Looking for a manufacturing partner? A quick search on Google or Alibaba will surface hundreds of results. It isn’t difficult to find a factory – but it is a much harder task to find the right one. Entrepreneurs struggle to find and vet a manufacturing partner overseas. Many turn to sourcing agents to be their in-country representative. Sourcing agents can make the task of getting your product made easier but come with their own risks. How do you know if they’re connecting you with the best factory and negotiating the best price? Often they are secretly working on the factory’s behalf. Here’s what you need to know about the risks of working with a sourcing agent. WHAT IS A SOURCING AGENT?When working with a factory overseas, there are four common options for getting your product made:
THE RISKS OF WORKING WITH SOURCING AGENTSSourcing agents aren’t always as altruistic – or as helpful – as they might appear. On one hand, a sourcing agent can provide access to a network of vetted factories and save entrepreneurs a lot of time. They can help you navigate the process and serve as your in-country representative. On the other hand, more than 90% of sourcing agents are reported to get hidden commissions from factories. “As a result, when things go wrong, they often tend to defend the factory,” writes one expert. “Some intermediaries are invaluable. Others are completely incompetent or, even worse, flat out crooks. Some do not even reveal that they are acting as an intermediary, leading you to believe you are dealing directly with the factory.” Sourcing agents commonly take advantage of uninformed entrepreneurs by manipulating the pricing scheme in the factory’s favor. There are a few ways that a sourcing agent charges for their work. Some charge a large flat fee upfront; others charge “a percentage of your manufacturing transactions for some set period of time or a set number of transactions.” In each of these instances, it’s easy for the sourcing agent to find a low-cost (and often low-quality) manufacturer and split the difference with the factory. For instance, a sourcing agent could charge an entrepreneur $1,000 upfront for a job that costs $500. The $500 difference gets split between the sourcing agent and the manufacturer – and the entrepreneur knows nothing. Other sourcing agents charge hidden commissions or work simply source the product from a different factory than the one they’ve advertised. HOW TO VET A SOURCING AGENTIt is very hard for an entrepreneur to verify that a sourcing agent is being transparent about their role in the transaction. But, sourcing agents can also be invaluable partners. Vetting a sourcing agent requires asking the right questions and getting referrals from other entrepreneurs who have gone through this same process. This article is originally posted on Gembah.
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It’s undeniably more affordable to outsource your product manufacturing to a factory in China or India. But, for most entrepreneurs, it’s difficult to discern which factory is the best fit. Instead of learning how to vet a manufacturing partner, many people rely on a sourcing agent to help navigate the process. While it’s easy enough to find a manufacturer yourself or through a third party, sourcing agents and factories on Alibaba too often take advantage of entrepreneurs and new businesses that haven’t learned how to vet a manufacturing partner. Working with the wrong factory can lead to huge amounts of waste and costs: defective and poor-quality products, and missed production deadlines, are all too common when working with a factory that hasn’t properly been vetted. Here’s what entrepreneurs need to know about assessing a potential manufacturing partner. ASK THE RIGHT QUESTIONSviously, the biggest question you will have is the cost: how much the factory will charge to manufacture your product. But cost isn’t the only thing you need to consider. There are plenty of factories out there that will charge pennies – to deliver a product with terrible quality and is virtually worthless. In addition to asking for a price quote, Shopify recommends that you ask these questions to vet a manufacturing partner: What is your minimum order quantity? Especially with a new product, make sure the minimum order quantity (MOQ) is a manageable amount of inventory. Dead-stock is costly; so make sure your MOQ matches your business plan and projections. What is your sample pricing? The price of a sample ranges dramatically, depending on the supplier. It could be free, discounted, or the full retail price – so make sure to ask upfront. What is your production pricing? Shopify’s experts recommend that you “ask for pricing for several quantities to get a sense of if and how they do discounted pricing for bulk orders.” What is your turnaround time? Including the time it takes to ship, how fast can a factory get the product to your business? What are your payment terms? It’s common for suppliers to ask for new businesses to make the full payment upfront, which is something you should certainly know ahead of time. See if there’s room to negotiate if your relationship goes beyond the first order. Do you subcontract work to other factories, or is all the work done in-house? This question is a big one: make sure the factory you’re vetting is the one who will be creating your product. If you’re outsourcing to an overseas company, they are likely to run your email through a translating app. Keep your email short and to the point to make sure that nothing gets lost in translation. ASK TO SEE THE BUSINESS LICENSEReputable manufacturing companies in India, China, and elsewhere will have a business license, and if they can’t show proof of legal incorporation and that they are allowed to export, this is a red flag. Not only can a business license help you ensure quality control, but it also “provides valuable information about the company’s business scope and registered capital,” writes The Next Web. A company's business scope tells you the purpose of founding the company. For instance, if a company was founded to focus on distribution, then the business is probably not as experienced or reliable in manufacturing. They could be a trader, meaning they outsource to other factories. Likewise, if the company has a small amount of registered capital – i.e., the investment with which the business was founded – that could also be a sign the company a trader. Look for manufacturers that have a large amount of registered capital. A good manufacturing partner should send you a copy of their business license. If you want to verify the document, check the relevant government website. Alibaba and Global sources both provide automatic business license verification. GET REFERENCES FROM OTHER COMPANIESPerhaps the most critical step in vetting a company is checking reviews from other clients who’ve outsourced to their factory. Ask the manufacturing partner to provide references from other clients. Get in touch with those clients directly to make sure they had a good experience. Ask your manufacturing partner who else they’ve worked with, and to put you in touch with someone at the company who can verify the relationship. This article is Originally Posted on Gembah
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Lean product development is an approach to developing products that focuses on reducing waste, speeding up delivery, and increasing profit. This approach to product development is used by dozens of successful companies, including John Deere, Nike, and Intel. Originally formulated by Toyota, lean product development is a great approach for new businesses seeking to capture the most customer value with the least amount of waste. Here’s what entrepreneurs need to know about lean product development. BACKGROUND: THE HISTORY OF LEAN PRODUCT DEVELOPMENTLean product development, or lean manufacturing, originates from Toyota in the late 20th century. The Toyota Production System was born from a need to meet the varying tastes of car buyers. After World War II, the growing middle class desired cars of different shapes, sizes, and colors, a demand that Ford’s factory model wasn’t equipped to meet. Consumers wanted different models, thereby requiring different materials, production lines, and skilled labor. Toyota’s approach to meet this demand depended on two central tenets: jidoka and just-in-time. Jidoka is a Japanese phrase that roughly translates to “automation with a human touch.” It refers to a method of quickly identifying and correcting issues that may cause faulty production. “Just-in-time” is a concept that focuses on refining and coordinating each step in the production process so that it only produces what is required for the next phase in the sequence, dramatically lowering waste. The rest of the lean product development methodology flows from these two core values. Toyota designed a system that minimizes waste while maximizing value to the customer in terms of product quality, price, and good design. Other companies have since applied the values of lean product development to software, consumer goods, and other manufacturing processes. PRINCIPLES OF LEAN PRODUCT DEVELOPMENTStemming from jidoka and just-in-time are seven key principles that encapsulate the approach to lean development. These principles dictate how an entrepreneur or new business can adhere to the lean development approach to deliver value and minimize inefficiencies. These principles are: Eliminate waste: waste includes anything which does not provide value to the end-user. Lean product development experts define waste very broadly, from “unnecessary movement of workers on the shop floor” to inventory deadstock and overproduction. Build quality: this is a disciplined approach to making sure products are well-crafted. It includes things like incremental development, automating tasks prone to human error, and constant feedback. Create knowledge: provide a way to capture knowledge and document learning throughout the process. Defer commitment: “To defer commitment means to not plan (in excessive detail) for months in advance, to not commit to ideas or projects without a full understanding of the business requirements,” explains one expert. Deliver fast: deliver a simple product to customers quickly and iterate and enhance new versions thereafter. Respect people: communicate effectively, resolve conflict proactively, respect others and work as a team for the benefit of the end-user. Optimize the whole: every part of the operation must be optimized for one specific end goal – delivering value to the customer. Lean product development principles have been rewritten and applied to the product design context, as well as to starting a company. The Lean Startup, a 2011 book about product development, outlines how to avoid building a product that no one wants or needs by learning from Toyota’s original lean product development principles. In today’s competitive economy, applying a lean product development approach can dramatically improve your company’s chance of success. HOW TO USE LEAN PRODUCT DEVELOPMENTLean product development begins by considering what specific value your product or service can provide for customers. What problem are you solving by developing this product? Do market research and competitive analysis to make sure the demand for what you have to offer truly exists. Next, incorporate the principle of holistic optimization. Get all stakeholders involved from the start. Identify a partner who can work with your business from product design to sourcing to production management and logistics. “Collaboration in the early stages of a project reduces the number of negative impacts and holdups that can happen down the line as progress continues. Getting manufacturing involved ahead of time allows for problems to be identified and resolved early, before they cause deliverability issues later,” describes one expert. Then, look at ways to eliminate steps in the process that are wasteful or inefficient. The next phase of your lean process seeks to optimize production – often simply constructing a minimum viable product for consumer feedback and testing. An MVP is a version of a product with just enough features to allow customers to conceptualize what your final product will be and provide feedback accordingly. Respond to customer pull and iterate your initial vision based on what the market demands. Finally, repeat the process until you’ve achieved perfection. Perfection, as defined by lean product development, is “measurable value with no waste.” It’s an extremely sustainable, profit-building method for product development. Inevitably, this approach benefits both consumers and brands. Article originally published at: https://gembah.com/what-is-lean-product-development/ Article copyright (c) protected, all rights reserved. Reuse of this article or any of its content by permission only.
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