November 2, 2020
Identifying and working with reliable suppliers is crucial when starting and/or developing a new business or product. The right business partner can set you up for success. The wrong one can jeopardize your business before it’s even got off the ground. Nowadays, in our interconnected online world, there is a massive amount of information available. But finding your right partner in sourcing in this impenetrable environment can be challenging – especially for newbies.
Here are some helpful steps and tricks to find the right supplier to turn your ideas into products!
The first step is to design your product. It is quite likely that you have already done this when you thought of the idea, but it helps to get professional input so your product is what you envision while also being feasible for a manufacturer to produce.
So before going into the prototyping stage, request some early feedback. An objective opinion will help you to validate the market fit and business viability.
Find somebody whose opinion you value (preferably an experienced product designer or commercially minded business person) and ask them to grill you on the idea. In case you work with an experienced product designer, you should both sign an NDA (non-disclosure agreement). This is crucial for your protection and you should have one in place with anyone you plan to discuss the idea with, including friends and family.
If you can and have the resources: Enter the industrial designers. They are pros at helping you design your product to match both your vision and manufacturing standards. Additionally, they can provide design drawings and documentation, both of which will be useful when it is time to find a manufacturer.
Once you feel ready to approach a manufacturer, you should clarify for yourself whether you want direct contact with your manufacturer or whether you want to delegate this to an agent.
Think about in which country, region and location you would like to manufacture your product and what legal obligations that might entail. The more precisely you think about it, the easier it will be to find your right sourcing agent and future business. Also, think economically and consider issues that occur in all business endeavors such as product returns. Calculate in advance what percentage of returns you can afford and how you plan to handle them.
It is strongly recommendable to make comparisons between suppliers. Assessing aspects such as the suppliers’ quality, price, MOQ, INCOTERMs, lead-time to order as well as payment terms is a good starting point for evaluation. Check the company’s background – you may also request references. Other aspects to consider are the suppliers’ availability, warranty and/or guarantee policies. You might also want to include aspects such as offered services (dropshipping, manufacturing, private labeling) into your supplier evaluation – make sure you know what service you are actually looking for in advance.
Nowadays, you can find a huge amount of potential suppliers online. From an economic perspective, it is attractive to source in the Asian market – especially in China.
Here you can find the Top 20 China Sourcing Websites.
But before contacting potential suppliers headlessly, also take the time prepare yourself to answer the questions prospective manufacturers might ask you.
Let’s quickly talk about approaching suppliers in general before digging into the right questions to ask (and to prepare for in advance). Due to the high amount of email inquiries suppliers receive regularly, it is not unusual for many suppliers not to reply to every request.
A lack of supplier responsiveness is one common complaint from entrepreneurs. So how do you avoid being ignored? There are a few things that you should avoid when you reach out to suppliers for the first time:
Long emails:
Your first email to a manufacturer should be clear and concise. Focus on what suppliers care about the most, such as details of what you are trying to source.
Asking for too much:
Stick to ask for the essentials to assess the fit between you and the supplier. Avoid asking for too much or too many quotes.
Asking for too little:
If you ask for a quote well below the supplier’s minimum order you risk being met with silence. Consider giving them a quick call to ask what their minimum order is.
In case you contact suppliers from overseas, they are likely to use translation programs to reply to your request. Therefore, keep your inquiries short, concise, well-formatted and error-free and if you’re asking questions, it is best to number them.
Once you have identified a potential suitable supplier, it is time to approach them. While the costs is probably what interests you most, you should approach suitable partners with more structured questions in order to increase your chances to build a sourcing partnership. You should take time to prepare questions such as:
In order to make their business profitable, suppliers work with minimum order quantities, also referred to as a MOQ. Make sure the minimum order quantity is realistically manageable for you, and that you can afford them. As the MOQ varies from supplier to supplier depending on the individual products, it’s important to ask upfront.
Prior to the production details, make sure you request the sample prices for your product calculation. Sample pricing also vary heavily, depending on your product and supplier. Some suppliers may charge the full retail price, others will offer you samples at a discounted rate and some may even send you samples for free.
For obvious reasons, finding out the production price is one of the most important questions for you. It is recommendable to ask for prices of several quantities to get a sense of a suppliers discounted pricing for bulk orders. Regardless of your own location, most manufacturers provide quotes in US-Dollars as it is the dominant currency in international trading. Having said this, you should also be aware of global economic developments and the influence of currency fluctuations on your business.
Knowing how long it will take to produce your order is crucial to plan and develop your business activities. Planning ahead and avoiding long idle and waiting periods is essential when planning a reliable and robust business.
Many suppliers require, especially for new businesses, to pay for the full order upfront. This is an important aspect to consider since inventory is a major cost for startups. You may want to also ask if they provide payment terms on future orders.
Assessing what cost will occur and time you need to take into consideration for both sample and product shipping should also be included in the list of questions you approach a supplier with. For your ease of mind ask whether the supplier will provide you with the necessary documentation such as tracking numbers.
Return and refund policies vary per supplier. Make sure your potential supplier offers supporting services that take over handling task that would fall onto your shoulders additionally if the supplier would not offer them.
Are you in the process of identifying a suitable supplier for your business idea? Subscribe below or send us a message for a free template (get an idea of what to expect in image below) to structure your findings and to assess who the best fitting supplier is for your business.
Building a trusting partnership with your supplier can positively influence your business. A trusted partnership goes both ways, so it would also be less likely bump up prices unexpectedly. Getting to know your suppliers can be a gamechanger here: Spending some time in calls with them, staying in touch with the new network and eventually meeting the supplier and visiting the premises, builds the foundation of a long-term sourcing partnership.
The whole sourcing and its preparations often take longer than people like to admit. It might take up to six months to get your design ready for mass production and identifying the appropriate partners to build long-term business relationships with. What might help you, especially when starting to build a robust supply chain, is to work with an established agent who has already built reliable networks and has a certain expertise in the market in which you are looking for suppliers.
When identifying suppliers on your own, look out for a sourcing partner with a reasonable price who can accompany you as you grow your business. Look for indicators that project whether your potential supplier is reliable and can prove stable business activities. Apart from making a conscious decision where your supplier is located, you should also make sure your sourcing partner has the competency (technology, workforce, business terms) to conduct business long-term.
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