Business :Keep Logistics in Mind When Deciding on a Manufacturer

By Karina Popa

When businesses have a shortlist of potential manufacturers, they should consider the logistic aspect of things to come up with a factory that best fits them, and to get in touch with the manufacturers to ask some questions prior to requesting for a quotation. When sending an email to manufacturers to get additional information, the questions they can ask are as follows:

What are the kind of companies do you work with?

In general, businesses will go for a manufacturer that work with companies like theirs. For instance, if this is a big company that specializes in household appliances, it will choose a factory that works with big companies that concentrate in home appliances. When entrepreneurs create a new technical product, they will favor a factory that works with businesses that also create a similar product. They should see to it that it is ideal by considering the other companies the manufacturer has partnered with.

Are you willing to sign a non-disclosure agreement (NDA)?

In other countries, intellectual property theft is widespread. When a factory does not want to sign an agreement like NDA, it should be removed from the potential partners list. However, an NDA does not necessarily guarantee that a product will not be leaked. To have some leverage against frauds, businesses should have a patent filed in their primary market.

What minimum order quantity (MOQ) do you require?

There is no strict number recommended, but it is crucial for businesses to take their profit margins into consideration. They have to pay for their order whether or not they sell all the units. Prices are usually reduced with higher volumes, therefore it is best to ask the volume that will prompt a price break.

What is your pricing for samples?

A lot of factories will give a sample of current products, provided that businesses are willing to pay shipping and customs fees. However, they should make sure they are agreeable with the sample pricing structure of the manufacturer before deciding on them. They should keep in mind that custom product pricing usually requires customers to pay 50 to 100% for tooling.

What is your turnaround time?

When a business is given a particular date to fulfill an order, they should be able to find a manufacturer that can meet the deadline. They should also consider shipping. If this is their first order of their new product working with new factory, they should give an allowance for their shipping date. Luckily, most of the time, a smaller shipment can be airfreighted earlier than a boat shipment to quickly deliver small orders/samples (if this is the case).

What are your terms of payment?

Before starting a production run, many factories ask for a down payment. This could be a 50% deposit for tooling, and the remaining 50% upon completion. You should stay away from factories who ask them to pay 100% up front.

How do you deal with delays?

It is ideal for a factory to be proactive in terms of preventing delays, and usually, the contract would have a penalty clause that businesses are comfortable with. However, this is harder to implement with vendors in foreign countries. In addition, if the MOQ is not too big, it can be hard to negotiate a penalty clause.

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