A Founder’s Guide to Securing Manufacturing Partners
By: Kevin Brisebois
Tags: Hardware, Startup, Manufacturing, Supply Chain, Guides And Tutorials

Over the past five years, Brinc has advised hundreds of hardware founders how to traverse the pitfalls of launching and scaling a custom hardware-based company. Beyond the fundamental requirements of financial viability, technical feasibility and market desirability, we emphasize the importance of securing robust supply chain partners.

For first time hardware founders, thousands of decisions are required to bring a concept into reality. With limited internal resources, one of the critical decision points will be who to partner with for external development and manufacturing support. To set clear expectations, founders first need to understand that creating custom hardware is a complicated process. Founders might have reviewed their design multiple times and have full confidence going into manufacturing but just one small issue can set a project back weeks or even months.

Having the right partners throughout the New Product Introduction (NPI) Process can immediately augment the team’s experience, reduce the time needed to get to market and clearly define a path to success. Likewise, choosing the wrong partners can have adverse effects, including costly project delays and challenges to scale production.

“Securing the right manufacturing partners is like sorting through a sea of puzzle pieces. From a distance most manufacturers will look similar but only upon careful inspection will you find partners that fit your specific needs.”

In this blog post we will be focusing on our collective learnings from over 100 founder engagements while also highlighting our top 5 tips and best practices when validating manufacturing partners in China to launch and scale production successfully.

Tip #1. Validate vendors ability to deliver

Every custom product comes with its own unique set of challenges and needs. Before settling on a manufacturer, make sure their technical expertise matches your requirements.

For manufacturers, writing a proposal and painting a picture that they are the ideal fit and able to achieve a majority or all project goals is easy. Validating what has been proposed is often the real challenge.

You should investigate a manufacturer’s experience carefully. Use due diligence to gain a better understanding of the work they have already carried out and their areas of expertise and qualified successes they have had with other clients. A demonstrative track record of quality, communication and the standard of equipment a potential supplier uses should provide you with a clearer picture of their suitability for your business.

Here are some of the things we inquire when validating a vendor’s ability to deliver:

1. Case Studies / Track Record: Are case studies provided in contextually relevant terms of how they would engage with you?

2. Past Client Referrals: Connect with past clients to learn what went well and challenges of engaging with specific vendors.

3. Quality Management System: Does the vendor have clear procedures and software tools in place to manage new projects effectively?

4. Capacity: Does the vendor have the resources or equipment when you need it?

Tip #2. One size does NOT fit all

It can be tempting to exaggerate your volume expectations to get the attention of your preferred manufacturer or lock in higher MOQ pricing. However, this approach will inevitably harm your relationship with the vendor long-term. Instead, have open discussions on your volume expectations with potential manufacturers. In most cases you will encounter two types vendors; those that are flexible and open to working with your projected volumes and others that require guaranteed commitments to engage.

Often overlooked, the size of your potential manufacturing partner is also an important consideration. It’s easy to get excited when you start engaging with larger vendors that have all the right capabilities, facilities, team and endless scaling capabilities. For these vendors, it’s important to consider where your company fits on the scale of their current client engagements. If your production scale requirements are low and your company would be one of the smallest clients with this vendor, you will be in a weaker position. In these scenarios you will often be assigned junior staff to lead the project and could find it hard to get the attention you require. Likewise, engaging with a small vendor that provides attractive pricing and attention is equally enticing. When considering partnering with these operations it’s important to understand the willingness and ability to scale in anticipation of future growth. Is the vendor willing to invest in the resources or equipment to scale? Is there a long lead-time required to scale up?

From our experience, engaging with vendors where your company sizes align usually results in better long-term engagements.

Tip #3. Don’t underestimate the importance & impact of communication

Often under-appreciated, communication is one of the key factors that can make or break your ability to successfully launch and scale.

Most vendor engagements in China start with a sales representative that can speak good to fluent English. This person will act as your key contact from initial interaction through to project kick-off. This is perfectly normal but be aware that this person doesn’t usually represent the team aligned to your project, who you will need to communicate with regularly.

As you start to engage with vendors, don’t be shy about asking for introductions to team members that would be assigned to your project. Set aside time to talk with them to test their ability to communicate as well as demonstrate their clear understanding of your project requirements and goals. Remember that you will be communicating with this team for several months, so minimizing the risk of misunderstanding is crucial.

“If you don’t know the communication ability of your assigned team before kickoff, your project is already at risk.”

This is often one of the final criteria that we use to differentiate between vendors with similar capabilities and solutions.

Tip #4. Don’t save Terms & Conditions for last

As a startup, it’s incredibly important that you understand the terms and conditions presented to you. While some vendors are more friendly towards startups, others consider young businesses a greater risk and offer more restrictive ‘standard’ terms.

To avoid surprises at the end of your vendor assessment process, work with them to understand their terms and conditions early on. T&C are also a good way to differentiate between vendors offering similar solutions as there can be major differences in payment terms, willingness to provide credit, IP ownership, quality assurance and indemnity.

Furthermore, it’s important to understand that it’s perfectly normal to question and negotiate on T&C but don’t set your expectations too high. Unless you are able guarantee significant production volume, vendors are not usually inclined to change standard T&C for new clients. It’s also worth noting that the most capable vendors have the ability to pick and choose which new clients with whom they want to engage. Attempting to coerce them into terms that they don’t normally accept could unintentionally quell their interest in partnering with you long-term.

Tip #5. Relationships build the foundation for long-term success

The relationship between a business and manufacturer is a balancing act that is critical to the success of a product. From the start, you should be actively seeking to build communications between your business and the decision-makers at your appointed manufacturing partners.

In many cases, vendors will also actively seek to build a personal relationship. This is expected in China particularly, where relationships are an integral part of all business dealings and often prioritized over other factors. This process is known as guanxi, which refers to having personal trust and a strong relationship. Guanxi can even involve moral obligations and the exchanging of personal information. It may be harder to build relationships this way, but once trust has been established, it can lead to a long-term trustworthy partnership that is mutually beneficial.

If you find you’re unable to contact the factory owner or decision-makers directly, it should be a point for concern. Rarely will you find manufacturers who simply want to transact and demonstrate a lack of personal interest in your project. Long-term this is not healthy for your business and while changing vendors is always an option, it is a costly and time-consuming process.

Conclusion

Choosing the right manufacturing vendors for your business is not always a straightforward decision. Proposals and pricing are often the primary focus but there are lots of factors to consider that will help determine the best partner, based on your unique needs.

Best practices we recommend to determine the right partners include:

· Probe for details of case studies and past client engagements.

· Find vendors that are the right size based on your production requirements.

· Get to know the execution team and validate communication abilities.

· Don’t overlook T&C alignment and start discussions early rather than the end process.

· Invest in building a relationship with vendors to yield meaningful long-term partnerships.

Moreover, before making your final decision, consider your current and long-term business goals. Seek partners who can support your current needs and grow with you when the time is right to expand. Changing vendors is costly, time consuming and should be avoided unless it’s absolutely required.

Brinc has helped hundreds of hardware founders navigate the manufacturing landscape in China and offers a range of solutions, including supply chain management from concept through to scale.

To learn more about our bespoke solutions, visit our website at: www.brinc.io/services