By Milad Nouri

Find the right manufacturer, perform a network-based sourcing

The starting point of each manufacturing project is to find the right factory. This part of the project is the most important one because it will affect the following stage of the process. The choice of the manufacturer highly depends on the type of product and the size of your business.
 
For instance, if your orders, in terms of quantity, do not fits the production capacity of the factory you would have problematic situations. If your quantity is much less than their usual orders, you may have commitment problem to your project. If your quantity is much more than their maximum production capacity you will have production delay problems.

Keep in mind that bigger factories do not always mean better quality. Very often smaller factories will be more committed to your project therefore they will be more willing to change and improve their production process to match your requirements.

For products with high intellectual property the choice of the factory is even more difficult, because in China the protection of intellectual property is still not well developed. For these type of products it would be more suitable to find manufacturers with no or few business relationship with your market. This could decrease the risk of possible copy of your intellectual property by your local competitors.

Finally, to accelerate your manufacturer research and to have an effective cooperation with the manufacturer, a networked-based sourcing could be performed. That is to say that you should look first, in your business network (other suppliers, partners, suppliers of your partners etc…) to try to find a suitable manufacturer. In China it often happens that you could perform better and faster using your “guanxi” (network in Chinese). This is also applicable to your sourcing, because in manufacturing projects the development part of the product could take time and requires the commitment of your manufacturer. For this matter you have to establish a mutual trust which is enabled though your network.

Audit and visit of the manufacturer

After finding the manufacturer, an audit of the factory should be performed whether by you or by a consulting company based in China. The audit has to cover the control of the factory facilities, management team, production process and working conditions. In addition, the certificates of the factory such as CE, Rohs or other standards related to your country have to be controlled to ensure that the factory has the required quality level.

However, having the certificates do not always mean good quality in mass production. Because to acquire these certificates factories make specific samples following the specifications and the factory can even change and improve the product during the certificate application. So these certificates mean that the factory is able to match the quality requirements however in mass production a quality management plan has to be defined to ensure that the factory will actually follow the specifications.

Sign a contract before the production

Since “time to market” is always very important for manufacturing projects, the contract establishment stage is often forgotten or postponed because it takes time (negotiations) and it also can be costly because it requires sometimes external resources (lawyers, experts…) to define a correct contract covering all the possible conflict situations.

In case that you do not have enough time or the budget to establish a contract conformed with international business laws, you can however write a purchase contract covering the following points:
* the manufacturing procedure
* delivery time (for samples and orders)
* exclusivity of the product and the territory (to protect your intellectual property)
* quality control process and acceptance quality level of the production
* penalties in case of late delivery or quality problems

This procedure is essential to avoid conflicts during the production and after delivery. The contract allows to write down all the aspects of the manufacturing project that even you might forget in the future and the signing of the contract improve the mutual trust.

Request and analyze samples

Before starting the production, you should request samples of your product. The sample analysis could be done by yourself or a specialized company. For the sample confirmation you have to set a high quality level because in mass production the quality level of the product might decrease.

Take the time to confirm the sample, because after sample confirmation and production start, it is not suitable to change the specifications of the product. This might cost you time, money and you could loose your credibility toward the manufacturer and it could harm the mutual trust.

Close control of the production

Once the production starts, you have to establish a strong production monitoring. First of all, the production planning should be required from the factory. Many manufacturers do not have a production management system therefore the production is not well planed. Even if the factory do not follow every day the planning, this will give them the deadlines of the production and will give them a visibility of the delivery time.

During the production you have to establish a quality control process. You can whether perform the quality inspections with your company staff or quality control company based in China. It is important to have quality inspections at the beginning of the production to detect possible defects earlier and perform the necessary changes. A pre-shipment inspection is also highly recommended to control the quality of the production to ensure that it matches the requirements. But do not wait the end of the production to worry about the quality because the quality control process should start from the very beginning of the production.

Milad Nouri, Managing Director of China Consultants Int’l Ltd.
This is the second part of “Manufacturing in China, main challenges and practical tips for SMEs”  Here you can find part one.