Buying Manufacturing Involves SellingPhil started in business as a chartered accountant with a penchant for travel. He learned about manufacturing and sourcing by doing. He quickly learned that buying manufactured products and components involves a lot of selling. Particularly when you are starting out, you need to sell your vision, potential, and differentiation to attract and retain the attention of a quality manufacturing partner.
When you are starting with nothing and no track record, [sourcing] is selling. It’s about presenting yourself as a person that people want to do business with.Manufacturing benefits from economies of scale. For a manufacturer to take on a small client involves some risk. That said, volume isn’t the only thing of interest to a manufacturer. The opportunity to work on innovative products and participate in their customer’s growth is also appealing. It’s up to you to demonstrate the special something that differentiates your company and product. How can you become meaningful to your manufacturing partner?
While it can be tempting to focus on larger manufacturers whose capabilities look impressive on paper, it can prove very rewarding to seek out small manufacturers. Great relationships can be built by helping each other succeed.
Know ThyselfPhil acknowledges that some of his biggest sourcing problems resulted from him not being sufficiently clear about what he really wanted from a manufacturing partner. Although the Request for Proposal (“RFP”) document is usually a tool of larger, established businesses, it can be a useful template for small companies.
- In the first part of your sorta-like-an-RFP, you’ll want to explain what you make and how you make it. How many do you currently make? How many do you need to make? What are the really important factors that go into making your product? It’s a useful exercise to try to teach somebody how to make your product, because much of the process has probably become tacit. Unless you spell it out in language completely understandable by somebody else, the real know-how will remain trapped in your head. (Video can be a great way to explain a manufacturing process, by the way.)
- In the second half of your document, layout your vision for the product and your company. Who are you? To whom and how do you sell your product?
- Assessing fit – the best manufacturing partner is the one that has capabilities, capacities, interests, and timeframe that fit yours.
- Establishing expectations – whether you are working with a manufacturer across the street or around the world, they are going to see the world differently than you. Quality glitches, delivery delays, and other problems shouldn’t come as a surprise if you don’t establish clear, baseline expectations for each other.
Finding a Sourcing PartnerIdeally, you’ll be able to tap into your existing network to get recommendations regarding one or more prospective manufacturing partners. (That’s how I originally got connected to Phil.) It takes a little work, but it’s remarkable how small the world can become if you keep asking progressively better questions. On the other hand, there is nothing wrong with starting by searching Google or Alibaba. It’s a quick and inexpensive way to get a sense of the market and develop a starting list. Armed with his initial list of prospects and his RFP, Phil likes to connect by email or phone in order to make an initial assessment of interest and fit. Are they responsive? Can you communicate effectively? The next step is to share the RFP and dig deeper with a narrowed list of candidates.
Manufacturing is About RelationshipsI’ve learned the hard way that there is no such thing as a simple product, and manufacturing is an inherently complex, dynamic process. Even if the design of your product and the tools used to make it don’t change from order to order, the people running the machines and packaging your product often do to some degree. If you treat your manufacturing partner in a transactional manner, you can expect the favor to be returned. If it’s all about the Benjamins, you lose the ability to use other currencies. Phil believes that one of the most important things you can do prior to starting a relationship is to make a personal visit to your prospective sourcing partner.
- It demonstrates your seriousness. That’s particularly true if you are considering overseas manufacturing. Getting to China isn’t hard. Neither is it terribly expensive. However, it takes time and effort. A personal visit represents an investment.
- Meeting face-to-face allows you to more fully assess fit. If you aren’t speaking with a decision-maker during your visit, you haven’t yet achieved an appropriate threshold of meaningfulness. You have some selling to do, or you need to find a better fit.
- In-person meetings are your best chance for affirming mutual expectations.