Find the Right Factory For Your New Custom Product

Did you know that 80% of all new product development headaches stem from poor factory choice? Indeed. Because if the factory who manufactures your new custom product lacks the right people, processes, or equipment—it eventually shows. Through inconsistent quality, communication breakdowns, and thousands of misspent dollars.

In this Right Fit Factory™ article, you'll learn the following:

1. How to prepare a product for pre-production, so you get it right the first time.
2. Where and how to find the right factory for your custom product.
3. How to recognize and evaluate factory competency.
4. Key indicators you’ve found your Right Fit Factory.™

So whether you’re a product manager, entrepreneur, or innovator preparing to find a great manufacturing partner, here are all the red (and green!) flags to know if you’ve made the right choice.

If you’re going it alone and want some help, finding just the right factory for our clients is a specialty – don’t hesitate to get in touch. Without further ado, here's everything you need to know about choosing and finding a factory overseas, and how to make the very best factory selection for your custom product.

How to Prepare Your Product for Manufacturing

Ensuring you have the right product that’s ready to find its right factory depends on first doing your due diligence. Once a factory is casting your injection molds and building a production line, you’re officially in too deep.

If you’re sure you’ve got the next big thing and just need to know how to source an overseas factory now, you can jump to that section here. But how much rigorous testing have you done of your product prototypes? Have they performed as intended? What are the important features of your product? How does your product stack up against other products in the market?

Have you figured out your order quantities? You need that information prior to finding a factory.

How about your forecast for scale?

Have you determined your product/market fit?

Is your IP protected?

Answers to all of those questions, and more, help determine what you need in a factory. Without first knowing what you need from your factory, your chances of connecting with the right one are like finding a needle in a haystack, and that haystack is in another country that speaks another language too.

Let’s drop the metaphors. Without knowing what you really and truly need from a factory, which is determined by the product you want to produce, jumping ahead to “get things going” is the quickest road to failure.

Conduct Market Research

Market research is the first step to preparing your product for production starts with seeing if it’s worth investing in. Composed of qualitative and quantitative research, it enables you to know whether or not your idea really has legs. During this phase it is very important to avoid confirmation bias which can take you off of the right path. Instead, just like a scientist, you need to test your own assumptions and find evidence that supports or disproves your hypotheses.

Only the novice puts stock in their untested great idea. Experienced product developers do the research. They learn who the target customer is and become obsessed with learning about their desires.

Once you know who your target customer is you can make educated guesses about what they most need and want from your product—the solution to their problem. It doesn’t stop there. Those educated guesses need to be put to the test to see whether they’re true or not.

During the market research phase, some of the most important questions you’ll answer include:

• Who are my customers, really? If you don’t already know, love, and have deep empathy for your customer, your business won’t succeed.
• What is my customer’s real problem? What are their pain points? Know them intimately. Can their problem be resolved in different ways? In what ways is your solution better? How do you know it’s better? Prove it.

Once you’ve learned enough about your target customer and their needs, it's time to see if your product fits well into the broader marketplace.

Determine product/market fit

Can you build your product at a price customers are willing to pay, and will that price enable you to comfortably make a profit? If the answer to either part of that question is no, then it is not a viable idea.

Are your would-be customers interested in a solution to their problem? Where would they purchase your product, and is there room on the retail shelf for it?

Take a close look at the broader landscape, your competitors, and where your business fits into it. Next, try to figure out, at least on paper, if your product can cost out to make a profit. As good as an idea for a product may be, if you cannot build it at a price that customers are willing to pay, and that makes a profit, then it isn’t worth pursuing.

If you’re excited about a huge available market, the entire

127.3 billion dollar shoe market, for example, don’t forget that no matter how unique or disrupting a new running shoe is, even under the best of conditions, only a tiny fraction of those sales are accessible to the new merchant.

Determine order quantities and forecast for scale

Determining the quantity of orders you will place, the cost of those orders, and the amount of markup you will place on every item sold is the next important step on your journey. It’s a crucial step because it is here that you can see how order quantities impact your profitability.

Knowing your quantities will also help determine the kinds of factories you can use, since an exceptionally small or large order could change the type of factory you choose. Get a rough idea of the number of units in your first production run. Including your ramp up rate, how many units can you move in your initial launch? At least some business analysis at this stage helps to know which suppliers to approach, and at what scale. So sit down, crunch the numbers, and see what it all looks like on paper.

Once you have a good ballpark estimate of what producing your product will cost, you can do the math and see what the customer’s price will be. Knowing what you do about the current landscape, is this product idea viable from a business perspective? What’s the outlook on its profitability i.e., what’s the profit outlook?

Don’t get too bogged down here. Remember, this is still an iterative process. More often than not, your first quotes won’t meet your expectations and will change down the line. It's still good to have a few numbers ready for when you begin qualifying factories.

Here are some additional questions you should ask to help you better understand your business, product, expected revenue, and profitability:

• How risky is this venture? Identify the potential risks and challenges, regulatory hurdles, market acceptance issues, etc.
• Who are the competitors in this space? Study them obsessively. What are they doing right? What are they doing wrong?
• Is there a good business case for this product? Is the financial investment worth it? Will the payoff be enough?
• What’s your go-to-market strategy? How will your product be introduced and marketed to your target audience? Include pricing, distribution, and promotion. From there, you can start calculating to answer this question: What’s the cost of acquiring a new customer?

For now, these are just projections. But they’re also extremely useful in helping you forecast scale and initial production runs.

Identify your product strategy

Tony Hsieh, the late founder and CEO of Zappos, observed of both poker and business that one of the most important decisions you can ever make is which table to sit down at. You can be dealt all the best cards and luck in the world but who you’re playing against matters.

We say the same is true for products. Which ideas you choose to invest in, and in what environment, can be more important than the skills you bring. At Product EVO, we’re extremely selective about which products we back. Our checklist is simple but non-negotiable:

1. Is there more demand than supply?
2. Is the product in line with your skills and passions?
3. What does the competition look like?
4. Is there a sweet spot (i.e. a gap) between 1 and 3 above that looks like an opportunity?

Case in point: the following keyboard projects from two different clients help us illustrate how different product strategies led to two completely different outcomes:

Company A had a goal of making a keyboard that could compete with Apple’s in quality but only cost 40% of the price. They knew their target customer well and knew the keyboard would sell, but despite spending two years and $10K in prototyping, they could never prove profitability.

We uncovered the reason why. With only 1/10,000th of Apple’s market share, they’d never be able to dream of reaching Apple’s production volume. That was the reason why they couldn't slash their costs the way Apple could. Company A’s product was sound but they had no means of producing it at the scale they would need to make it profitable to produce. The project folded.

Company B built a high-end, totally customizable keyboard that no one else (including Apple) was making. The cost was triple or even quadruple that of Apple’s, way out of reach for the average consumer. Nevertheless, Company B proved that a small but passionate minority was out there willing to pay almost any price for such a product, and at the higher price. Company B’s higher profits meant that they didn’t have to sell as many units to stay in business and thrive.

Company A’s strategy looked solid on paper—but the assumptions behind their numbers hadn’t been sufficiently interrogated. With Company B, careful research on a specific niche supported a theory that, at first glance, looked untenable. The differing product strategies and available market share for each product was what made all the difference.

Identify your competitive advantage

What advantages do you have that make you uniquely suited to develop this product better than anyone else? Take an honest look at the resources you have access to, beyond capital. Look at brand, access, available time, distribution, and any of the unique skills or experience you have that directly inform the product you are currently developing. What insights, strengths, relationships, and knowledge do you have that can give you competitive advantage?

What is your product’s competitive advantage? What does it do or do better than current products on the market? What problem does it solve? What pain points does it alleviate? Great features are swell, but what real benefit does your product and its features actually deliver?

Know your constraints

Know your limiting factors. Brilliant marketer Seth Godin has some good advice about marketing but it applies to production and nearly all projects: Know your constraints ahead of time.

What are you up against? What are your REAL constraints that can’t be changed (for now)? Time? Resources? Capital? Acknowledge the constraints and work within them.

Ask yourself the following honest questions:

1. What resources can I feasibly put into this? (time, risk tolerance, capital, etc.)
2. Exactly what kind of market am I looking at? Given my resources, is it the right size market for me to be competing in?
3. What do I really want to achieve with this? What’s the outcome I’m looking for? (Fast results and/or a quick profit? Disrupting an industry? Winning the market?)

Determine the most important product features

Now that you’ve made clear the boundaries of your sandbox, you can maximize your offerings. By now, you should know a whole lot about your target customer. Hone in on exactly what makes your product unique and special, the pain points you’re solving for your customer, and how your product differs from those of your competitors. Figure out how to articulate your product’s unique advantage to designers, factories, investors, your sales team, marketers, and eventually, in the most convincing way possible—to your target customer.

Create your Minimum Viable Product (MVP)

Ready to put all your thinking, fact finding, and assessments into action? It’s time to build your MVP!

Your minimum viable product includes, in the crudest way possible, the core features that you believe will satisfy your early adopters. Using whatever you can, whether that’s pencil, paper, glue, string, cardboard, foam, or a 3D printer, assemble an MVP so that you can “show” what your product does. In other words, your MVP needs to include the functionality you envision, even if it does so crudely.

Your MVP is different from a prototype. Prototypes can be anything from sketches to physical products. They can vary from being homemade to very high-quality, pre-production prototypes like 3D prints.

Your MVP is your proof of concept. It’s what you use to prove that your idea has legs.

Once you have your MVP put together it’s time to test it. Beta test it. Have focus groups. Talk to people about your product, and more importantly, listen deeply to what they have to say.

Get your MVP in front of the public. Attend a trade show, farmer’s market, etcetera. On average the cost of iterating a product at a trade show is $20 per hour, so it’s an extremely cost efficient way to test your product. At Product EVO, we’ve come to a trade show with a rough idea for a product which we iterated upon as we received feedback on it. By the end of the trade show we had potential customers asking, “How can I buy it?”

Are the features you thought important also important to those who try your MVP? Do people ask for features and functionality you haven’t thought of before?

Trade shows can be daunting. Your first few pitches may fall flat, but if you persist, you may be able to hone in on the exact problems users are having. You can even tell them about potential features not included in your MVP at the time and see their faces light up when you mention a solution they like. The insights you garner during that experience can immediately be taken back to the workshop and tinkered with.

Complete your product designs and prototype

Once you’ve tested your MVP, you can start iterating on it. Zero in on performance and usability. Plan on there being several iterations of your working prototypes in which you develop and test using it. Step into the customers’ shoes frequently, or better yet, start giving out your working prototypes to would-be customers and early adopters.

Test not only your product but also the pitch, price point(s), and business model. Can you create a product that consistently provides the promised result? After each change, keep asking yourself: What do I need to learn from this? What is the fastest and easiest way to build, test, learn, and iterate quickly?

Hire experts to complete your product design

Imagine you’re trying to take the Super Bowl. Would you rather have Eli Manning on your team or your buddy Joe who just learned Fusion 360?

To turn your idea into a design that a factory can use, you need to have your functional prototypes completed. A professional design team or engineering firm is the best and smartest way to get that done. Your friend Joe doesn’t have the necessary expertise, neither do so-called “professionals” on Fiverr or Upwork.

We get it. It’s good to be scrappy, in the beginning. That’s what your early “proto tests” and MVP are all about. But when it comes time to bring your product to life we recommend working with a professional for the blueprints that will soon get reproduced (or improved upon a couple of times, and then reproduced) many thousands of times over.

Here’s why: There are lots of ways to design a product. And just because someone can, doesn’t mean they’re good at it. There are lots of ways to design in or design out costs in a product, doing so well requires expertise. For example, on our first keyboard project, the first design had 23 parts. We built it and saw that it was a piece of junk that broke quickly. A single redesign by a professional reworked the keyboard with far fewer parts, immediately reducing the cost 20-25% and improving the overall quality of the product.

Many factories will advertise the fact that they can help you finish your designs, sometimes even for free. But if your product has any custom features or has a defensible, unique intellectual property (IP) in any way, we recommend hiring a pro.

When you hire a pro, that doesn’t mean your product will come out perfect. No product design is perfect the first time. Continuously making improvements many times over, before it ever goes to the factory line, is part of the process. When you have your product professionally designed, that redesign will pay for itself 30x over when it goes to production.

Have your functional prototypes completed

Your functional prototypes are just what they sound like: they’re prototypes that function.

Note that it’s here, in the functional prototyping phase, where you’ll hit some of your most frustrating and serious setbacks. But now, more than ever, is the time to power through. Here’s where you glean your most valuable insights about your product.

Imagine how much you’ll save in production costs if you can work out all the kinks here instead of on the production line. This is where you want your product to fail. You want to find every possible problem at this phase. Problems become your IP.

Industrial design will focus on a product’s appearance and usability. An industrial design can be made with anything from a simple pen and paper to software like Adobe Illustrator, etc. You might also need a mechanical design that illustrates the functionality of your product, and factors such as materials, processes, and safety requirements. The tools often used at this stage are Fusion 360, Solidworks, AutoCAD, and/or Pro Engineer. Another kind of design is service design, where you build a service experience. To do that you’d likely start with service blueprinting and customer-journey mapping. In software design, you begin with user flow charts and/or wireframing.

Rapid prototyping ensures that the factory thoroughly understands what it will be manufacturing and, importantly, that your product will be in the best shape possible for production. As you can well imagine, once your product is in production making changes becomes very costly.

Intellectual Property Protection for Overseas Manufacturing

At Product EVO, when it comes to intellectual property overseas, lots of safeguards are used to make sure things go right since we do rigorous due diligence and only work with factories with the safest of security protocols.

When things do go wrong, the savvy product developer can spot an “IP leak.” It shows up clear and fast—a similar product with a different logo, on sale for cut rates on the open Chinese market.

We field a lot of concerns about intellectual property (IP) in our business—and nothing could be more understandable. After all the hard work and expense that went into improving your design (the most valuable part of your IP), you want to do everything in your power to protect it. There’s nothing more galling than discovering what appears to be an exact copy of your product for sale on Amazon or Alibaba for half the price of yours.

There could, however, be several different explanations for this.

The most hopeful, and probable, is simply that—congratulations!—your product got so popular that someone took the time and effort to reverse-engineer a cheap approximation in hopes of capturing some fraction of your online sales. Though incredibly frustrating, these aftermarket products are usually of much lesser quality. If you have a strong brand, your followers should be able to tell the difference.

The most feared explanation is when a product's intellectual property (IP) is compromised or stolen and used to reproduce exact replicas of your product, in violation of your patents, trademarks, and/or IP rights, to be sold as either counterfeit under a copycat brand, or even under some new, rival banner. And, while you can try to intimidate bad actors with legal action here in the United States, good luck trying to prosecute overseas. Sadly, once your IP has been stolen there’s not a ton you can do.

Therefore, it’s critical you protect your IP from the outset–even as early as your factory search. Here’s how.

Don’t use the factory to complete your designs/prototypes

In addition to manufacturing your product, many factories will advertise their in-house design and product development services. These types of factories are called Original Design Manufacturers (ODMs), where these services are offered in some sort of package deal or, when that factory manufactures your product, are even complimentary. Do you find yourself just a little bit skeptical of any ODM factory who says they'll save you thousands, if not tens of thousands, in development costs thanks to their all-in-one factory where they can do all of it? It really is too good to be true.

ODM factories take the position that they're full or part owners of the designs they had a hand in creating. In such instances, they won’t exactly be eager to release them back to you, and if that ODM factory retains the rights to the files, you won’t have much control over what happens to them.

It’s true: product development can be an expensive process. A product manager or entrepreneur has to be willing to invest in the development of that product to get positive results and ultimately launch a great product that does well in the marketplace.

Prototyping is not for the faint of heart, but if you can get past the dragon, it’s where the pot of gold is. Stick with it, and your efforts will be rewarded in a safe, well-designed, market-ready product that never once compromised your IP.

Beware a supplier with its own sales and marketing department

When you’re looking to hire a factory to manufacture your new custom product, you might not (think you) care much about what brands or businesses they own on the side, or what sales and marketing efforts they run. But rest assured, you do.

Problems and disagreements with overseas factories aren’t the norm, but when an imperfect batch of goods is left up for grabs, a well-equipped factory with the capabilities to repackage and resell what’s left probably won’t hesitate to do so. This sort of thing simply isn't as frowned upon in other countries like it is in the U.S.

To figure out if the factory you’re looking at has such capabilities, look for a strong sales and/or marketing presence on Alibaba under the same company profile. For example:

• Look at the factory name, page, and see if they have a branded logo
• Look to see if this supplier has their own products for sale

When you see the above, it’s usually an indication that in addition to making goods, they also sell them to the public. This indicates that the supplier has a sales and marketing department in the business of branding products (or rebranding them) and selling them to the local or wider world market. We take that to mean that just about anything leftover from your project—including entire production runs rejected due to poor quality—could be sold off in a similar way. We’ve seen it happen.

In Exhibit B, the factory has added a brand and a logo to its listing.

One reason OEM factories work well for us at Product EVO is that by having most of their business locked up in producing the materials of other factories, OEMs are disinterested (and frankly, ill-equipped) to sell our clients’ products to others. We’ll explain more about OEMs later.

Don’t send full samples for your RFP

During the factory search process is not a time to be sharing your most valuable IP, your product design. You want to send over only enough information to quickly qualify factories for additional quoting so that you can start assembling a “grouping of quotes.”

• Send only partial or sub-assembly designs: If sending a competitor’s product isn’t feasible, send only a single sub-assembly for initial quoting and due diligence. This way, the factory doesn’t get access to your full IP. Nevertheless, you can still engage in good, fruitful conversations and get price estimates to figure out who you’re ready to move forward with.
• Send only 2D designs for initial quoting: Another way to limit what a factory sees is to send only 2D, not 3D, designs. Another strategy would be to send different parts of your 2D designs to different factories, so that no single factory has all of your 2D designs.
• Use a competitor’s product as a sample: One great way to get quotes from factories is to send a competitor’s product. This kills a few birds with one stone: it protects your IP, gives you an estimate of your competitor’s costs, and it starts a constructive dialogue with potential factories who can help you reverse engineer and build upon some aspect of your competitor’s product down the road, if you choose.
• Leave out a few key numbers: One of the sneakiest ways we protect our client’s IP is to purposefully leave out a number or two from the specs. This strategy also works as a litmus test for how a factory may respond to a mistake like this. In the final qualifying phase, we do this test to specifically see what the factory does to correct the error.

Even after all this due diligence, however, you still want to proceed carefully. We always test the waters with a factory supplier before entering into any large contract or sending a large payment. If you want help with this process, you can always schedule a strategy call with our team, but with these tips we think you’ll have the best odds of protecting your IP against unwanted theft, security breaches, etc.

Now you’re ready to start looking at and vetting factories.

How to Conduct an Overseas Factory Search

Finding a good factory partner is so important. We estimate that 80% of all new product development headaches stem from poor factory choice. So, we’ve identified a basic formula for finding, qualifying, and selecting your ideal match for a factory. Here’s a brief overview of the steps:

1. Identify a list of promising factory candidates (Iong list)
2. Send a request for a quote (RFQ) using our template
3. Shortlist a handful of factories using our Factory Scorecard
4. Assess your top factories with our top “Four Criteria”
5. Visit your factory or conduct a “Due Diligence Checklist”
6. Make your factory selection

(Factory matrix for your first round of due diligence)

Where and how to search for quality factory candidates

Keep in mind that this process is a two-way street. Factories are qualifying and shortlisting buyers just as much as you are them.

Here are some valuable resources to help you find factories for your search. When you’re trying out a whole bunch of factories at one time, score and rank them with our handy Factory Scorecard Template.

To find listings of factories, look through online resources:

• Trade organizations
• Importgenius
• Alibaba.com - for factories in Asia
• MFG.com - for factories in Mexico

Also look through sourcing platforms. These are like Alibaba but include access to factories:

• Made-In-China
• Global Sources

You can also import database platforms. These services enable you to look up a competitor’s product and see the manufacturer of record on the import documents.

• Panjiva ($150/mo.)
• ImportGenius ($99/mo.)
• AllImport ($20/mo. base)

While most product managers and entrepreneurs are well aware of Alibaba, it’s still a great place to find new factories, if you know how to look. Don’t forget you can always cold call companies to ask them where they manufacture their products. You’d be surprised how many will tell you.

Knowing where to find good manufacturing partners is just the tip of the iceberg. Learning to spot the trading companies from the factories is another story–and it’s an important one, so be sure to read what follows!

Understanding the supplier marketplace

Not all manufacturing partners are created equal. There are companies out there hoping to score your business which advertise manufacturing capabilities, but in reality, plan to outsource the work. Know the signs of such “trading companies” and understand the downsides of working with them before getting too far into your search for a factory.

What is a trading company?

A trading company, of which there are many in China in particular, is a business that does not make its own products. Instead, they act as a go-between for producers and suppliers, contracting and “trading” with other factories to get wholesale prices and resell goods for a profit, sometimes under a subsidiary brand. They are similar, though not identical, to wholesale distributors in the U.S.

Trading companies best serve smaller projects, tiny orders, or in instances where you're dealing with a lot of varied product types. Occasionally, they may be helpful in finding hard-to-source materials. There are also trading companies that simply buy and resell products; the business they do is nothing more than one of being profit-skimming middlemen.

Another problem with working with a trading company on a custom product is that if they don’t possess the technical background in the processes or materials your product requires, they will fail to pass the critical details on to the actual factory. They’ll also give the factory poor guidance if they have to answer a question for you. When you unknowingly work with a trading company fronting as a factory, you run the risk of the following:

• A lack of due diligence
• Confused communications
• Quality degradation
• No oversight
• Slow progress and communication
• Inconsistent results

These sorts of negative outcomes can lead to a very lengthy and often expensive development process, and a negative experience manufacturing your new product. Instead, look for a more traditional factory like an OEM.

What is an OEM?

At Product EVO we prefer working with factories called Original Equipment Manufacturers (OEMs), which make the products, or the parts, that go directly into end-products sold by other companies or manufacturers. These suppliers aren’t typically selling branded products to the consumer marketplace. That means they aren’t interested, or equipped, to do much with your IP.

There can be a lot of advantages to working with OEMs, such as:

• Improved production capabilities
• Lower labor costs
• Shorter delays and lead times
• Higher performance and quality
• Increases in product lifespan
• Diversified opportunities for expansion
• Few resale incentives

So if you want to retain a lot of control over your product, we believe that OEMs, not ODMs or trading companies, are a better choice for any new or custom product with a detailed product development phase.

At Product EVO, we’ve learned to develop our processes from working in the trenches. You can benefit from our hard-learned lessons and save thousands of dollars in wasted time, money, and products that are inferior as the result of working with unqualified factories. Click here to get started with us.

Read on to learn how you can determine whether the “factory” you're looking at is a trading company or an original equipment manufacturer.

How to make sure you’re looking at a factory (not a trading company)

As you shop around for factories, you may find they’re all starting to look and sound alike. So how can you quickly zero in on the qualified players? The first step in choosing the right factory is figuring out if they’re even a factory at all!

Ask for the factory’s website (and not just a listing on Alibaba)

Check for a company website, not just a listing on Alibaba. While it may seem obvious, one of the very first things we request from a new supplier is for their company website. Why?

First, they’re not always easy to find on their own. A factory could have multiple websites including page listings on multiple marketplaces that don’t always crosslink. Secondly, a website can tell you a lot without even clicking on it.

When we ask a potential supplier to provide us with their website, more often than not, we get back a link to an Alibaba page. Here’s an example:

But here’s the trick. See how the URL contains an Alibaba tail? Ex: CompanyName.en/alibaba.com. There are many variations on this pattern: Made-In-China.com and GlobalSources.com are two other common sites as well.

On Alibaba and others, it’s easy to build a profile and "sell" goods. You don't necessarily have to be a manufacturer or represent a factory to conduct business. This makes it tricky for end users to tell the difference. And while scams are rare, it’s all too simple for bad actors to build out a page, throw up some product specs, and be “open for business.”

Many legitimate suppliers also have listings on Alibaba. However, if a potential new supplier doesn’t have their own, B2B-facing website and only provides you with a satellite site on Alibaba, Made-in-China.com, or GlobalSources.com (passing as their principal website), then this is a clue that the factory you’re looking at, isn’t one.

A factory that markets itself with a professional, stand-alone, B2B-facing website can be a quick litmus test for finding actual factories that invest in putting their best foot forward. However, this is only one of eight data points to consider in our Right Fit Factory™ Process. So if you’re in the middle of vetting factories, check out our free, downloadable Right Fit Factory™ Scorecard to keep track of it all.

Dig into the factory’s business listings

Dig into a supplier's business listings such as the type of business license, ISO certification, export experience, etc. After a quick website check, the next thing we look closely at when vetting suppliers for our clients is the factory’s (actual) name and their business listing on the marketplace websites like Alibaba, Made-in-China, or Global Sources.com.

Look closely at the factory’s “Company Name”

You might think you know a company’s name by looking at its URL and/or branding. But it’s not always that easy. You may be surprised to learn that a supplier – that in all ways appears to be a factory, in possession of its own branded website – may still operate in whole, or in part, as a trading company. You can find this supplier’s name and business profile on listings on Alibaba, Made-in-China, or Global Sources.com.

Here’s an example:

On its main marketplace page [Exhibit B, directly above], this business’s name appears to have a logo with the letters “ZHNET” and a URL that reads “ZZtactical.” However, in smaller letters beside it, and on their Alibaba account (Exhibit A: Arrow #1, above), you can plainly see the company’s name is “Baoding Zhengze Trading Co., Ltd.” And yes, you guessed it, any business using “Trading Co.” right there in their name, probably is one.

Look up the factory’s “Business Type”

Clicking on the company name will take you to a company profile page (Exhibit A: Arrow #2) where there are business categories listed such as a trading company, factory, distributor, wholesaler, etc. (Exhibit A: Arrow #3). In this case, “Baoding Zhengze Trading Co., Ltd.” is listed as a verified Trading Company. We have our answer. Now, let's look at a less obvious example:

There’s no “trading” in the company name, so that could mean it’s an actual factory. But let’s keep looking.

Under “business type” the generic list is not very helpful. It offers too many options to make sense of what they really do. Rarely is a factory a “Manufacturer, Trading Company, and Distributor/Wholesaler.”

In order to further clarify, we have to dig deeper. Here are a few more clues for helping you understand whether you’re looking at a factory or trading company.

Examine the company’s product offerings

Look for factories offering a single product category as opposed to offerings across multiple categories and materials. Beyond the company profile, look at the factory’s product line [Exhibit C]. Check for consistency in the factory’s product catalog.

Ask yourself if they pass muster on the following two additional criteria:

• Question #1: Are their listed products directly related to each other?
• Question #2: Are their listed products made from similar materials using similar equipment?

Let’s evaluate this example:

1. The company lists many different types of backpacks, briefcases, and tactical bags. So do they pass on the first question? The answer is Yes.
2. But when you look closer at these products, you might notice an extensive variety of options: plastic rolling suitcases, leather briefcases, and fabric backpacks of nylon and canvas. So do they pass on the second question? The answer is No.

Look at your potential factory’s product catalog. See if it focuses on a single category of products, or more than one.

For example, in Exhibit D below, we see a factory which seems to make towels but also stainless steel containers. This is a completely different product category, with distinctly different materials and processes. Hmm. It’s highly suspect. A variance like that can only mean one thing: that you’re dealing with a trading company that doesn’t specialize in anything but transactional, off-the-shelf product sourcing.

Examine the factory’s experience

Countless times we’ve seen clients trust what a factory says at first encounter, only to realize later on that it’s standard practice to say yes first, and then figure it out later. At Product EVO we operate under a “Show Me” instead of a “Tell Me” policy.

We’ve also discovered that any time a factory claims to be able to work with two or three very different processes or materials–it’s a signal to start asking more questions.

Though the above Chinese Factory (Exhibit D) may still operate as an actual factory producing goods, they probably aren’t manufacturing all of these products in-house. It’d be incredibly uncommon to find a factory that would work with this many different types of bags.

While this occasionally varies by region, as a general rule, you won’t see a real manufacturer producing more than a handful of different kinds of products. Raw materials require specialized machinery that take expertise to run, and a lot of space to store. For this reason, factories almost always specialize.

In this case, it’s more likely that this factory shares a marketing or salesperson with one or more other factories. English-speaking salespeople are a rare and coveted commodity in China, and so one account person might represent multiple factories at a time, utilizing Alibaba to that end. This equates to a middleman, no better than a trading company.

If you see that the factory is advertising branded products and is selling them, this could be another sign of a trading company.

Factories will outsource specific parts or entire projects to “cooperated factories” or even buy brand-new machinery or open a new line for projects that appeal to them.

Confirm the factory’s equipment

It’s pretty uncommon for small to medium-sized factories to be vertically integrated. This is somewhat the norm. After all, an aluminum factory relies on an outside anodizing supplier in much the same way a garment factory depends on a fabric mill to supply the fabric. If the factory you select doesn’t have all of the equipment needed for vertical production, they will have to rely on various other “cooperated factories” to make your product. That could slow things down.

To prevent that, ask about their equipment, methodology, and the like. Try to assess whether or not they will be doing the work on-site.

In Exhibit A below, the company’s profile lists them as manufacturers of a variety of bags. The uploaded photos seem to support this narrative since the products and situations themselves look very realistic (#2) and (#3).

In this second example, however, we see a factory with Stainless Steel Kitchen Containers (#2) on offer. When we check into the supplier name (#1) “Shenzhen Huiye Hotel Suppliers Co. Ltd.” it raises red flags. When you click on their profile page, you see a company that sells supplies of bedding, towels (#2), chairs (#3), and cookware (#4) in addition to stainless steel food containers. At this point, we can be confident this is a trading company. This tells us that they have little to no specialization and that they would be ill-equipped to assist with any technical challenges or oversee QC with a technical eye. In other words, steer clear!

Shortlist a few good factories

A factory’s competency might seem the hardest to evaluate from afar, especially if you’re new to manufacturing and product development. We recommend that you keep a dialogue going with several of the factories who have passed muster up until this point in your journey, since it will work in your favor when you’re in negotiations. Next, it’s time to do a little magic.

Request samples

Want to get to the truth of what a factory can deliver? Eliminate a bunch of “wrong pick factories" in one fell swoop with this step. Ask them for a sample of a product like yours. Tell them you want to see what they’ve done that’s similar, so that you can compare, then behold the magic that follows…

Just like that, many “factories” will do you the favor of taking themselves out of the running, either because they can’t be bothered, or because they know that the time it would take for them to get samples routed from the real factory would take them out of contention for your business anyway.

Factory samples are a mandatory part of our factory vetting process at Product EVO. Not only for quality assurance purposes–but for the simple fact that it weeds out a lot of incompetent factories and straight-up trading companies, all at once.

There's a lot to think about, look at, and ask in order to do sufficient due diligence on the factories that have made it to your shortlist. Do not lose your inspiration or tenacity during the process. Count your “near misses” and celebrate your moments of learning and discovery along the way. Learning how to vet and source real overseas factories to make your new product is a worthwhile, valuable education.

Once you’ve shortlisted a number of good factories, asked questions, worked through a few initial design challenges, and asked for samples, it’s highly likely that only a smattering of those on your shortlist remain. Let the culling continue!

Send an RFQ

Often referred to as an RFQ, your Request for Quote is a business document that asks factories to respond with pricing and payment terms. One big mistake we see companies make far too often is sending samples or designs of their product off to total strangers overseas, just to get a quote. If you want to be taken seriously by good factories and get reasonably accurate responses, walk the line carefully. Give them enough information to demonstrate that you know what you are talking about, but not so much information that you could compromise your intellectual property.

Here’s a checklist of what you should include in your initial RFQ:

• Product Description
• Total Number of Units per Order
• Number of Sizes per Order
• List the sizes or dimensions
• Number of Color per Order
• List the Colors
• Category / Industry sports outdoor
• Function
• Usage
• Material
• Unique Product Specifications

To get accurate quotes quickly from factories you can download our RFQ Template here. It’s the same RFQ template we’ve used internally for years.

One thing that you’ll discover is that nearly all of the factories you contact will ask for a sample of your product for the purposes of being able to give you a quote on price. You’ll send these out at some point—but not yet.

How to Evaluate and Find the Right Factory

Qualifying your shortlist of factories enables you to parse down your list even more. While evaluating a factory from afar is definitely challenging, knowing the right questions to ask can help you make sound choices as you progress in the journey to finding and securing the factory that’s right for you and your product.

Over the years, we’ve discovered that a good factory selection has a lot to do with how they rate on these four basic criteria:

1. Communication: How well does this factory communicate and how responsive are they?
2. Questions: How well-formed are their questions?
3. Samples: Are they willingly sending you one, or requesting one from you?
4. Team: Is there sufficient team infrastructure to support your project?

What do these have in common? They’re qualifiers that make it easy to size up one factory against others.

Communication

Finding a suitable manufacturing partner to help bring your new product into the world is a huge commitment that’s fraught with negative consequences if you choose wrong. Like all good relationships, it’s best if it’s built on a foundation of trust, honesty, and excellent communication.

Miscommunications can dramatically impact production, and you may not learn this lesson until it’s too late. So unless you’re fluent in the native language (or have translators in your employ), it’s the strength of your counterparts’ English, and how well you understand one another, that will be the strength or weakness of your relationship. In any other context, placing a value on someone’s ability to converse in English might sound harsh or even intolerant. Very little overseas manufacturing could get done if we didn’t all employ a little patience and grace with language barriers. Large-scale industrial production relies on precise measurements, and when miscommunications happen, the consequences (and costs) can be downright devastating. Understanding one another is not “nice”—it’s critical to the success of the project.

Assess your factory contact’s English proficiency

Once you have a consistent point-of-contact, such as an account manager, you can assess the ease with which you are able to communicate with them in English. No doubt, this will require at least some investment of your time—at the minimum, a few rounds of emails and calls.

Consider the following:

• When you ask about their company history or specific aspects of your product, do they answer meaningfully?
• How is their written English? Do you struggle to understand them, or is the communication smooth?
• How is their spoken English? Do you struggle to understand them, or is the communication smooth?
• When you do not understand what is being communicated, do they take necessary steps to get the communication realigned? What appears to be their course of action for dealing with communication issues?

One of the best ways to know if your questions are being understood is from the responses you get. If their answers don’t make sense, it’s likely due to one of the following reasons:

1. The language barrier
2. They’re not experts in the product or category

Either way, it’s a bad sign.

Assess your factory’s responsiveness

English aside, as you compare your communication with different factories, you might notice them falling into one of three categories of responsiveness:

• Non-Responsive. These are the suppliers that replied to your RFQ and maybe an email or two but then quickly disappeared.
• Responsive. These are suppliers that got back to your emails and questions promptly. They answered most or all of your inquiries and replied with thoughtful follow-up questions. When you took a day or two to respond, they didn’t hound you for answers. There was some give and take in the conversation.
• Too Responsive. These are the suppliers that email sometimes 2-3 times per day, sending you their factory information, requesting samples, and vying for your business. None of their emails have much to do with your actual project. Although they email you repeatedly, they never seem to answer your direct questions.

The factories that fall under #2 “Responsive” are in the sweet spot. A responsive, attentive supplier that doesn’t go overboard with solicitation is, in our opinion, a great sign that you and this factory could be a good match.

Once you’ve done the above, you will have a shortlist of potential factory candidates with whom you can communicate clearly and who look like they would be a good fit for manufacturing your product.

Questions

In much the same way that asking the right questions quickly tells you which factories know their stuff, which do not, the quality of the questions your factory point-of-contact asks you can tell you a lot.

Consider the following:

• Do they ask very general questions? Is what they’re asking something they should know as purported experts at that type of manufacturing or process?
• When you leave a necessary bit of information out of the conversation, do they ask a question aimed at getting that information from you? If they do, do they demonstrate expertise or naiveté in how they ask their question?
• Do they ask you relevant and thoughtful questions?
• Do they ask few to no questions?

When it comes to international business, both parties need to be able to understand one another. If it’s a bumpy ride from the start, assume it’s only going to get worse as you dig further into your project specs.

Samples

If you’ve been following our advice step by step, you should have requested samples from your shortlisted factors prior to sending an RFQ. Did all of the factories you reached out to send you their product samples? It’s highly unlikely all of them did. Those who failed to send you their samples should be removed from your list. You may feel some reluctance at removing factories that otherwise looked like strong contenders from your list. That’s understandable. Remember weeding out incompetent factories and trading companies is what needs to happen at this stage of the factory evaluation process. The consequences of keeping them on your list can cost you a lot. They’ve already demonstrated their inability or unwillingness to send you a sample of their work to show you what they’re capable of doing, so get them off of your list.

Team

One way to tell that you're dealing with a well-equipped factory and not some one-man-in-a-garage operation is by getting to know their team, and yes, doing so does require some sleuthing.

Consider the following:

Does the company's leadership have support behind them? Does your contact ever mention meeting up with engineers? Do they refer to their prototype department? Are they speaking with a production manager? If so, these are all good signs that your supplier has the basic infrastructure to support your product during development.

Try to build relationships with more than one member of the factory's staff and at different levels of the company, across different departments (sales, engineering, production, leadership). Your best kind of contact is an English speaker with some sort of technical experience, as they can help bridge the experience gap from the sales or management office to the factory floor. Ask all sorts of technical questions to see how well they field them. Best case scenario: your contact is able to answer confidently, but still confers with the other experts on their team.

Visit the factory or request a virtual factory tour

While physically traveling to and visiting a factory is not possible for everyone, it’s one of the best ways to test relationships, vet your factory's equipment and capabilities, and do a gut check. When you're there in person, it’s a lot easier to get a sense of a factory’s scale and production capacity. If you hire a factory that’s too big, you’ll likely end up as a low priority and won’t get the personalized attention you want. But if the factory is a very small mom-and-pop operation, the chances of them floundering (on expertise, equipment, capacity, etc), or contracting out to other suppliers is pretty high.

You can get a sense of the factory’s culture and working conditions through the simple exercise of smiling, engaging, and observing the factory employees. Do you get smiles back? Do employees appear to be at ease engaging with you or do they barely look up? Both scenarios tell a different story–and are easily understood without language.

Years ago, during one of Product EVO's factory site visits we saw that a particular factory had employees living just outside their fence in large, bare shipping containers. It was a powerful image that stuck with us and told us they were definitely not a factory on our list.

If visiting in person is not a viable option for you, be sure to request a factory tour via video call. Any factory you do business with should welcome clients and give tours, virtually and in person. You want to see the factory conditions and how comfortably your point-of-contact or factory representative answers off-the-cuff questions.

How much these elements factor into your final factory selection is, of course, entirely up to you. At Product EVO, we factor them in quite a bit. We’ve ruled out entire relationships based on what we’ve seen and learned during site visits. For better or for worse, visiting in person offers those intangibles that are hard to judge any other way.

We’ve discovered some really great, smaller factories by visiting in person.

Make Your Factory Selection

Finding a factory supplier that can deliver on your timelines, hit your quality requirements, meet your target price, and be an ongoing partner in your success for years to come is a major challenge. Consider all you’ve done and learned to get this far. You’ve prepared your product for manufacturing by doing real market research, iterating upon your design, making your MVP, getting your prototypes made, and protecting your IP during the factory search and evaluation process. You’ve done your due diligence to help ensure your factory will be able to communicate well with you, be responsive, have the production capabilities your product requires, and more.

After you’ve discovered that the quality of products coming out of a factory is up to your standards, and meets the criteria laid out in this document, price will come into play.

Negotiations around a product’s price are a complicated process – arguably, an art form – one we will explore in a future guide. However, it goes without saying that cost will start to factor in at this stage. You’ll want to look at both

So, you’ve narrowed your top 10-15 factories down to a qualified few that are now grouped around the same basic price point. Now what?

After all this hard work and due diligence, it’s decision-time! No room for “analysis paralysis” now. Who’s your all-star? At this point, be confident that you’re ready to make a well-informed choice for your overseas manufacturing partner.

Ways to Avoid Issues When Outsourcing Manufacturing Overseas

While sourcing isn’t rocket science, it can be a lot of work. It also requires reserves of patience. In this business, we say, “Slow is fast.” Through our experience collaborating on more than one thousand products, we know that maxim to be true. Here’s our tried-and-true advice on how you can avoid issues when outsourcing manufacturing overseas.

Level up your communications

Communicating with someone on the other side of the world takes practice. Set your factories up for success by using communication strategies that bust through the language barrier, and get your message across correctly the first time. Here’s how:

Use visuals whenever possible

The cliché that a picture is worth a thousand words is no truer anywhere than in working with a factory. And if a picture is worth a thousand words, then a video is worth ten thousand.

One of the most effective communication tools is to build a simple, rapid prototype of your own, take pictures or videos of it, and send it to your designer or factory.

At Product EVO we do not explain anything to our suppliers without pictures, screenshots, diagrams, or videos. Years ago, prior to our “communication revelation,” we’d spent weeks on a backpack project, trying to get the factory to understand what we were asking for. We were at a stalemate until we built a simple backpack frame ourselves from wire, poster board, and tape. We sent the engineer a video showing how our homemade on-the-fly backpack frame worked, and the problem was solved within 24 hours.

Visuals cut through language and cultural barriers much faster than an exchange of emails. It might take a little longer than shooting off a couple of lines of text in an email, but clarity is always worth the extra effort in product manufacturing.

Be objective (not subjective)

This might sound easy–but it’s not. When you tell your supplier that you want something bigger, printed darker, or a surface that’s a little softer–you and only you know exactly what you mean by this.

If your requirements are subjective in any sense, they will be misunderstood, and your product will come out wrong–every time. Do the work to figure out how to objectively define your requirements. Get out a tape measure, calipers, calculator, Pantone book, durometer–whatever tool the job requires. Be objective in your communication.

Capture all decisions in one place to prevent mistakes

Leaving design details up to interpretation can be costly. You can send over good tech packs or CAD files at the start of a project but at some point product information, updates, and new decisions get spread out all over email, WeChat, calls, meetings, and various different sample revisions. As a result, decisions get lost, and (guaranteed!) mistakes will get made down the line.

Do yourself a favor and document every specification and decision about a product in one single place. Diligently work to keep it updated. Every time something new is established pertaining to the production of your product, update the documentation accordingly. Know that 99% of the time, not doing so will result in mistakes and wasted expense.

Conduct a final process audit

There’s one final way you can assess every detail of a factory’s production capability. It’s by doing a full process audit. A process audit lays out exactly how the factory intends to build your product from start to finish. It’s a detailed explanation of the steps involved, the machines, and the processes that go into your specific product so that you can be sure the manufacturer adheres to a list of expectations.

A process audit is another incredibly effective way to uncover what a supplier does and does not do in their own factory, and reveals which parts or steps they’ll outsource to other suppliers. Faster and cheaper than a trip overseas, this method gives you a purview into what it’s like to work with this supplier and whether or not they can deliver a product made to your exact specifications. Much more is said about process audits in our Complete Guide to New Product Development.

It’s also a good time to review standards and processes, like REACH Standards, California Prop 65 Standards, and UL for electrical products, adherence to environmental regulations, etcetera. All of that can be found in our Complete Guide to New Product Development, linked to above.

So now that you’ve learned some tips and narrowed your overseas factory list, you’re ready to move on in the process. This means entering into factory negotiations, and collaborating on your Golden Sample (the perfect prototype used for building your first production run).

Unless, that is, you’re stuck. If you are, you may want to consider a U.S.-based manufacturing partner, who are equipped to aid in, and train you in, managing this process for the very first time if you’re new.

Making the Case for a U.S.-based Manufacturing Partner

There’s a strong case to be made for using a U.S.-based manufacturing partner who can help you through the process of testing and finalizing your product design, protecting your IP, and sourcing a reliable factory that’s capable of delivering your product according to specifications.

Starting with a product idea and market research, we do the proper groundwork it takes to correctly ideate, strategize, iterate, test, and develop a product that meets real needs that connect to real people and that delivers on its promises.

A U.S.-based manufacturing and development partner can help you with:

• Factory Sourcing & Selection
• Product Discovery, Strategy & Business Analysis
• Product Profitability Outlook
• Manufacturing Operations Management
• Establishing Processes & Standards
• Product Development & Prototyping
• Supply Chain Management
• Quality Control & Inspections
• Factory Troubleshooting
• And more!

With a U.S.-based product development team overseeing your overseas manufacturing, you can operate with a trusted partner who understands your vision and product. And, knows how to navigate the entire product development process all the way from idea to store shelves.

Quality Control

Quality control, aka “QC” is arguably one of the hardest production steps to get right. The Product EVO Quality Control (QC) Checklist details all of the requirements a factory needs to set up an effective quality control system. Consider that a U.S.-based manufacturing partner can assist you with the following:

• Bill of Materials (BOM) lists all the materials, components, parts, and sub-assemblies needed to create a product or the ingredient list including Pantone or RAL colors.
• Understanding Functional Testing Requirements are usually on your QC checklist, but they are worth mentioning since they are often overlooked.
• Don’t forget Critical Function as it’s easy to assume that your factory knows what your product should do but that’s not always the case.
• Understanding Acceptable Quality Levels (AQL) are defined as the quality level that is the least tolerable for acceptance (either critical, major, or minor).

A U.S.-based manufacturing partner can help establish your QC process from start to finish, explain all these technicalities to you, and make sure you don’t neglect anything critical along the way.

Logistics

Overseas logistics can be a nightmare. As a U.S.-based product development and manufacturing partner, one common area we step in to help with is logistics, or, the packaging and shipping of a product all the way from the factory, to your warehouse, and/or all the way to the consumer.

For example, a disc golf client of ours had tested their shipping cartons repeatedly to ensure that their palates of product would arrive to the U.S. in mint condition—but hadn’t put the same care into testing their direct-to-consumer packaging. Resulting in many broken and bent discs arriving to unhappy customers. We worked with them to get to the root of the problem, and solve their packaging problem with a quick change to their supplier and operations to get the issue resolved quickly.

This is just an example of how something that might seem obvious in hindsight, or from the outside, in reality often gets overlooked when costs, deadlines, and resources come into play. In other words, a product development team like ours can help you think about how to protect your product all the way through its journey. With considerations such as:

• Packaging Best Practices. You have to treat packaging with as much care as your products because packaging often gets overlooked (until which time it gets screwed up).So clearly specify materials, dimensions, thickness, and colors.
• Choosing Correct Shipping Cartons. Your factory will always underestimate how much abuse cartons take during international shipping. Often, factories pack far too much product into a carton and inadvertently crush the internal packaging during shipping. Using a suitable shipping carton for your product is especially true for Air Freight and LCL shipments.
• Packaging / Shipping Testing. We see so many products get destroyed during transit. It’s downright painful to witness after all the work, time, and money that’s been invested into their creation. Save yourself a lot of pain—do some testing. You can package up one of your samples, ship it across the country and back again. See how beat up it gets. Simple actions like that can provide a lot of insight and learning.

Communication

Now that you have all of the specifications in one place, you’ll want to use them to create clear expectations around what will be accepted and rejected after production, so that there will be no surprises. As we’ve covered extensively in this guide, communication is a make-or-break component of your manufacturing experience. A US-based manufacturing partner can help your development process by:

• Establishing Clear Communication Channels
• Hiring 3rd-Party Suppliers
• Setting QC Standards for 3rd-Party Testing
• Understanding Timelines & Requirements for Lab Testing
• Catching the stuff that usually gets missed

Once you’ve thoroughly researched, selected and qualified your factory, it’s time to focus on preparing for your first production run. You’ll need to have your QC, AQL, and logistical standards ready, and everything should be thrice checked, to make sure everything is covered for your first production run and future success.

Next is entering into a relationship with your selected factory. By starting price negotiations, and collaborating on your perfect, Golden Sample (the final prototype worthy of putting into production).

To learn so much more about every step of the product development process, make sure to check out our blog, and follow our social channels as a resource.

Final thoughts on finding your Right Fit Factory™

We know that finding a great manufacturing partner can feel like searching for a diamond in the rough. We hope this guide can help you develop an ability for finding those diamond-caliber factories, and enrich your understanding of all that goes into finding the Right Fit™ factory for you. A trustworthy, detail-oriented overseas manufacturing partner is an incredibly valuable asset, one you’ll appreciate all the more when you find the right one.

Do you want or need help getting matched with the right factory? We’ve got proven manufacturing partners across a wide range of product categories all over India, Mexico, China and S.E. Asia. Learn more by scheduling a call today!

Or, if you’re interested in the sourcing process from start to finish, check out our Complete Guide to New Product Development.

About Product EVO

At Product EVO, our mission is to help entrepreneurs cut through the dense manufacturing and product development process to predictably, and successfully, bring new products to market. We’ve helped hundreds of innovators apply the right tools, and strategic focus, to the production of over a thousand new and innovative designs.

Harnessing our nearly 20 years of experience working overseas, we’ve got the industry know-how, trusted relationships, and seasoned processes to get through just about any design or manufacturing challenge imaginable. You won’t find our factories on Alibaba—and you can trust that your IP is always respected and protected.

If you’re searching for a new manufacturer, process or component, our expert product managers can help–get in touch today.