who works on intellectual property rights and is familiar with the Chinese business environment, before you talk to anybody else of your product idea. On the other hand, if you visit ten companies in Shenzhen without telling them what you need to make, that would be very unproductive.

In particular, spend some time reducing the market risk

As consultant Eric P Rose advises hardware startups, you should make sure there is a demand for your product, and you should understand the nuances of that demand before you invest a lot of money and energy in making that product a reality.

Research has shown that 42% of startups that fail, fail because they deliver something the market does not value. That’s actually the number 1 reason for startup failure!

In addition to market research, one way to keep the market risk limited is by developing a “minimum viable product” as version 1.0 of your product:

• Show virtual (computer designs only), physical ‘look-alike’, and physical ‘work-alike’ prototypes to your target users/buyers, to get feedback along the way and pivot if necessary
• Get to market faster with a simpler product, get real-life feedback, and make informed decisions about what should be in version 1.1… or 2.0!

What certifications will be needed in the countries of sale?

You need to know this from the start, and that may require a bit of research (with a service such as ComplianceGate.com, ProductIP.com, or others).

For example, many of the electronic products we have developed for our American clients require an FCC, and sometimes also a UL, certification. This has to be planned from the initial design stage:

• Placing components the wrong way on a PCB can cause a failure for FCC (doing design reviews & simulations has proven invaluable, in our experience);
• If you develop a power bank and retailers request that it is UL-certified, you are probably better off spending some time looking for a battery supplier that has already got that same UL certification.
• The certification needs to be done on pre-production prototypes after the tooling and nearly all the engineering work has been done. Redesigns at that stage can be expensive and time-consuming.

What type of factory should you work with?

A business learning how to manufacture a product in China needs to look for the type of supplier that will be a good fit for its needs. One way of categorizing suppliers is based on their business model:

• Original Design Manufacturer (ODM) — if you want to piggy-back on their existing technology, keep investment low, and be more of a distributor than the product owner. It comes with its own risks.
• Original Equipment Manufacturer (OEM) — if you don’t mind working in the “Chinese way” where the supplier hides some elements but subsidizes the product development. The OEM is specialized in the type of product you are buying.
• Contract Manufacturer (CM) — if you are ready to pay for the development and the tooling, and have a clear contract that gives you a lot of control and visibility. The assembler is more of a generalist, often working on different product categories.

Another way is by their size. I generally classify them into 3 broad levels:

Smaller factories might be ‘light’ on engineering resources and on quality control. Larger organizations tend to be much slower and more expensive. Finding the ‘best match’ might take some work.

What is the most appropriate process for prototyping custom-designed parts (if any)? Conventional CNC machining, 3D printing, or more seldom used approaches such as stereolithography, selective laser sintering, or vacuum casting?

This information can drive your search for the best partner for initial prototyping. Typical Chinese factories usually don’t have such processes in house, but can help with later-stage prototypes. We’ll discuss this in more detail in ‘Element of solution 4‘.

Element of solution 2:

Structure your supply chain on a solid foundation

Your new electro-mechanical product may count tens of components. In many cases, what makes or breaks a development project is a succession of mistakes when setting up the supply chain. Here is how to avoid that.

(By the way, if you want to go deeper into this topic, I have written e-books on how to find and develop suppliers, and on how to verify suppliers.)

Identify, screen, and qualify suppliers

By now you have an ideal supplier type. There are probably thousands of options in your product category, so you need to screen them down.

First, make sure you are not dealing with a trading company pretending to own & operate a factory. A business registration check is simple and quick, and it can help you weed these out.

You also need to make sure they can do a good job when the time comes to ramp production volumes up. Do a process audit on one or two key factories. An engineer can visit them and look for risks in the most important areas.

In-depth conversations, as well as astute observations, are also important. If the owner used to be a salesperson and has been re-investing his profits in real estate, these are usually not good signs.

Never let a middleman obscure visibility

Don’t let an assembly factory set up and “own” your entire supply chain. (We cover this in more depth in the next section.) If you do not know where the critical components come from, it will cause several issues in the mid-to-long run:

• If there are quality issues in one of the component suppliers, they might never be well resolved, and you won’t be able to send a good engineer there.
• You will have little idea of the margin made by your assembler. We have seen cases where it was in the 60% to 80% range.
• The assembler might raise prices and/or under-deliver, and you might have trouble rebuilding that supply chain. For example, you really want to keep the same anodizing effect on your product’s surface, but most anodizing workshops can’t reproduce it.

Don’t try to control every aspect of your supply chain

Some suppliers are critical, others aren’t. You don’t have unlimited resources. Let your manufacturer pick the suppliers of screws, connectors, etc.

However, you need to identify a few critical lines in the Bill of Materials (BOM):

• If a material is in contact with food, you will need to ensure its supplier is aware of regulatory requirements,
• If the casing is made of injection-molded plastic, you need that factory to be capable of delivering consistent quality,
• If glue is involved and might create serious issues, you will need the MSDS.

Have a backup for every critical supplier

This may not be possible when you develop your product and at the time of the first order. You need to think about it at some point, though.

It can also be useful if your order volumes pick up faster than expected — that’s a good problem to have, but still, a problem if your primary supplier cannot follow as quickly as needed.

Keep in mind that onboarding a new supplier takes time. If you wait until you need a backup, you might lose a lot of time.

Element of solution 3:

Set the right expectations from the start

One of the three key mistakes I outlined at the start of this guide on how to manufacture a product in China is the failure to set a proper agreement from the start with suppliers. It is actually more complicated than that since there is more than 1 document to prepare.

Also, documents and legal agreements are not sufficient. You will need to adopt the right strategy and make the right decisions.

Clarifying your needs and your standard

First things first. Communicate your needs clearly! No Chinese supplier will be able to guess what your product users need or require, as well as you do.

Start drafting a product specification sheet (including tolerances wherever possible). It will be very useful at all levels — for engineers working on prototypes, for purchasers, for the manufacturing staff, and for all the inspectors along the process.

Once a look-alike and a works-alike prototype is approved, it must be catalogued as part of your standard. Once a pre-production prototype (with parts coming off the tooling made for production) is approved, it will become the new standard. And so on.

Strategies for maintaining confidentiality

Once your product is on the market and is successful, it is likely to be copied by Chinese companies (whether it is made in China or not) and fighting them might be very difficult. Before that, though, there are ways to reduce the risk of being copied. Here are 4 classic strategies.

Have a lawyer draft a non-disclosure, non-use, and non-circumvention (NNN) agreement that is applicable in a Chinese court, and have every Chinese supplier sign it before you disclose anything confidential to them.

When you contact and screen potential suppliers, show them a part or product that is different from yours but requires similar processes. Then, only show your product to the 1 or 2 ‘best fits’.

Make sure to check your potential suppliers on these two dimensions:

• Nature of business: are they a trading company that will necessarily send your IP to outside factories? Once it is sent outside of their organization, there is usually no way to control it.
• Internal engineering competencies: can they work on design & engineering themselves, or will they need to collaborate with outside parties?

Avoid raising money on Kickstarter and Indiegogo too early in your project, because some unscrupulous companies might even re-use the photos you prepared as part of their marketing materials!

Compartmentalizing the supply chain (the ‘black box’ concept)

In China, some buyers have had a particularly nasty surprise: a bad actor in their own supply chain noticed the product’s success and decided to take advantage of it by making extra quantities and selling in competing channels.

It is particularly destructive because they might beat you to the market when you develop your version 2.0 if they have sufficient information about it.

In order to avoid this situation down the road, we have set up this approach for several clients:

• We buy components from various suppliers, who are never given the full picture and don’t even know what the end product does, in what distribution channels it is sold, what brand it is sold under, etc.
• We manage final assembly (including testing & packing) and shipping, and every party involved is kept in the dark.

Development & manufacturing agreement(s)

Companies learning how to manufacture a product in China who choose to develop a new product with their new supplier very often forget to specify their requirements in these two areas:

1. Open BoM (Bill of Materials) — A good BoM includes the full list of the parts making your product, the names & contact information of all the suppliers of these parts, the price of each part, the MOQ and lead time to order each part, and so on and so forth. Read the

— A good BoM includes the full list of the parts making your product, the names & contact information of all the suppliers of these parts, the price of each part, the MOQ and lead time to order each part, and so on and so forth. Read the China Law Blog’s take on this

2. All the intellectual property generated in the course of this project should be yours, and all deliverables should immediately be sent to you. As

, and all deliverables should immediately be sent to you. As our favorite lawyers wrote:

“Chinese manufacturers usually prefer to cover all of the costs of product development because they want to own the resulting product and foreign companies far too often go along with this, without realizing this likely means the Chinese manufacturer will end up with the product and its related IP.”

 

Negotiating all this is usually straightforward when working with a contract manufacturer, might be difficult with an OEM, and is always very convoluted (or outright impossible) with an ODM.

Quality verification & validation plan for prototypes

If no testing plan is documented for your product, how will the engineers working on prototypes be able to know if they have done a good job?

For example, you’ll want to test your prototypes:

• For compliance (safety, battery cells…)
• For performance, including stress testing
• For robustness
• For all important features

(As you document this plan, and as you update it, make sure its content ends up in the specification sheet we mentioned above.)

Pushing the product to its limits

You are also advised to plan for functional testing outside of ‘normal’ use.

For example, we worked on the development of a battery-powered skateboard. We did tests on smooth roads, but also on dirt roads, on slopes, with a very heavy user, and so forth. Basically, don’t limit yourself to the optimal operating window (shown in green below):

The same logic can be applied by a reliability testing laboratory. You don’t have to set all this up by yourself.

All the results you gather this way will inform you of the limits of the product as it is designed. And you might decide on design improvements.

Tooling and other non-recurring engineering (NRE) investments

Spend time planning before giving the green light on these types of investments. Buyers tend to trust their suppliers way too much at this point.

For example, for plastic injection molding, how many shots will the mold allow you to make? The type of steel used will make a large difference — for example, a mold made in P20 steel might start to require a lot of rework after 40,000 shots, while H13 steel might be good for 1 million shots.

The harder, and more durable, steel is harder to machine. The tooling takes more time and is more costly. But it might be just what you need. You need to understand and specify all this.

Pilot runs before mass production

I have already mentioned this, but it is worth repeating:

• Some of the components are custom-made — have these components’ suppliers do a small batch and count how many pieces are ‘good the first time’. If the proportion is under 90%, you are exposed to sharp and sudden price increases.
• Your product is new for the assembly workshop, too. Ideally, they have prepared some custom tooling for assembly and for testing. A small run on the assembly lines is the best way to confirm the processes are ready. The more complicated and new the product is, the more issues will be discovered this way.

Quality monitoring of production

You approved a prototype, you feel the R&D engineers know what you want… but what about the production and quality staff? Be there if you can during the first mass production batch. Observe their own quality control processes.

Now, do not think inspectors will fix all your issues. They only detect problems — ideally at the source, but often hours or days later. The key, once your scale volumes up, will be having the manufacturer set up and fine-tune the right process controls.

When the time comes for the second or third batch, do not expect the production ramp-up to be smooth. With Chinese assemblers, there are often long delays, as I described before.

Element of solution 4:

Get the design and engineering right

Let’s say you followed all the advice I laid out above because you want to know how to manufacture a product in China successfully. You have a strong plan and a good idea of what to do. You have found and qualified the right suppliers. You have clarified all the right requirements and got written agreements.

You still need to keep control of technical aspects. Getting competent and experienced people focused on your project and working on the right things is not easy.

Don’t go to a Chinese manufacturer too early

Some people don’t spend sufficient time working on their product design, and they hand an immature design to a manufacturer. This is usually misguided for a few reasons:

• A manufacturer makes money when it purchases materials, transforms them (in a ‘mass-production’ batch), ships them out, and gets paid. Expect them to keep their best people busy with those activities.
• Chinese companies tend to live in the short term. You might be able to “sell” your project to them and get a few good engineers working on your new product development, but they might be reassigned to other pressing issues 3 months later after you sent a long list of improvements needed on their second prototype. After that, the project might crawl to a halt, or keep going at a glacial pace.
• They are experts at operational procurement and manufacturing, and they are generally weak at evaluating what materials would make the most sense, sourcing new suppliers, and so on. It means they will not provide all the assistance you need to make a great product or simply to fix the problems you run into.

In other words, work with a design firm and with a supply chain management firm until you are at the point where you can bring a mature design to a manufacturer. It will be faster and they will give you better work quality. (And there is a price for it, obviously.)

Work with people who have already done it before

Your product is unique. It comes with its own challenges. Don’t work with engineers who are trying to figure out how to use CAD software, or what protocols to use, otherwise design & development will drag on for a long time!

There is usually a logical process to follow (example below).

PCB logical design process

Designers and engineers should be able to explain it to you. If they can’t give you examples of similar projects, as well as the usual steps to follow, it is a sign that you are about to work with the wrong people.

DFM (Design for Manufacturing)

The more unique your product, the more vital good DFM suggestions will be for entrepreneurs and SMES who’re wondering how to manufacture a product in China. Any improvements done at the design stage will take much less time and money than in subsequent stages.

A part of this analysis can be reduced to a checklist — here are a few examples:

• Can we reduce the number of components?
• Can we find ways to simplify the design and cut costs?
• Can we make assembly easier, so as to improve both efficiency and quality?
• What materials would be the most appropriate?
• How to miniaturize certain elements?

In addition, a good designer or engineer can review your product design and will usually have a number of questions and remarks, simply by pulling from their past experiences interacting with Chinese manufacturers.

Prevent design-related defects

Most quality issues found in the field come either from design or manufacturing. Poor design can cause many problems that might only appear after 6 or 12 months of use.

The more robust the design is, the less likely you are to experience quality issues down the road. But what makes a robust design? It simply means it will be more forgiving of variations in the manufacturing conditions, and defects will be less likely to appear.

Let’s say a critical operation relies on a physical and/or chemical process. There is always an optimal operating window (in green below). For example, the parameters might be pressure and temperature, in an injection molding press.

If the optimal operating window is tiny, small variations (which might be unavoidable) will result in quality issues. And, if the manufacturer identifies this phenomenon, they will not take responsibility when you come back to them with customer complaints.

Manufacturing and testing processes

You need to design your product, give it shape (prototypes), and test it. At the same time, someone also needs to start designing the process and testing it.

We have seen buyers push their manufacturers to hurry up, to the point where they started assembling products without having thought of the assembly steps, without training operators, and without preparing any inspection/testing process. These are the cases where everything goes wrong, and shipments end up being very late.

How to avoid being in such a hurry that important preparation steps are skipped? Start to work on it at the same time the final prototypes are being validated and the tooling is made. It takes a bit of planning and coordination, but it is worth the extra work.

These are just a few of the many considerations you need to keep in mind when it comes to the design and engineering work, which will shape the final product’s cost, quality, and success in the marketplace. Once again, make sure to work with experienced people and allocate the right resources.

 

Conclusion

Many people who come to us asking about how to manufacture a product in China are worried, and they say “new product development is messy, and we never know where it is going”. I will say this is very true if you don’t work hard on planning and if you place an untested manufacturer in charge of all the development work.
Your product is new, and you will have to handle associated risks (technical choices, market acceptance…). Make sure you don’t add extra risks to the mix.

Three years from now, when you have successfully brought your innovative product to market and you are working on its second (or third) version, you will need to repeat this process. You will probably decide to simplify certain aspects of the design and spend more engineering time in one crucial area. You will probably take measures to prevent certain risks, and spend time planning your next steps. You might even switch to a more suitable type of factory.

Ideally, you will get all this (mostly) right the first time you embark upon a new product manufacturing project. It was this guide’s objective. Hang on — it will probably be a long journey. And let me know how it goes.

A client recently had me source a new Chinese supply chain for injection-molded plastics. In this series I’ll explain how we were able to go from having no contacts in China to successfully receiving quotes from several injection-mold manufacturers. There are many steps to building a supply chain for a product, including design, transport & logistics, due diligence and negotiation. Today, we’ll focus on finding the manufacturers.

1. Start Early And Build Your First Supplier List

Plan on spending at least a month identifying your best manufacturing partner, and several more months finalizing designs, fabricating molds and beginning the manufacturing process.

It can be daunting to start with nothing when you are trying to establish relationships leading to a successful manufacturing partnership. At first, any manufacturer you find seems like your only hope. That’s why I recommend starting out by building a list of 10 suppliers with whom you can communicate directly.

Building a large list helps to reduce the feeling of scarcity as you develop relationships and negotiate with the most promising manufacturers.

Though you could engage a sourcing agent to connect you with their recommended firms, here are some ways to meet suppliers that are accessible to everyone:

Alibaba.com

Alibaba assists buyers and exporters in finding and sourcing manufactured goods produced by Chinese firms. Use Alibaba’s search bar to find products like yours. Search strings that include the production method work well. I used “injection-mold plastics” and quickly found many pages of manufacturers for molds, plastic components and assembled products.

Contacting suppliers is simple: just click on the orange “Contact Supplier” button on the product page or directly from the search results and start typing. I recommend creating a canned intro that describes who you are, what your product is and what you are looking for.

Here is approximately what I used:

Hello,

My name is Brandon Green, and my company is looking for plastic injection-molded components.

These components are produced from [polystyrene, polycarbonate, etc.], and are used for ________.

We already own molds / need to have molds created / need help finalizing our designs.

We expect to have a Minimum Order Quantity of ________ units every __ months.

I will be in Shenzhen and Guangzhou from ______ to _____ for Canton Fair, and would like to meet with injection-mold plastics manufacturers at that time.

Thank you,

Brandon

[Company Name]

Allow the suppliers a few days to respond. You can use this time to reach out to other firms, or learn more about the production process and refine your product’s requirements. Don’t fixate too much on choosing suppliers with perfect English. It’s important to be able to communicate, but as long as you’re both able to get your points across with the help of translation software, it’s better to prioritize compatibility with your order quantities and ability to meet the production standards you require.

Canton Fair

Commonly known as the Canton Fair, the China Import and Export Fair is a trade expo designed to connect Chinese manufacturers and wholesalers with buyers and exporters. It has been running since 1957 and held its 120th session in October 2016.

Though attending a major trade fair might be intimidating at first, gaining access is easier than one might expect, and allows for meeting a large number of suppliers in person in a short amount of time.

Keep in mind that most suppliers are at Canton Fair to sell their finished goods, not to find clients for bespoke manufacturing. However, I asked many firms there if they perform custom work, and the worst response I received was a polite “no."

You can apply to visit Canton Fair online here. Though the approval process is typically fast, give ample time for your application prior to your trip. Admission is typically free of charge for advance applications, but not same-day tickets.

2. Reach Out To Your Network

Even if you don’t know any manufacturers, tell people in your network what you’re looking for. Much to my surprise, my (mostly U.S.-based) network was able to connect me with several injection mold manufacturers, both near-shore and overseas.

Being open about your needs and goals can be helpful within China as well. Other business travelers to Shenzhen can be very helpful, given the entrepreneurial nature of the community. I found buyers happy to share their recommended manufacturers. In fact, simply by asking for advice from an expat community in Shenzhen, I received many recommendations of the best suppliers to partner with based on our specific needs.

3. Schedule Time For Factory Visits

A common concern in any new relationship with overseas suppliers is that communicating over such a distance can make it easy for misunderstandings to occur, and meaning can get lost in translation.

I cannot recommend enough that as part of the selection process, you make a point of flying to China and touring the factories that will be used to manufacture your products. Not only will the visit assist in understanding the process itself, it will give you and the manufacturers common visual vocabulary in dealing with any issues that come up. Moreover, it allows you to review the facilities to make sure the procedures and practices are up to the standards you require.

Though it may seem difficult to move from a sales representative’s contact info to a factory visit, I found it as easy as suggesting a day. It’s best to have a firm understanding of your product and needs before beginning the visit. While a sample or 3D model can be very helpful in communicating, many companies have engineers who are happy to work with you to understand your needs and find a solution, or even design a product based on your requirements.

4. Recognize The Economics Involved

While injection molding is a very inexpensive way to fabricate large numbers of products, the economies of scale are only in your favor if you can handle Minimum Order Quantities (MOQs) of thousands of units per batch. Using CNC (Computer Numerical Control) manufacturing to create a product mold can cost from $12k to $60k, and altering that mold can be expensive and difficult. If your product requires complex development and iteration, you will want to use rapid prototyping methods like 3D printing to finalize the design before commissioning a finished product.

5. Caveat Emptor

As with any new business relationship, be sure to perform adequate due diligence before entering any agreements or remitting payment.

6. Achieving Results

By employing these strategies, we identified manufacturing partners and received several quotes within a few weeks of initial contact. These quotes reflect a strong understanding of our product and requirements, and a savings of over 35% from our current domestic production costs. As daunting as it may seem to move from a design to a finished product, results can be achieved rapidly and effectively using these methods to find suppliers who will guide you through the process. Just remember, suppliers are looking for you just as hard as you’re looking for them.