​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. ​

When working with a factory overseas, there are four common options for getting your product made:

• Work with a third party
• Work directly with the manufacturer (direct purchase)
• Work with a trader or distributor
• Work with a sourcing agent

According to one report, 80% of entrepreneurs work directly with the manufacturer, which gives them control over the process and saves money from avoiding commissions and fees to a third party or agent. However, if you’re new to sourcing, you might want to bring on a sourcing agent: someone who manages the relationship with the factory. A sourcing agent is someone who can reach to a supplier or manufacturer to source the product you need, making a commission in the process. Sourcing agents offer a measure of control over the final product, customization, and at a lower fee than working with a distributor or trader. But there are a number of risks to working with a sourcing agent.

​Sourcing 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. 

​It 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. 

Perhaps 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. ​

The Misfits Lair, a project by Zinnia Holdings LLC ©

​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.  

​Lean 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.

Stemming 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. 

​Lean 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. 

The Misfits Lair, a project by Zinnia Holdings LLC (c) ​